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Chinese energy futures surge to multi-year and record highs amid global oil gains and domestic power crunch

October 15/2021

MOSCOW (MRC) -- Chinese energy and petrochemicals futures prices surged to multi-year and record highs on Monday, driven by gains in global oil prices and a domestic power shortage as the world's top coal consumer is facing tight supplies, reported Reuters.

"In the near term, the supply shortage in coal pushed up the demand in crude oil and LPG, which are substitutes for coal, for power generation," said Huang Liunan, a Guotai Junan Futures analyst, referring to the global market including China.

The November crude oil contract on the Shanghai International Energy Exchange (INE) and fuel oil on the Shanghai Futures Exchange both gained by a fifth since September, reaching their highest since November 2018.

Liquefied petroleum gas (LPG) on the Dalian Commodity Exchange also jumped 4% to hit record highs on Monday, gaining a third in the last two months.

Gains in refined fuels were driven by a recovery in road traffic and air travel, Huang added.

"Starting from Q1 2022, we will see a steady increase in demand of jet fuel with the recovery of international traveling, boosting the price of energy-related products even further."

Aside from facing coal shortages, China's power industry is also under pressure from tougher emissions standards at a time when demand for power is strong. Authorities have ordered two top coal regions to boost output and given coal-fired power utilities permission to charge customers higher prices.

Even so, Liaoning, the province with the largest economy in China's northeast rust belt warned on Monday of worsening power shortages despite efforts to boost coal supplies and manage electricity consumption.

Prices of petrochemicals like methanol and ethylene glycol have also surged, tracking gains in coal and crude oil.

Futures prices of methanol - which can be used as fuel - on the Zhengzhou exchange are up 43% since the start of September and gained 8% on Monday to hit a three-year top. Meanwhile, ethylene glycol prices on the Dalian exchange rose 6.5% to record highs, having gained over a third since the start of September. The recent power shortages have hit production of the petrochemical, which is an industrial compound found in many consumer products ranging from antifreeze to solvents and paints.

As MRC wrote before, China's oil consumption is likely to peak around 2026 at about 16 million barrels per day and that of natural gas by around 2040, said a top executive of Sinopec Corp. in September 2021.

We remind that in August 2021, China Petroleum and Chemical Corp, also known as Sinopec, the world's petrochemical major, launched the first phase of the Gulei refining complex in Zhangzhou city in Chinas southeastern Fujian province. The refining complex, a 50:50 joint venture between Sinopecs Fujian Petrochemical Company Ltd and Taiwan Xuteng Investment Company Ltd, invested 27.8 billion yuan (USD4.28 billion) in the first phase. That will result in an 800,000 tonnes per annum ethylene plant, a 600,000 tonnes per annum styrene unit and seven other downstream petrochemical units, Sinopec said.

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 1,396,960 tonnes in January-July 2021, up by 7% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 841,990 tonnes in the first seven months of 2021, up by 29% year on year. Supply of propylene homopolymers (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of statistical copolymers of propylene (PP random copolymers) subsided.


mrcplast.com
Author:Margaret Volkova
Tags:crude and gaz condensate, propylene, ethylene, gas processing, petrochemistry, Sinopec, China.
Category:General News
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