International oil prices fell on Tuesday as concerns about falling oil demand continued to weigh on the market. As of the close of the day, the November contract of WTI crude oil futures fell by US$1.78/barrel to close at US$89.35/barrel, a decrease of 1.95%; the December contract of Brent crude oil futures fell by US$1.90/barrel and closed at US$94.29/barrel, a decrease of 1.95%. is 1.98%.
On the second trading day after the holiday, the prices of ethylene glycol, styrene and fuel oil in the energy and chemical sector fell sharply. International oil prices continued to fall on Tuesday, leading to a slight decline in domestic high-sulfur and low-sulfur fuel oil. Among them, the main high-sulfur fuel oil contract 2301 closed at 2873 yuan/ton, a decrease of 3.3%; the main low-sulfur fuel oil contract 2212 closed at 4972 yuan/ton, A decrease of 0.76%.
Du Bingqin, a crude oil researcher at Everbright Futures, told a reporter from Futures Daily that the decline in high and low sulfur fuel oil was mainly due to the fall in sentiment after the market surged sharply on Monday. From a fundamental perspective, the current fuel oil market remains stable, with low-sulfur fuel oil performing slightly better than higher-sulfur fuel oil. As of October 6, Singapore’s onshore fuel oil inventories increased by 2.5%, reaching the highest point in the past two weeks at 22.9 million barrels. Fujairah fuel oil inventories increased by 1.57% to 12.64 million barrels. Fuel oil inventories in the ARA region also increased significantly. Nearly 8% to 1.13 million tons. The recent increase in inventories has put certain pressure on the fuel oil market.
Due to sanctions and embargoes in Europe and the United States, Asia has become the main destination for Russian fuel oil. According to shipping schedule data, Russia’s fuel oil shipments in August reached 5.32 million tons, an increase of 880,000 tons from July; fuel oil shipments in September are expected to reach 5.18 million tons, an increase of 200,000 tons from August.
“At present, this trend has not changed, and with the end of the peak demand season for high-sulfur fuel oil, the ability to digest the increase in supply will be weakened. As for low-sulfur fuel oil, as Asian refineries begin to With autumn maintenance and the closure of the East-West arbitrage window, the market expects that the number of arbitrage cargoes in the low-sulfur fuel oil market will gradually tighten from late September. It is expected that the arbitrage volume from the West will continue to decrease in November. The tight supply situation in the market may continue.” Du Bingqin said that therefore, the recent performance of low-sulfur fuel oil has been stronger than that of higher-sulfur fuel oil.
Xue Yangming, an energy and chemical analyst at Xinhu Futures, also believes that on the one hand, international oil prices have adjusted and high-sulfur fuel oil has fallen with the external market; on the other hand, despite the production cuts by major oil-producing countries in the Middle East, the supply pressure of high-sulfur fuel oil may have eased slightly. The overall sour oil production in the Middle East is still at a high level, and Russian fuel oil exports to the east of Suez have not decreased, so the supply of high-sulfur fuel oil is sufficient. In addition, although high-sulfur fuel oil is still cost-effective in replacing natural gas, the peak season for power generation demand in the Middle East, South Asia and other places has ended, and the demand for high-sulfur fuel oil power generation has weakened, resulting in a relative excess supply.
Regarding the market outlook for fuel oil, Xue Yangming believes that the upward drive is limited and will run weakly. The short-term supply pressure of high-sulfur fuel oil is difficult to ease. However, refineries have started to enter the peak maintenance season. After OPEC+’s substantial production reduction, supply pressure is expected to ease slightly. In the future, attention will be paid to the actual decline in Russian production and the progress of the Iran nuclear agreement. On the demand side, the cost-effectiveness of desulfurization units is still outstanding, and the demand for high-sulfur ship fuel is expected to be slightly supported; high-sulfur fuel oil power generation has entered the seasonal off-season, and demand has weakened; in terms of refineries, high-sulfur fuel oil has a cost-effective feed, but the improvement is relatively slow. Especially the main consumer country, the United States.
“The demand for ship fuel oil at the Singapore port has picked up from July to September this year. In August, the sales volume of marine fuel oil in Singapore increased by about 1.09% year-on-year to 4.1163 million tons. It is expected that the demand for ship fuel oil will rise steadily in October. In addition, entering October, Europe, Japan and South Korea and other places have entered the winter peak season for power demand. Against the backdrop of high natural gas premiums for low-sulfur fuel oil, these regions are expected to increase fuel oil power generation loads. It is expected that seasonality and economics will bring low-sulfur fuel oil to a certain extent. The demand increase for high-sulfur fuel oil may be weak and low-sulfur fuel oil relatively strong in the later period,” Du Bingqin said.
During the “Golden Nine” period, ethylene glycol prices rebounded from lows, with a monthly increase of 5.82%, and the highest price in the middle of the month was 4,576 yuan/ton. Market participants believe that there is a high probability that the “Silver Ten” will fall short of expectations. Under the circumstances of relatively high cost pressure, MEG maintenance equipment restarts quickly, and there will still be a lot of new production capacity in the future, so it can only rely on compressed operating rates to achieve rebalancing. The path of month-on-month demand improvement is basically in line with market expectations, but the year-on-year decline in previous years is obvious. The market is pessimistic about terminal demand after the peak season, and the corresponding period price performance is high and under pressure.
On Tuesday, the spot price of ethylene glycol followed the futures price and showed a downward trend. On that day, the main futures contract fell 4.75% to 4,165 yuan/ton, and the average daily spot price was 4,182 yuan/ton. The post-holiday resumption of work on the demand side is less than expected, which will hardly give a significant boost to prices. During the same period, the expected recovery of the supply side has put pressure on the market again. Among them, Shaanxi Coal and Weihua Chemical Plant, Xinjiang Guanghui and Tianying are restarting, and Yulin Chemical’s 1.8 million tons/year new plant process is being opened up, and supply will increase in the fourth quarter.
“On Tuesday, the main contract positions of ethylene glycol fell sharply, mainly due to the weakening supply and demand expectations.” Yang Sijia, an energy chemical researcher at Xinhu Futures, said that on the supply side, the domestic operating rate has rebounded from a low level. As of October 8, ethylene glycol The operating rate increased to 53.02%, which is about 10 percentage points higher than the low point in late September. This is mainly due to the resumption of oil production capacity, while the resumption of coal production capacity has been slow due to efficiency factors. However, recently,�� Yulin Chemical’s 1.8 million-ton new device has opened up the process, which has significantly suppressed market sentiment. The domestic production of ethylene glycol is expected to increase in the future. In terms of ports, unloading at the port has been smooth recently, with port inventory increasing to 892,000 tons month-on-month. Import arrivals from 10 to 16 were around 125,000 tons, and the destocking speed of ethylene glycol ports has slowed down. On the demand side, terminal orders have indeed improved from September to October, and gray fabric inventories have gradually declined, but the destocking speed is not as fast as in previous years, and demand is expected to weaken seasonally after October. In addition, the seasonal improvement in terminal demand has always been difficult to transmit upwards, mainly because the polyester segment is in a situation of high inventory and low cash flow, and there are rumors in the market that polyester factories have intentions to reduce production. Taken together, the weakening of expectations is the main reason for the decline in ethylene glycol prices. However, ethylene glycol has low profits, especially because most mainstream processes suffer losses, so the downward space in the market outlook is also relatively limited.
“The price of ethylene glycol lacked momentum after rebounding to around 4,600 yuan/ton in the early stage. It opened higher and lower after the holiday. In the product overcapacity cycle, supply will restrict the price rebound in the mid-term. We will pay attention to the resumption of production of overseas devices in the future. The country as a whole will show a rhythm of interval oscillation,” Du Bingqin said.
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