International chemical industry suffers from high oil prices

On July 5, the Organization of Petroleum Exporting Countries (OPEC) and other oil-producing countries alliance (OPEC+) cancelled a meeting to discuss an increase in production, which not only pushed up international oil prices to their highest point in the past three years, but also made people in the international chemical industry market frown.
Difficult
.

Long-term production increases divergence intensifies

OPEC Secretary-General Barr said in a statement that the 18th OPEC and OPEC+ ministerial meeting originally scheduled to be reconvened on the same day was cancelled
.

Analysts believe that the OPEC summit is difficult to produce, the main reason is the differences between Saudi Arabia and the United Arab Emirates and other countries
.

At the same time, sources said that the UAE has invested billions of dollars to increase production capacity, so it is unhappy that the benchmark output used to calculate its reduction level is too low and hopes to increase the benchmark output
.

Institutions bullish crude oil prices

Although oil prices have continued to rise, due to factors such as increased demand, many institutions are still optimistic about the outlook for oil prices
.

In the past 7 years, due to the needs of transformation, the oil industry has insufficient investment, and reserves and spare capacity have declined
.

　　But at the same time, Saudi Arabia and Russia, the leading countries of OPEC and OPEC+, do not plan to increase production rapidly
.

　　However, market participants pointed out that due to changes in the US climate policy, the US shale oil industry cannot be able to increase production at will in response to price increases as it did in the past, while the epidemic prevention and control measures in Europe and the United States continue to relax, and international oil prices are inevitable
.

　　The chemical industry is hit

　　At present, the international chemical industry is facing the double blow of soaring oil prices and sudden increases in freight rates
.
Among them, oil price is particularly important, because oil price is still one of the key factors affecting ocean freight
.
Generally speaking, fuel costs account for more than 30% of the operating costs of shipping companies
.
The more unstable oil prices are, the more pressure the chemical industry will face with high costs
.
And companies cannot pass on costs to consumers, which will result in lower profit margins
.

　　Plastic is a similar terminal chemical product
.
Bloomberg said that in order to meet the increasing demand of the market, Asian plastic manufacturers must build additional factories to meet the demand from masks to auto parts, but these have not been converted into profits because of the rising cost of crude oil and other raw materials.
Swallowed
.
For manufacturers that rely on liquefied petroleum gas, the price of propane in the United States has soared, pushing up costs
.
The price of the benchmark Far East propane exchange contract has exceeded US$660 per ton, the highest since October 2018
.
Since mid-April, the price of propane has risen by 1/3
.

　　Al Lafa, an analyst at Fischer Global Energy Consulting, said that “the market will be tested in the near future, especially in the third quarter.
” Chemical plants worldwide that do not have a complete refining system or cannot obtain cheap raw materials may be forced by cost issues.
Reduce production
.
This will hinder the recovery of the global economy
.