Weekly Bitumen Report: The 2-million Cut of OPEC and its Serious Effects on the Market and the 8th Nov. Election of USA

On Wednesday, 5 Oct. 2022, the 33^rd meeting of OPEC+ was held which was the first in-person meeting after the emergence of Corona in the world. The members of this union decided to decrease oil production up to 2 million barrels per day from 1^st November 2022. This is the biggest reduction after the reduction of 9.7 million barrels on April 2020.

The analysts believe that the reduction was planned with the purpose of controlling and stabilizing the oil price but in fact, it seems to be a hidden aspect to put pressure on the democratic party for the election of 8 Nov. and president Biden initially called it “OPEC’s Short-sighted Decision”. As a result of this decision, the USA president instructed to release 10 million more barrels of the US Strategic Petroleum Reserve (SPR) to stabilize the oil price.

However, it seems that whether it is a political decision or a plan to control the market, it has affected all the market analyses and on the same 5 October, Singapore HSFO observed a growth of 14-19 US dollars and brent oil price exceeded 93 US dollars in the early hours after the announcement of OPEC decision.

During the last week, although it is predicted Iran will decrease vacuum bottom price by around 5% based on the pricing formula on 7 October, the refineries competed for vacuum bottom in a range of 13-46% and packed bitumen price increased to more than 400 USD/MT, FOB Bandar Abbas.

It is also being heard that bitumen price in India will decrease around 10 US dollars on 15 October that might not happen after the recent decision of OPEC. Also, the Indian refineries were supposed to decrease bitumen price by 25 US dollars on 1 October while in the official announcement, only a fall of 10 US dollars was observed.

Also, after the official announcement of monsoon completion in India and the decrease of bitumen import due to various reasons, it is expected to receive a huge demand from India market.

Singapore bitumen price reached to 560-565 US dollars during the last week and South Korea bitumen price touched the level of 505 US dollars after a 5-US dollar increase. On the other hand, we should wait to see the increase of bitumen price in Bahrain too.

Of course, it seems that the current worrying economic situation of China in 2022 and the effects of its recession should not be underestimated and we should wait for the meeting of Chinese Communist Party on 16 October to see its outcomes on the world’s economy. However, It looks that after some months of facing an abnormal market, right now the determining factors of bitumen price are all in line to experience an upward trend and we should wait for frequents movements in the market.

Besides, as mentioned in Infinity Galaxy’s last week report, in the war between demand and crude oil price, not only the demand was the winner of this war but also, crude oil price grew in line with the demand.

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