Russia Petrochemicals Q4 2018
With oil prices set to rise above USD70/bbl in 2018 and 2019 as a result of sanctions on Iran, Russian oil prices are set torise and should stimulate the local petrochemicals market. However, this trend will also raise naphtha feedstock costs, which areindexed to oil prices, and this could undermine the competitiveness of Russian petrochemicals production. Where the market is insurplus, we can expect to see margins put under pressure as local producers compete with imports from countries with feedstockcost advantages, particularly the Middle East, and seek to export. However, for much of 2018, the Russian polymer market was tightand although this drove up prices - and in turn margins - the competitiveness of local petrochemicals production ensured that risingimports did not undermine local operating rates. In the likely event that in the 2020s, oil prices return to the USD90-100/bbl levelseen before 2014, producers have the option to utilise more feedstock from the country's immense ethane resources and diversifyfeedstock. Feedstock flexibility, as well as product diversification, will be key to growth in Russian petrochemicals capacity.
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