Turning occurs, the solvent oil market is fading

The continuous soaring of international oil prices in October has become the focus of the energy market. The current crude oil market, global supply shortages and increased fuel demand in various regions are expected to support oil prices to remain high. The situation in which natural gas prices are still tight and rising has not changed, and international oil prices are still further pushed up. International crude oil prices have risen to their highest level in seven years.

Chart: International crude oil price trends

On October 26, WTI futures settled at US$84.65/barrel, and Brent crude oil futures settled at US$86.40/barrel, both hitting the highest price since October 14, 2014.

Solvent oil prices broke through the 7,500 CNY/ton mark, becoming the highest price point in the past three years. Is the price of crude oil the only factor affecting the solvent oil market?

From the perspective of supply, there are relatively concentrated manufacturers of solvent oil annual overhauls this year. Main refineries such as Changling Refinery, Jinling Petrochemical and Yangzi Refinery will be overhauled in 2021. As the current largest manufacturer of solvent oil, Ningbo Keyuan ceased production in early May due to safety issues and has not yet started construction. Due to environmental inspections in the first half of the year in Shandong, Dongying, as the main solvent oil production area, maintained a low operating rate.

The above factors have caused a significant reduction in the output of mineral spirits.

However, as the oil market declined at the end of the month, the hype atmosphere gradually became flat, and the solvent oil market declined in some areas. In addition, the reduction in demand from downstream manufacturers such as grease and chemicals caused by power curtailment has also brought hidden dangers to the solvent oil market.

Looking at the market outlook, OPEC's production reduction atmosphere is still continuing; the winter is approaching, the impact of natural gas on crude oil is still obvious, the energy crisis signal has not been lifted, and the bottom support of international crude oil prices is solid. We expects that the solvent oil market may still be very expensive in the short term.