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Asian oil buyers expect cancelled OPEC+ meeting to drive crude oil prices even higher and hurt margins

July 07/2021

MOSCOW (MRC) -- Crude oil buyers in Asia are concerned that an unexpected cancellation of an OPEC+ meeting to discuss a rise in output could drive oil prices even higher and hurt their margins, reported Reuters.

They are now awaiting Saudi Arabia's official selling prices (OSPs), which were delayed until after the OPEC+ meeting and set the tone for prices of a majority of Middle East crude sales to Asia, to assess the oil market's direction.

Brent crude oil prices rallied to above USD77 a barrel, the highest since 2018, on Monday, after ministers of the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, called off oil output talks and set no new date to resume them.

"The OPEC no decision and resulting high price will have short-term negative impact on Chinese refiners, as they will see margins pinched due to often lagging domestic fuel prices," a Singapore-based crude oil trading executive familiar with Chinese refineries' thinking said.

"That could force them to cut runs, which should lift margins again and bolster their crude oil buying," the source added. China is the world's second largest oil consumer and top overall importer.

The talks were cancelled following a clash between top producer Saudi Arabia, which wants to maintain output curbs, and the United Arab Emirates, which has pushed for increased output.

No date has been set for the next OPEC+ meeting, which has left some sources speculating there would be no output increase in August while others expect the group to convene a new meeting within days in order to secure an agreement.

Still, buyers in Asia are optimistic the row will be temporary.

"Buyers would like prices to be reasonable and early release of additional barrels will help us ... this is more of a temporary phenomenon and would settle eventually," a source with an Indian refiner said.

For now, Asia's physical crude market remains adequately supplied even as global fuel demand gradually recovers from the coronavirus pandemic, refining sources said. Asia is the top oil consuming region, accounting for roughly 37% of world use.

Meanwhile, as MRC informed earlier, Indian refiners, anticipating a lifting of US sanctions, plan to make space for the resumption of Iranian imports by reducing spot crude oil purchases in the second half of the year. The world"s third-largest oil consumer and importer halted imports from Tehran in 2019 after former US President Donald Trump withdrew from a 2015 accord and re-imposed sanctions on the OPEC producer over its disputed nuclear programme.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.


mrcplast.com
Author:Margaret Volkova
Tags:Asia, crude and gaz condensate, India, USA.
Category:General News
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