Asia’s petrochem markets bearish amid heavy crude oil losses, global economic weakness

Asia’s petrochemical markets are being battered following hefty losses in crude futures, with most market players wary that commodities prices will keep falling in the near term amid global economic weakness, as per ICIS. At midday, NYMEX light sweet crude for November delivery was trading slightly higher at US$82.08/bbl after tumbling nearly US$4/bbl overnight. Crude prices slumped at the close of trade on Tuesday to US$81.84/bbl after the International Energy Agency (IEA) cut its oil demand forecast for 2014 and 2015, while reporting that global oil supplies in September increased a huge 2.8 mln bpd year on year. Oil prices have been on a downward spiral as concerns over weakening global demand heightened following cuts in growth forecasts by the International Monetary Fund (IMF) on 7 October, affecting sentiment in the overall petrochemical markets. The global economy is projected to grow at a slower pace of 3.3% this year and at a 3.8% pace in 2015, according to the IMF - a global financial stability watchdog. The IMF pointed to stagnation and low potential growth in advanced economies and a decline in potential growth in emerging markets as medium-term risks to global growth. Naphtha and aromatics markets are particularly susceptible to the apparent free-fall in crude prices. At midday, open-spec H2-November naphtha prices fell US$23.50-24.50/ton to US$715.50-718.50/ton CFR Japan. Benzene shed US$35/ton to US$1060-1065/ton FOB (free on board) Korea, while toulene fell US$22-23/ton to US$932-939/ton FOB Korea at noon. Styrene monomer (SM) prices fell below US$1400/ton CFR (cost and freight) China for December cargoes this week. Most buyers in the polyester chain took to the sidelines, adopting a cautious stance amid declining prices in the upstream markets. Purchases were mainly done on a need-to basis, as majority of buyers are expecting prices to fall further given prevailing weakness in the global macroeconomic conditions, as per market players. Sources in the petrochemical industry warned of a build-up in inventory, particularly for purified terephthalic acid (PTA), with not much improvement in downstream demand. “An oversupplied PTA market, together with a bearish upstream market might continue to add a downward pressure on spot prices,” a Chinese trader said. The nylon chip market is also feeling indirect pressure from slumping crude prices. Market players are taking a wait-and-see stance because of tumbling prices of benzene and capro in the Chinese domestic market. In the olefins markets, butadiene (BD) prices tumbled to US$1200-1250/ton CFR NE Asia, as the sharp fall in crude prices sent traders scrambling to offload stocks. Ethylene and propylene prices held steady at midday.