Naphtha hits lowest of 2 years in Europe, 8 months in Asia; eyes on oil
by Esra Ersöz - eersoz@chemorbis.com
Spot naphtha prices have been falling since early July both in Asia and Europe with cumulative losses reaching 15-16%. The recent levels suggest the lowest levels of 2 years in Europe and 8 months in Asia, according to the weekly average of ChemOrbis Price Index.
Oil remains in the driver’s seat
Crude oil is the main driver behind the downtrend of the spot naphtha market. Disregarding a short recovery in the last week of July, crude oil prices were on a trajectory path since the beginning of last month as WTI (NYMEX) benchmark lost 10% and Brent recorded a larger decrease of 12% in total.
Will production cuts help overcome fears of economic slowdown?
After marking the largest daily gain in a month on Friday upon the news that Saudi Arabia will respond to the recent weakness by limiting exports to below 7 million barrels per day in September, crude oil prices are likely to face fluctuations in the days to come amidst conflicting factors.
Although OPEC continues to slash output, the ongoing trade dispute between China and the US fuels fears of an economic slowdown as it globally pressures demand and inevitably affects crude oil prices.
Opinions vary on oil demand
Some analysts argue that the third quarter will be the high season for oil consumption and global demand will pick up in the second half to help gradually reduce oil inventories.
However, others are mostly drawing a weak outlook. The International Energy Agency (IEA) said on Friday mounting signs of an economic slowdown had caused global oil demand to grow at its slowest pace since the financial crisis of 2008.
Pointing to the fall in demand and non-OPEC supply growth next year, Bernstein Energy said, “We believe that OPEC needs to cut by a further one million barrels per day in 2020 if they are to defend oil prices at $60 a barrel.”
Stocks have also built in naphtha market
Although the majority of the losses in naphtha stems from the upstream crude oil market, it is solely not the main factor. Thin demand and muted activity caused supply to build, contributing to the weakness of naphtha prices.
Oil remains in the driver’s seat
Crude oil is the main driver behind the downtrend of the spot naphtha market. Disregarding a short recovery in the last week of July, crude oil prices were on a trajectory path since the beginning of last month as WTI (NYMEX) benchmark lost 10% and Brent recorded a larger decrease of 12% in total.
Will production cuts help overcome fears of economic slowdown?
After marking the largest daily gain in a month on Friday upon the news that Saudi Arabia will respond to the recent weakness by limiting exports to below 7 million barrels per day in September, crude oil prices are likely to face fluctuations in the days to come amidst conflicting factors.
Although OPEC continues to slash output, the ongoing trade dispute between China and the US fuels fears of an economic slowdown as it globally pressures demand and inevitably affects crude oil prices.
Opinions vary on oil demand
Some analysts argue that the third quarter will be the high season for oil consumption and global demand will pick up in the second half to help gradually reduce oil inventories.
However, others are mostly drawing a weak outlook. The International Energy Agency (IEA) said on Friday mounting signs of an economic slowdown had caused global oil demand to grow at its slowest pace since the financial crisis of 2008.
Pointing to the fall in demand and non-OPEC supply growth next year, Bernstein Energy said, “We believe that OPEC needs to cut by a further one million barrels per day in 2020 if they are to defend oil prices at $60 a barrel.”
Stocks have also built in naphtha market
Although the majority of the losses in naphtha stems from the upstream crude oil market, it is solely not the main factor. Thin demand and muted activity caused supply to build, contributing to the weakness of naphtha prices.
More free plastics news
Plastic resin (PP, LDPE, LLDPE ,HDPE, PVC, GPS; HIPS, PET, ABS) prices, polymer market trends, and more...- Initial ABS prices for July see larger increases than PS in Europe
- Supply constraints spark stronger PE trend than PP in global markets
- ABS, PS uptrend falters in China after H1 2020 ends at multi-month highs
- Stats: China’s total PP imports spike in May; Vietnam and India’s rising shares shine out
- Tight supply drives HDPE, LLDPE gains in Southeast Asia
- European PE markets set for 2nd bullish month on rising costs
- Turkey’s PP and PE markets propelled to a firm start to H2 despite vulnerable conditions
- Asian PVC sees V-shaped recovery in Q2, what will Q3 bring?
- Will capacity additions cast cloud on ethylene upsurge in Asia?
- US PVC offers in Egypt rise steadily but resistance grows in tandem
