GPCA ’14: Low crude prices unfavourable for Mideast petchem makers

DUBAI (ICIS)--The current low crude oil prices are unfavourable for the petrochemical producers in the Middle East whose production is based on fixed feedstock costs and thus cannot take advantage of recent low naphtha prices, but the situation will change, a senior industry executive said on Monday.
 

“It is not good for us that crude oil price is low,” said Mohamed Al-Mady, vice chairman and CEO of Saudi Arabia’s major SABIC.

“But things will change,” Al-Mady said in response to a question while addressing the  9th Annual GPCA Forum held in Dubai on 23-25 November.

He said it was not the first time the oil prices had dropped and even in the past, the petrochemical industry had survived in such times.

However, he did say that lower naphtha prices as a result of low crude oil prices did not benefit the industry in the Middle East, which was based on fixed feedstock cost that had not come down in the low oil scenario.

US crude prices had fallen by about 30% since their peak in June, when prices hovered at about $110/bbl. At that time, concerns over possible oil shortages due to armed conflicts in Libya, Syria and Ukraine fuelled the oil price spike.

However, prices came tumbling heavily in early October on concerns about slowing world economic growth, after the International Monetary Fund (IMF) cut its global GDP growth forecast to 3.3% for this year and to 3.8% in 2015.