In early January 2018, oil prices hit their highest levels in more than three years. “U.S. crude oil inventories are at their lowest level since August 2015. OPEC is getting closer to its target of reducing OECD industrial stocks to the five-year average,” says PVM Oil Associates analyst Tamas Varga.

Data from the U.S. Energy Information Administration showed that crude inventories fell by almost 5 million barrels to 419.5 million barrels in the week of January 5, 2018. This drop is likely due to the extreme cold weather that stopped some onshore output in North America, which was expected to be short-lived. Production cuts led by OPEC and Russia that started in January 2017, and are set to continue throughout 2018, have underpinned charges. There is still downward pressure in the physical market, where the second and third largest OPEC producers have cut their prices to remain competitive.

The oil price decline that began mid-2014, when the price of oil was consistently over $110/bbl, has changed the fundamental economics of the global chemicals industry, and has brought about widespread uncertainty. Additional supply from North American shale oil and continued high production levels from OPEC are likely to make a slow but steady recovery.

Nonetheless, prices will need to recover over time to permit investment in production and exploration. Over the past ten years, oil prices have gone through at least two complete cycles, and more significant swings are likely to happen. During this time of ever-changing prices, setting short and mid-term plans will continue to be necessary.

Oil is one of the key ingredients in the manufacture of various chemicals and related products. Consequently, many chemical firms benefit from lower crude oil prices. However, companies using natural gas as opposed to oil for their feedstock do not enjoy those benefits, resulting in the cost of natural gas affecting chemical firms more than the price of oil in those cases.

Additionally, a substantial decline in crude oil prices would impact the market in other ways. It makes the economics of petroleum substitutes a great deal less attractive, including bio-based and battery chemicals. This issue is causing companies, from global powerhouses to niche firms, to reevaluate their strategies.

 

 

Sources:
https://www.cnbc.com/2018/01/10/oil-markets-near-3-year-highs-on-tighter-us-market.html
https://www.icis.com/resources/news/2018/04/10/10210537/us-on-pace-for-record-oil-natgas-production-in-2018/

US / China Tariffs Create Unrest Among Industry.

Consistent back-and-forth tariff announcements over the past two weeks between President Trump and China have the global marketplace on edge, fearing potential trade war inclinations and potential impacts across markets for years to come. Trump’s original tariff on steel and aluminum were aimed to incentivize U.S. companies to buy steel and aluminum from U.S. producers, strengthening the U.S. metal industry.

China’s rebuttal tariffs in March and April primarily target high-value American exports, from airplanes to soybeans.

Although many of the affected products target consumers, the potential impact of continued and ongoing tariffs will likely make its way up the supply chain and reach the petrochemical and derivative markets.

Timeline:

March 8: Trump imposes 25% tariff on steel and 10% on aluminum for China.

March 22: Trump announces tariffs on an additional $50 billion of Chinese goods in response to the alleged theft of intellectual property from U.S. companies. At this time, Trump gave the U.S. Trade Representative (USTR), Robert Lightizer, a maximum of 15 days to draft a list of targeted products.

March 23: China retaliates, announcing $3 billion in duties on 128 products, ranging from 15–25%.

April 3: USTR releases their list of 1,300 affected products, including flat-screen TVs, medical devices, aircraft parts and more.

April 4: Hours after the U.S. publishes the list of imports subject to new duties, China responds with an additional $50 billion in U.S. tariffs, affecting 106 totals.

Brief List of Impacted Plastic Materials & Products:

Primary Shaped Polycarbonate
Polyethylene, with a primary shape specific gravity of less than 0.94
Acrylonitrile
Primary Shaped Epoxy Resin
Polyethylene Terephthalate Plate Film Foil Strips
Some primary vinyl polymers
Some primary shapes of acrylic polymers
Some primary shapes of pure polyvinyl chloride
Adhesives based on other rubber or plastics
Polyamide-6,6 slices
Some primary-shaped polyethers

Links to read more:

Bloomberg: Tariffs stick it to U.S. Manufacturers

Washington Post: Trump Pushes Back on Fears of a Trade War with China