Rising Bitumen Prices Amidst Middle East Tensions
Despite encountering various obstacles in Iran, such as severe weather conditions including heavy rain and storms in Bandar Abbas, the Persian Gulf, and the UAE, as well as operational slowdowns at ports, the price of bitumen has persistently risen.
Traditionally, the correlation between oil prices and geopolitical tensions in the Middle East has been straightforward. However, this time, the oil market is bracing for potential fluctuations in tensions between Iran and Israel. Financial market analyst Vandana Hari notes that despite recent attacks by Iran on Israel, there hasn’t been a significant escalation in tensions between the two nations. She predicts that markets will gradually return to pre-tension price levels due to prevailing uncertainties. The future trajectory remains uncertain, with no significant changes observed thus far.
Nevertheless, despite ongoing crude oil exports from the Middle East and the uninterrupted operation of the Strait of Hormuz, a vital passage for 17% of the world’s energy, it’s unrealistic to assume the current situation mirrors that of last week. Recent tensions between the two countries were substantive, and future actions in the region remain uncertain.
Meanwhile, the demand-supply ratio for oil continues to rise. However, recent supply disruptions have led to decreased oil production, while global oil reserves, typically on the rise in the first half of the year, have remained static. If OPEC+ fails to increase its supply, oil reserves may decline in the latter half of the year, potentially leading to another price surge.
An impending market risk, compounded by security tensions in the Middle East, lies in the potential imposition of new sanctions against Iran by the United States. Given Iran’s recent surge in oil production and exports, such sanctions could trigger another uptick in oil prices, with Russia poised to benefit.
Conflicting reports regarding China’s economy have surfaced, with some suggesting a deeper recession while official data indicates a 3.5% increase in China’s GDP in the first quarter of 2024 compared to the previous year, surpassing earlier forecasts.
In the United States, the Federal Reserve has yet to announce any changes in interest rates officially. Overall, global uncertainty prevails given the current circumstances.
As of Wednesday, the price of 180 CST in Singapore stood at $516 USD, while bitumen prices in Singapore and South Korea traded at $410 and $400 USD, respectively. Bahrain’s bitumen price remains steady at $380 USD. In Europe, bitumen prices ranged from $467 to $510 USD.
On April 15, India witnessed a $7.9 USD increase in bitumen prices, underscoring the significant impact of market fundamentals on prices as the country approaches elections.
Bitumen Prices in Iran:
Despite numerous challenges in Iran, including adverse weather conditions and operational slowdowns at ports, the price of bitumen has continued its upward trend. Last week witnessed a notable increase in competition for vacuum bottoms, averaging 8.5%, after several months. It is anticipated that Iran’s vacuum bottom base price will see a considerable increase on Saturday.
