Petrotahlil :Polyolefin markets of Turkey were on a prolonged downward trend since mid-May due to persistently hesitant demand amid economic challenges and plentiful supply. This week, however, sellers have renewed confidence as the attacks on Saudi Aramco rattled oil markets and fueled supply concerns although the firming sentiment has lost steam to some extent later in the week.
Aramco-driven jump in oil futures shook markets on Monday
State-owned Saudi Aramco’s key facilities in Abqaiq and Khurais were hit by drone attacks over the weekend, causing a 50% loss in oil output of the country. This made a tremendous impact on markets considering that Saudi oil production stands at 9.8 million barrels/day, which approximately accounts for 10% of the total global supply.
On Monday, oil markets reacted after the unexpected disruption as both ICE Brent Europe and West Texas Intermediate (WTI) futures settled up by more than $8/bbl. They respectively indicated the largest daily percentage gains in 30 years and around a decade.
Saudi companies cut output on short feedstock supply
Several Saudi companies reported curtailed feedstock supplies in the aftermath of the attacks and halved their downstream PP and PE operations at a variety of rates early this week.
Meanwhile, production rates improved by the middle of the week as Saudi Aramco progressed in restoring of its lost output. The news that the giant expects to fully resume production by end September eased woes and caused oil prices to erase more than half of their Monday surge later on. Saudi suppliers also aim to be back to pre-attack production rates in 2-3 weeks.
Absence of Mid-East sellers boosted buying interest
Middle Eastern producers withdrew their PP and PE offers to Turkey immediately after the news in order to gauge the developments. This was soon followed by the absence of other import sources including the US, Korea and Egypt.
Manufacturers reported, “Our Korean suppliers held back to their PPBC, PPRC pipe type 3 and HDPE natural offers after Monday,” while another buyer received visibly higher HDPE yarn offers from a trader for the same origin. Global traders affirmed, “We suspended our PP and PE offers in line with instructions from our head-quarter.”
Agents: Delivery delays possible for cargos from Mid-East
Agents of Middle Eastern producers expect some delays in their September deliveries based on reduced operating rates in downstream chain. A packager also noted, “We were informed that our PE shipments will face around a week-long delay.”
Markets see competitive PP, PE prices fading
“Traders adopted a firmer stance after suffering from large losses in the previous couple of months. They renewed confidence owing to the uncertain state of next allocations from the Middle East as well as a cautious firming in China ,” opined a player.
Many sellers refrained from making official offers for the most part of the week. Distributors issued increases amid a lack of clarity regarding their next replacement costs and Petkim’s PP and LDPE increases on Wednesday.
Prices rebound from 10-year low in PE, 3-year low in PP; buyers skeptical
Import PE and PP prices have rebounded this week after steadily falling for 4 months to hit the lowest levels of 10 years in the PE market and 3 years in the PP market.
Now players concur that polyolefins may see increase attempts so long as supply constraints remain in place. The ongoing lack of premium over China also supports this view. Nonetheless, buyers have doubts about the sustainability of a firming trend in the longer run unless end product demand shows a strong revival. The firming sentiment has already cooled off amid the recent correction in oil prices.
“Sellers have already voiced their increase targets for October counting on the firm sentiment across the board. Yet, larger hikes may be hard to be achieved considering volatile oil prices, global economic growth concerns amid trade dispute between the US and China as well as Brexit that is slated for end October,” commented a player.