Weekly Bitumen Report: The Oil Shock in Petrochemicals and Bright Prediction of the Market

During the last week, Russia was at the center of attention; some of the most significant events were the Kremlin drone attack, the broadcast of a documentary in Europe Union about the involvement of Russia’s vessels in the explosion of underwater pipelines of Nord Stream in the last September, and Reuter’s report about the suspension of the negotiations between India and Russia about the mutual trade with Rupees.


However, the most important news of the week was the fall of brent and WTI that started on May, 1 and on the second day of May, an unprecedented record was observed and WTI returned the level of 69 USD for the first time in several months. The analysts proposed various reason for this fall, including:


1) The Fear of Weak Demand in China
Tina Teng, the analyst of CMC Markets Institute, believes that the decreasing pressure on the oil price shows that China’s economic situation is not promising and the demand vision for oil consumption is not optimistic. During the last week, the official data showed that China’s production activities suddenly decreased in April and the first contraction in PMI Index since December 2022 was related to production.


2) Crude Oil Sales of Russia
In spite of the sanctions imposed by the USA and West, Reuter’s reported that during April, Russia loaded the highest level of its oil from its western ports since 2019 with an average daily loading of 2.4 million barrels and as a result supply exceeded the demand.


3) The Fundamental Factors in the Market
As it was mentioned in the previous reports, the purpose of cut in the oil production up to 1.6 million barrels by OPEC was to avoid more fall in the oil price than a strategy to increase it, because the concerns about the economic recession in 2023 and Federal Reserve policies to control the inflation led to concerns that oil price will face a serious fall. However, the cut of 1.6 million barrels in April 2023 postponed the concerns of fall in the oil price for a while.


On the whole, considering the above factors, oil price declined seriously during the last week and as a result, fuel prices dropped accordingly. Although, many of the companies and research institutes predict a brighter future for the shareholders of energy and mine sectors, and even Goldman Sachs forecasted the level of 100 USD for the crude oil price.


On 3 May, Singapore’s Fuel HSFO CST180 returned to the level of 427 USD with a fall of 22 USD. However, Singapore’s bitumen price remained unchanged at 460 USD. South Korea’s bitumen faced a 5-USD drop and reached 420 USD which is a sign of low demand from China.


Bitumen price in Bahrain remained at 370 USD and did not face any changes. On 1 May, bitumen price in westerns ports of India decreased 17 USD and the eastern regions and some of the states faced an increase of 2.5 USD which was a sign of high demand alongside the concerns of price fall.


In Iran, the average of weekly competition over vacuum bottom decreased to 68% that might be the lowest level during the last months. Iran bitumen price will face a fall on 6 May, based on the pricing formula, however, it is not clear to what extent it might fall.


The worries about price fall alongside the optimism for the future have created a very complicated situation and as it was stated over the past weeks, the market activists are requested to make their business decisions very carefully.


This article was written by Razieh Gilani, the export manager of Infinity Galaxy (https://infinitygalaxy.org/)