Crude Oil-to-PP Production Profit Analysis and Forecast
The average gross profit at crude oil-to-PP producers decreased by 30.65% M-O-M to RMB 1,102/mt in June. The cost from crude oil-to-PP production increased by 5.01%, as monthly average price of crude oil rose by 7.34% to $73.24/bbl, but crude oil-based PP EXW prices dropped by 1.67%. The profit also decreased by 9.61% than that in the same period of 2020, mainly because crude oil prices hovered at lows at that period.
In July, it is predicted that crude oil values will stay firm, even though there will be some uncertain factors that may block its values. First, the Iranian presidential election has come to an end. Under the leadership of hard-liners, the process of the Iran nuclear agreement is tortuous. Second, OPEC is about to hold a mid-year meeting to cut production. Currently, under the stimulus of high oil prices, the oil production cutting policy becomes uncertain. Third, U.S. crude oil output has begun to increase slightly, and the subsequent increase in oil prices will affect the formulation of OPEC’s production reduction policy. But crude oil prices are expected to ramp up in all probability in July when PP prices will hardly improve greatly, so the profit from crude oil-based PP production will decline to around RMB 1,000/mt.
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