Saudi oil fields and refinery facilities were attacked
A few days ago, market sources said that after the attack on Saudi Arabia’s oil facilities on September 14, concerns about the supply of raw materials in the Asian olefin and polymer markets had become increasingly apparent.
Prince Salman, Saudi Arabia’s new energy minister, said that on the morning of September 14, a drone attack on Abqaiq oil processing facility and Khurais Oilfield by Saudi Arabian Oil Corporation (Saudi Amy) resulted in a reduction of about 5.7 million barrels a day, equivalent to half of the company’s capacity.
Saudi Petrochemical Raw Material Outage
A number of Saudi petrochemical companies announced the interruption of raw material supply after the attack. These petrochemical companies are: Sipchem, Advanced Petrochemical Company, Tasnee, Yansab, Saudi Kayan Petrochemical Company and SABIC. The petrochemical companies announced a 30% to 50% disruption in raw material supply.
Saudi Arabia is a major player in the global ethylene and ethylene derivatives market, because most petrochemical enterprises in the country use ethane as the main raw material, and ethylene production is high.
Data show that Saudi Arabia’s annual ethylene production capacity is about 17.5 million tons, accounting for about 9% of global total production. Saudi Arabia’s total annual production capacity of polyethylene is about 9 million tons, accounting for about 8% of global production capacity.
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At the same time, Saudi Arabia is also a major methanol exporter in Asia, with methanol production capacity of 6.55 million tons per year. According to Chinese customs statistics, Saudi Arabia exported about 795493 tons of methanol to China in 2018, accounting for 11% of China’s total methanol imports.
Ethylene and Propylene Price Rising
An ethylene trader believes that the popularity of the Asian ethylene market will rise, but it is not yet clear how far it will rise. Some market sources also said that the Malaysian Border Garland Refinery and Petrochemical Company expects to restart naphtha-based steam cracking units in a few weeks, which may offset to some extent the negative impact of the attack on Saudi oil fields.
Standard & Poor’s Global Prussian Energy Information Company has previously said that Biancalan Refinery and Petrochemical Company plans to restart the cracking unit in the RAPID Refinery-Petrochemical Complex in Johor in mid-September. The cracking unit produces 1.2 million tons of ethylene annually.
Among the three main olefin products, propylene is most susceptible to interruptions in crude oil and refinery operations, as propylene is produced by fluidized catalytic cracking units in refineries. Meanwhile, propylene sellers are cautious. “So far, we’re watching, but prices are bound to rise,” said a Japanese trader.
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Pay close attention to naphtha Market
Market participants are paying close attention to the naphtha market, as a bull market is expected for naphtha, which may reduce the already weak profit margin of the petrochemical industry.
A naphtha trader said: “The reason for the surge in naphtha prices last Monday morning is that a lot of naphtha in Asia comes from the Middle East.” According to Prussian Energy Information, the average Prussian naphtha swap was more than $500 per ton last Monday.
According to market participants, Saudi Arabian Ami Trading Company exports 50,000 to 75,000 tons of naphtha to the Northeast Asian market every month from Yanbu Petrochemical Company, located on the Red Coast of Saudi Arabia. In addition, Saudi Arabia Amy Trading Company also exports naphtha directly from Labige Petrochemical to Northeast Asia.
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