Mixed trend in Saudi petrochemical products’ trade

Petrochemical product prices witnessed a mixed trend in November after remaining firm for the last couple of months, industry analysts noted.
According to researchers from Al-Rajhi Capital, Polymer products such as high-density polyethylene (HDPE) (-0.9 percent month-on-month), low-density polyethylene (LDPE) (-0.4 percent), polypropylene that are key to most Saudi Petrochemical firms marginally declined primarily due to weak Asian demand.
Other basic petrochemical products such as benzene, styrene and methanol advanced. Urea prices surged 11.9 percent on account of closure of a few fertilizer plants in China. On the cost front, while global naphtha price remained almost unchanged in November, Aramco set prices for Propane and Butane slightly lower for December after a sharp hike in November (up 18.9 percent month-on-month and 14.7 percent respectively).
Probably, analysts said, this was because the hike in November was higher than what was seen for US butane and propane.
The mixed trends seen for key polymer products saw spreads weakening for APC, while for most others such as SABIC and Yansab spreads were up. The recent rally in Urea prices also improved spreads for SAFCO.
According to industry experts, unless petrochemical product prices mimic the recent rally in oil prices (unlikely given flat naphtha price and long lag between the two) in the coming weeks, further upside for the stocks may be limited.
Sipchem is expected to trade higher in the short-term on higher pricing spread trend, while APC could see some weakness due to declining spread in November.
Helped by OPEC agreement, crude oil prices rose 10 percent since the start of November, as OPEC decided to cut production by 1.2m b/d from reference levels. However, OPEC’s November oil output rose .37m b/d m-o-m to 34.2m b/d, the highest in recent history.
They are likely to keep production levels high in the next month as well, building up inventories, as the OPEC agreement takes effect from January.
According to Bloomberg, US shale oil companies are using the post-OPEC rally to hedge their oil price risk for next year and 2018 above $50 a barrel, which could mean US shale production levels may remain stable in the future.

Source: Arab News