Crude Oil Prices close in on USD 90/b, Energy and Petrochemical Sectors may Face Uncertainty

In a volatile turn of events, both WTI and Brent were assessed inching closer towards the USD 90 per barrel mark on Wednesday. Crude oil prices have gained approximately 25% in last four weeks and kickstarted the new year on a strong note. Recent rally in crude oil prices comes in the backdrop of growing tensions in West Asia and limited impact of Omicron variant on demand amid declining supply fundamentals.

Incessant rise in crude oil prices may sent shock waves in both energy and petrochemical industry where both industries rely heavily on the movement of crude oil. Energy sector for import dependent countries like India, China is likely to face some uncertainty as fuel prices may manifest some impacts of recent resurgence in crude oil. Indian Government which is due to present its budget in coming weeks may mull over fuel prices while keeping an eye over the Current Account Deficit (CAD).

The fortunes of global petrochemical industry and crude oil have been intertwined from very long where petrochemical production depend significantly on crude oil and its derivatives. The climbing crude oil prices may prompt manufacturers to up the ante as petrochemical manufacturers may bear brunt the of rising raw material materials. North American petrochemical market has recently observed stability to a certain degree which may again face another trial by fire in coming weeks. Asian petrochemical market has been termed as stable amid chaotic crude oil prices however extended run of climbing crude prices may cause some volatility among Asian petrochemical markets.

As per ChemAnalyst, “there has been some speculations around crude oil breaching USD 100 per barrel mark in coming months as OPEC+ is unable to increase output amid surging demand from both energy and petrochemical sector. However, such speculations have been thrown in several times in last few years. Surging crude oil prices are likely to drive up petrochemical costs and market prices for downstream chemical intermediates, aromatics and plastics.”