Global crude oil increased during the Chinese Spring Festival holiday, with Brent crude oil futures traded around USD 83.47/bbl as of February 16, an increase of 2.25% from the period before the holiday.
In terms of supply, the compliance rate of OPEC’s production cut plan for Q1 2024 has exceeded 33% as of January. In addition, the ongoing conflict between Palestine and Israel and the continuing geopolitical tensions have raised concerns in the market about the risk of further worsening situation across the Middle East, becoming the main factors driving the rise in global oil prices during the Spring Festival. Looking ahead, global oil market after the Spring Festival holiday may be easily boosted but difficult to sharply decline. The implementation of OPEC+ production cuts is good, and the instability in the Middle East remains, leading to a still tight supply. Moreover, some economic data in Asia is improving, and while global demand expectations remain under pressure, there is still room for improvement. Brent crude oil futures prices are expected to remain stable above USD 80/bbl.
China To Start Refined Oil Price Adjustment on February 19
Chinese refined oil prices follow a rule of adjustment every 10 working days. Since the beginning of this year, the refined oil prices have undergone three rounds of adjustments in China, with two increases and one decrease. After offsetting, the prices of gasoline and diesel have both risen compared to the end of last year. At 24:00 on February 19, the first refined oil price adjustment after the Spring Festival holiday will take place. Given the recent rise in global crude oil prices, market participants think that the degree of this round’s corresponding oil price adjustment will significantly narrow, and there is a high probability of an increase in the next round of refined oil prices.
Benzene Prices Are Pushed Higher
The global crude oil prices rose, coupled with tight supply and a significant price increase of styrene in Europe and the United States, impacting the benzene market increasing firmly in these markets, with an increase exceeding that of Asian benzene market as Chinese benzene market was closed for the holiday. After holiday, Chinese benzene prices in Shandong province followed to rise, from CNY 8,130-8,190/tonne on February 7 to CNY 8,450-8,560/tonne by February 18. Both supply and import of benzene in China are expected to decrease in March. With low inventory and high prices in overseas markets, as well as expectations of an increase in refined oil prices, Chinese benzene market still has upward momentum.
Chinese PMDI Market Goes Up Strongly After Spring Festival Holiday
Before the holiday, Chinese MDI market turned weaker as downstream manufacturers gradually wound down production. However, owing to the maintenance of several mid-/large-scale MDI facilities in China in January, as well as logistics restrictions approaching the holiday, the supply of spot goods was reduced or slow down, leading to lower inventory levels of MDI in the market and relatively strong and stable MDI prices. On February 18, the first trading day after the holiday, traders gradually resumed work and offered obviously higher than those before the holiday. Similar to the benzene market, the post-holiday rise in PMDI prices was also affected by the rise in global MDI markets. Before the holiday, BASF and Wanhua announced price increases in ASEAN and South Asia markets, which correspondingly led to price increases in the local MDI market. During the Spring Festival holiday, the Korean MDI market moved up due to the rapid rise in benzene prices. In Europe, on the one hand, there is an expectation of a rebound in demand in the construction industry in March, leading to midstream and downstream manufacturers entering the market to stock up. On the other hand, some European suppliers have restricted supply. This all leads to a recent upward trend in the European MDI market under the “reduced supply and increased demand” pattern. In China, mainstream offers for PMDI on February 18 stand around CNY 16,500-16,800/tonne. Wanhua’s newly PMDI fixed price is set at CNY 17,500/tonne, and Covestro's newly PMDI fixed price is set at CNY 17,200/tonne, under their raw materials increasing pressure, which providing Chinese PMDI market stronger supports.
