China’s lackluster economic recovery is weighing on the margins from making some lesser-known oil products needed for plastics and petrochemicals, adding another bearish element to the market.
Margins from producing naphtha in Asia have tumbled around 65% this month to the lowest level since October, according to Bloomberg Fair Value data, a proxy for the region. A surge in Russian supply has compounded the pressure, with capacity expansions set to add further headwinds.
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China’s sluggish economic rebound is weighing on the broader oil market, with the prospect of stimulus measures failing to boost benchmark futures. Prices for ethylene and propylene, other products used to make petrochemicals and plastics, have also declined over recent months in Asia.
Margins are facing further pressure in coming months as more Chinese capacity comes online, according to a recent report from Energy Aspects Ltd. That will pose risks to utilization rates in Asia and Europe, the consultancy said.
