Q3 Solvent Oil Price Inched Up

In Q3, 2019, the international crude oil prices kept fluctuating within a widerange, and in China, the overall dealings in the solvent oil market were moderate.Due to the relatively short supply and the peak season, the prices of solventoil were stable-to-rising.

Interms of the operating rates at refineries, in August, due to the influence ofthe typhoon “Lekima”, many refineries in Shandong had to temporarily shut downtheir units, and the average operating rate of solvent oil units at refineriesin Shandong dropped to 36%, hitting the lowest point since the Spring Festivalholiday in 2019. Though the production at these refineries resumed to normal levelgradually later, many refineries showed resistance to solvent oil productionbecause of the short feedstock supply and the sluggish sales of solvent oil. Asa consequence, at the beginning of September, the average operating rate ofsolvent oil was only 52%, and the solvent oil supply in the market becamerelatively short in its peak season from September.

InQ3, 2019, the prices of solvent oil trended up. Up to September 30, the averageprice of 6# solvent oil was RMB 5,000/mt, up RMB 350/mt or 7.53% from threemonths before; The average price of 120# solvent oil was RMB 5,125/mt, up RMB350/mt or 7.33% from three months before. The average price of 200# solvent oilwas RMB 5,790/mt, up RMB 330/mt or 6.04% from three months before.

Therein,in July, there were many refineries experiencing turnarounds in East China,North China, Central China and Northeast China, and the supply of solvent oilbecame relatively short. Meanwhile, the prices of feedstock naphtha increasedto relatively high levels, supporting the solvent oil market, and therefore,the prices of solvent oil went up slightly.

InAugust, due to the influence of the typhoon “Lekima”, both the supply anddemand for solvent oil stayed at a low level. Many participants stayed on thesideline, and the dealings in the solvent oil market were tepid. Therefore, theprices of solvent oil stayed largely stable.

InSeptember, the international crude oil prices surged in the middle ofSeptember, and in China, the downstream demand for solvent oil revived to someextent, supporting the solvent oil market. Accordingly, the prices of solventoil kept rising. However, from the second half of September, the prices ofinternational crude oil continued declining, and as a consequence, the pricesof solvent oil in China stopped rising and remained stable.

SCIreckons that in Q4, 2019, there are many bearish factors in the internationalcrude oil market, and the international crude oil prices are likely tofluctuate downward, giving limited support to the solvent oil market in China.In terms of supply, though currently, a few refineries limit their output ofsolvent oil, there will be few refineries experiencing turnarounds in Q4, 2019.Therefore, the overall supply of solvent oil in Q4, 2019 will be largely ample.As for demand, with the drop of temperature, the demand for 120# and 200#solvent oil will become tepid, while the demand for 6# solvent oil will berelatively good. In terms of feedstock, the prices of naphtha are likely tofluctuate at relatively low levels. On the whole, SCI reckons that in Q4, 2019,the overall prices of solvent oil are likely to trend down due to the lack ofbullish factors.

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