China's Alkylated Oil Prices Greatly Increased

Supported by the increment in the international crude oil prices, the blended oil market performed well. Meanwhile, the end demand for gasoline was relatively moderate. Therefore, blended oil producers showed strong interest in operating, and the prices of blended oil fluctuated upwards. Meanwhile, the demand for the feedstock of blended oil from the blended oil enterprises grew to some extent, and the overall price of the feedstock of blended oil reversed its losing streak. Thus, the alkylated oil prices rose obviously. Up to January 5, the average price of alkylated oil in Shandong increased to RMB 6,014/mt.

The surged international oil prices gave strong support to the increment in the alkylated oil prices. Before the New Year’s Day, downstream users stocked up, and the demand for alkylated oil grew. Meanwhile, producers intended to cut the alkylated oil inventory. Thus, the trading activity in the alkylated oil market recovered temporarily. With the crude oil prices rising, most market participants held bullish sentiment towards the alkylated oil market, and producers were reluctant to sell resources with lower prices. As the spot supply was tight, sellers raised the alkylated oil prices successfully. During the New Year’s Day holiday, although the transportation for the alkylated oil resources was limited, downstream users still replenished stocks on a need-to basis. Besides, the prices of feed gas increased, lifting the cost of alkylated oil. Producers raised the alkylated oil offers under low inventory. After the holiday, downstream users adopted wait-and-see attitude to the alkylated oil market, but producers were active in raising the alkylated oil offers. Thus, the alkylated oil prices kept rising. Influenced by the buy-high sentiment, some downstream users purchased the alkylated oil resources moderately. Moreover, producers maintained firm offers under low sales pressure.

In the short term, the international oil prices will keep rising, giving bullish support to the alkylated oil market. In the meantime, producers will maintain firm offers in response to the low inventory. Besides, it is said that the government will impose consumption tax on mixed aromatics and light cycle oil, which will stimulate the downstream users to stock up for the feedstock of blended oil. Therefore, the alkylated oil prices may continue rising. However, as downstream users replenish stocks recently, the inventory at downstream users increases to a high level. Besides, the alkylated oil prices hover at highs at present, and the market speculation decreases. Downstream users may show weaker interest in purchasing alkylated oil resources, giving thin support to the demand for alkylated oil. SCI estimates that the increment in the alkylated oil prices will be limited.