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Oil tumbles, naphtha follows suit

  • 22/06/2017 (10:57)
WTI crude on NYMEX and Brent futures on ICE have both been trading below the $50/bbl threshold for the last three to four weeks. This is largely due to the recently exacerbated oversupply woes after the boosted production from the US despite OPEC and non-OPEC members’ efforts to rebalance markets.

After oil prices hit the $50/barrel threshold, shale gas producers started to return to the market, which increased US inventories and paved the way for a persisting bearish sentiment in the energy complex. According to ChemOrbis Price Wizard, NYMEX (WTI) crude oil futures sink to nearly 10-month low while Brent futures hit a 8-month low on a weekly average.

On Tuesday’s daily trading, NYMEX futures saw as low as $43/bbl and Brent futures fell to $45/bbl before both closed the day even below these levels. In the first half of this year, oil showed its weakest performance since 1997, according to Reuters, losing 20% in value.



Even though some participants such as Saudi Arabia met the requirements, not all members have trimmed their quotas. According the media reports, Libya is pumping oil at its highest level since June 2013, adding to the challenge that OPEC and allied producers face in trying to keep global crude inventories under control. Higher output from Libya and Nigeria, which are exempt from cutting their outputs due to the ongoing political unrest, also created a downward pressure on the market.

OPEC was reported to be mulling over deepening oil cut agreement as a precaution against increased oil output.

Lower crude oil prices also found reflection in the naphtha market along with the pressure from higher inventories in Asia. Buying interest remains slack due to the influx of material. Spot naphtha prices in both regions have lost by 22% since early 2017 on a weekly average. As the graph below created by ChemOrbis Price Wizard shows, naphtha prices on CIF NWE basis also broke below $400/ton threshold recently, standing at their lowest levels since September 2016.

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