Europe crude, petchems prices extend losses as stocks suffer 'Black Thursday'

Author: Jonathan Lopez

2020/03/12

LONDON (ICIS)--Crude oil, European petrochemicals spot prices, and stock exchanges extended losses at close on Thursday despite swift action by the European Central Bank (ECB) to pump money into the system.

Brent crude oil futures for delivery in May were trading by 16:45 GMT at $33/bbl, a fall of 7.5% compared to Wednesday's close.

Within petrochemicals spot prices, naphtha continued to take a battering, trading at $253/tonne, down form the morning's $278/tonne and down nearly 15% from Wednesday's close of $296/tonne. All prices are on a cost, insurance, and freight (CIF) northwest Europe (NWE).

Benzene spot prices were also falling sharply in Thursday afternoon trading.

The ICIS Evening Snapshot with latest spot prices for the main petrochemicals is due out at 17:30 GMT.

STOCKS SUFFER ANOTHER BLACK DAY
European main stock exchanges were falling well over 10% in what represented a worse day than the 'Black Monday' of this week, which had been the worst day for markets since the 2008 financial crisis.

Markets are already discounting a full-blown economic crisis as countries struggle to contain the spread of coronavirus which could ultimately dent economic activity in all sectors.

Italy's FTSE MIB index was nearly 15% down by 16:30 GMT, the worst performer in Europe as the country battles a full-on coronavirus pandemic that has put the country in lockdown.

Spain's IBEX 35 and France's CAC 40 were both down 14% as both countries prepare for a full pandemic, with more than 3,000 and 2,200 positive cases, respectively, confirmed as of Thursday.

Germany's DAX was down 11.9%, and the UK's FTSE 100 was down 10.1%.

The UK government is set to announce shortly measures to contain the virus, after its neighbour Ireland announced earlier in the day nation-wide school closures.

The European chemicals STOXX 600 index was down by 9.64%, with some chemicals majors like Solvay or Covestro down 14% and 13.6% respectively.

Also in the index, fertilizers players like K+S or OCI were down by 22% and 18.5%.

Whether the European Central Bank (ECB) expected its package of extraordinary measures published earlier in the day to act as a balsam for troubled markets, the experiment did not work.

Despite the current woes, some analysts can still see a quick recovery from the pandemic and forecast the global economy to pick up speed by the second half of this year.

RECOVERY IN H2 BUT LIQUIDITY NEEDED
"There are some gradual signs of improvement in the resumption rate in the industrial sector in China, although at a slower pace than expected ... Data outside of China will get worse before it gets better," said analysts at London-based TS Lombard.

"But global growth is likely to stage a decent recovery in H2, led by pent-up demand and policy stimulus. Global central banks, led by the Fed, have stepped in."

However, while lower interest rates in the US and more liquidity pumped into the system in the 19-country eurozone could act as a short-term relief, TS Lombard said more liquidity measures to ease likely corporates' cash flow constraints will need to be taken.

"Fiscal policy through tax cuts and rebates could provide some buffer to the demand shock. But the policy response so far has been inadequate."

The UK's Bank of England (BoE) passed on Wednesday measures to cushion the coronavirus hit; the US' Federal Reserve (Fed) cut interest rates last week.

Thursday's afternoon losses made this week the worst for European markets since the 2008 financial crisis.

The coronavirus crisis and the crude oil price war started by Saudi Arabia to gain market share have put an end to investors and corporates' hopes for an economic recovery after growth in 2019 sharply slowed down already.

Click here to read Thursday's morning round up of petrochemicals and crude oil prices