Weekly Bitumen Report: The Potential Factors Running Market Ambiguously

Considering the extent of the last week’s events, we will discuss each one separately.

• Russia- Ukraine War

In the 64th day of Russia- Ukraine war, its consequences are affecting on the complexity of the market variables. Guterres, the secretary general of the United Nations, travelled to Moscow three days ago and visited Putin, the president of Russia, to discuss the possibilities of a ceasefire between Russia and Ukraine but no clear outcome was obtained.

At the same time of this even that could be a green light to stop the war, Russia and the USA exchanged their prisoners that was a positive signal as well to reach an agreement on the ceasefire; but simultaneously Russia claimed that Kherson region was invaded by them and Europe announced that Ukraine will receive a significant military aid from Europe and these factors can be a sign of lack war end.

The instabilities of the war were significant factors of oil price inconsistency in the world and hence, all of the role players of the market are helpless in making the rightest decisions.

• Crude Oil Prices

During the last 64 days of the Russia- Ukraine war, oil price increased up to 135 US dollars and dropped by 97 US dollars in some days too. This 40-percentage range of oil price during a period of 60 days shows the fragile situation of the market.

Before this war, the concern of market players was a range of 2-3% increase or decrease of oil price but now this range has been widened up to 10-15% increase/ decrease on a weekly basis that is a confusing element in the technical or fundamental analyses.

The recent analyses of oil price might show the fall of oil price but in a long term, the increasing trend is estimated. The range of 95-130 US dollars can be an acceptable range of oil price during the first half of 2022.

• COVID Situation in China

In the most important port of the world, i.e. Shanghai, is strongly under the influence of COVID and is passing its third lockdown. Numerous vessels are waiting to berth to discharge their cargoes.

The virus has spread in other cities like Beijing and there is no accurate data about this variant to see if this is a new variant or not. Lack of accurate data in China is creating issues of shortage of raw material in China and other parts of the world that will affect demand, supply, and global growth and hence it cannot be concluded whether it will be a new crisis in the world or it is the current variant of Omicron.

• Iran and 5+1 Nuclear Negotiations

Although both parties of Iran and JCPOA have determined several deadline in the JCPOA negotiations, still there is no clear conclusions if the agreement will be obtained or not. In case of disagreement, the equity of Iran Rial against US dollars will increase 10-15% and this amount of fall of US dollar value can be expected if the parties reach agreement and this factor will affect the prices of oil products 10-15%.

• Marine Transportation Issues

Although it seems transportation costs to be moderated comparing to the beginning of the outbreak of COVID, it is increasing that it predicted to last till the middle of 2022. This is another factor of confusion in the market as well.
Considering the abovementioned factors, the current potential risks are for both buyers and sellers.

In the last weekly bitumen report of Infinity Galaxy, it was also mentioned that the 7-percentage increase of raw material of bitumen production might have been a sign of hope in the market, but it did not come true and there was not any noticeable increase in bitumen price. This can be a sign of market instability.

Hence, both buyers and sellers are risk. With respect to global inflation and economic instabilities in the world, it should be considered whether bitumen production is an economical action and Infinity Galaxy strongly suggest spot trading like previous weeks.

This article was prepared by Razieh Gilani, the sales manager of Infinity Galaxy (www.infinitygalaxy.org).