US Polyalphaolefin Futures Plummeted After a Prolonged Uptrend, Oversupply in Market to Follow
- 16-Dec-2021 6:15 PM
- Journalist: Bob Duffler
US Polyalphaolefin prices finally turned their course to the downside in December after exhibiting a gradual increase consecutively for 3 months. As per the ChemAnalyst database, the prices for Polyalphaolefin 4cSt FOB Oklahoma and Polyalphaolefin 8cSt FOB Oklahoma in the week ending 10th December stood at USD 2995/MT and USD 2750/MT after registering a decline of 2.9% and 5.0%, respectively, from the prices assessed in the closing week of November. Despite the long-awaited relaxation in the polyalphaolefin futures, the traders are now fearing the possibility of facing the brunt of oversupply soon in the market.
The polyalphaolefin prices, during the major portion of the fourth quarter, had maintained a steady and continuous growth due to both internal and external market pressures. The market was facing the wrath of skyrocketing ethylene prices riding on the back of acute tightness in the international crude oil inventories and the consequent historic highs in its prices at the global level. A major toll on the production activities in the US after the Ida hurricane made landfall in Louisiana (one of the largest petrochemical facilities concentrating state of the US) led to a supply crisis of crude oil and its complete value chain of downstream products, further deteriorating the situation. On the demand side, the speedily rebounding lubricant industry continued to extend upward pressure on the polyalphaolefin market causing the prices to stride up incessantly.
Nevertheless, the current US polyalpholefin market dynamics, in December, have shown a reversal in trend which is associated with the rise in international crude oil stocks after the major countries like China, India, Japan, and the USA itself emancipated crude oil volumes from their strategic reserves in compliance to a coordinated initiative to cap crude oil crisis. The replenishment of oil inventories has allowed the downstream industries including polyalphaolefin producers to enjoy a consistent supply of feedstocks for their production facilities.
What worries the market traders now?
A recent forecast by OPEC+ indicates the coming weeks to witness an expanding supply glut in the crude oil markets which is based on the uncertainty in demand stimulated by the recent advent of Omicron coronavirus. The OPEC+ forecast has made room for growing concerns in the downstream market over the probability of having to experience the extended ripples of the crude oil supply glut.
As per ChemAnalyst, the drowning crude oil futures is expected to propel the polyalphaolefin market to reflect similar sentiments in view of the anticipated stagnancy in demand from the end-user industries on concerns over rising pandemic and slowdown in winter sales. However, the bearish outlook may not last long and the prices may rise again once the polyalphaolefin demand retreats to robustness.