Asia petrochemical shares rise on hopes virus outbreak nears peak; oil prices higher

SINGAPORE (ICIS)–Asian petrochemical shares rose on Tuesday on cautious optimism that the coronavirus outbreak would soon peak, while oil prices were higher on expectations of a record drop in US shale production this month.

At 03:10 GMT, Japan’s Mitsui Chemicals was up 0.21%, South Korea’s Lotte Chemical was higher by more than 7% and Taiwan’s Formosa Petrochemical Corp inched up by 0.49%.

Hong Kong’s Hang Seng Index gained 0.77%, South Korea’s KOSPI Index was 1.69% higher and Japan’s Nikkei 225 Index was up by nearly 2%.

Company/Stock Exchange	% Change
Nikkei 225 (Japan)	1.88%
Asahi Kasei Corporation	0.82%
JXTG Holdings, Inc.	0.05%
Mitsubishi Chemical Holdings Corporation	0.65%
Mitsui Chemicals, Inc.	0.21%
Hang Seng Index (Hong Kong)	0.82%
Sinopec Shanghai Petrochemical Company Limited	2.51%
PetroChina Company Limited	-2.68%
KOSPI Composite Index (South Korea)	1.69%
OCI Company Ltd	2.41%
SK Innovation Co., Ltd.	2.39%
LG Chem, Ltd.	3.33%
Lotte Chemical Corporation	7.22%
Hanwha Corporation	1.96%
TSEC weighted index (Taiwan)	1.90%
Formosa Petrochemical Corporation	0.49%
Nan Ya Plastics Corporation	3.98%
Formosa Chemicals & Fibre Corporation	1.86%
STI Index (Singapore)	2.34%
Wilmar International Limited	2.67%
Olam International Limited	0.70%
FTSE Bursa Malaysia KLCI (Malaysia)	0.68%
SSE Composite Index (Shanghai, China)	0.74%
Jakarta Composite Index (Indonesia)	0.67%
PT. Chandra Asri Petrochemical Tbk	0.34%

Overnight, US-listed shares of chemical companies fell after OPEC and its allies (OPEC+) reduced the target of a supply-cut agreement that it announced earlier last week.

Following a massive rebound last week, the major US equity indexes fell for the first time in three sessions on Monday as investors remained on edge about the coronavirus outbreak.

Investor sentiment this week will be moved by the US earnings season which is expected to get underway on Tuesday, with some major US banks among the first to be reporting their financial results, Singapore-based UOB Global Economics & Markets Research said.

“Corporate profits are reportedly expected to shrink by at least 10% for the first quarter, but financial markets will be more interested in how corporate balance sheets are weathering the Covid-19 [coronavirus disease] shutdowns,” it said.

China’s General Administration of Customs (GAC) on Tuesday reported that the country’s exports fell by 3.5% year on year in March in yuan (CNY) terms, narrowing from the 15.9% decline in the January-February of this year.

The country’s imports rose by 2.4% year on year in March in CNY terms, reversing the 2.4% contraction in January-February this year.

China’s overall exports fell by 11.4% year on year in yuan terms in the first quarter, according to the GAC.

China’s economy is expected to contract sharply in the first quarter of this year following the coronavirus pandemic, the first time since at least 1992.

$/bbl (03:40 GMT)	Last price	% change	Net change	Closing	High	Low
Brent	32.25	1.61%	0.51	31.74	32.32	32.06
US WTI	22.7	1.29%	0.29	22.41	23.08	22.36

Crude prices rose on Tuesday after US Energy Information Administration (EIA) on 13 April said that domestic shale output is expected to register the biggest monthly drop on record during April.

WTI prices fell overnight as oversupply concerns continued to exert market pressure, even as OPEC and its allies agreed to cut production by 9.7m bbl/day.

“Clearly a big reason why there was a muted reaction from the market, was that this deal was priced in following [US] President [Donald] Trump’s tweet from early April, where he said he was expecting cuts of this magnitude from the Saudis and Russians,” ING Bank said in a note.

“Furthermore, while these cuts are substantial, they still fall short of bringing the market to balance over 2Q20 [second quarter 2020]. The stock overhang this quarter should still see prices trading lower from current levels, although the floor for the market is likely somewhat higher than it was prior to the deal,” it said.

The intensifying coronavirus outbreak is expected trigger a deep global recession in the first half and will likely result in an unprecedented drop in global energy demand, UOB said.

The EIA has warned that global energy surplus could jump in excess of 15m bbl/day by April 2020.

Globally, confirmed coronavirus cases have reached above 1.7m, with 111,828 deaths according to the World Health Organization (WHO).

The outbreak is believed to have emerged in December 2019 from China’s central city of Wuhan.

Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

Focus article by Nurluqman Suratman