Construction Industry braces for price hike in Bitumen
In a volatile twist of events, the global oil market is once again sending shockwaves through the construction industry.
On September 6, the Asian trading session witnessed a surge in oil prices, sparking concerns over supply shortages. This surge can be attributed to Saudi Arabia and Russia’s unexpected extension of voluntary production cuts until year-end.
Future crude oil prices soared to $90.18 USD per barrel, marking a 14-cent increase. Meanwhile, WTI (West Texas Intermediate) settled at $86 USD per barrel, reflecting an 81-cent hike.
Investors were initially anticipating an extension of production cuts only until the end of October. The unforeseen three-month extension has sent ripples of uncertainty throughout the market.
Jorge Leon, Senior Vice President at Rystad Energy, weighed in on the matter, stating: “These bullish moves significantly tighten the global oil market and can only result in one thing: higher oil prices worldwide.” He further noted, “The impact these cuts will have on inflation and economic policy in the West is hard to predict, but higher oil prices will only increase the likelihood of more fiscal tightening, especially in the U.S.”
Simultaneously, the U.S. Energy Information Administration reported the highest level of U.S. crude oil production in June since February 2020. This move was aimed at preventing further increases in crude oil prices.
Across the globe, challenges persist. Chinese factory production remains below desired levels, with weaknesses in China’s economy hindering the improvement in oil prices. However, OPEC+ actions to bolster prices have led to modest market growth in recent weeks, a development likely to have long-term negative effects on the global economy.
In another strategic move, the Bank of China (BOC), one of China’s four commercial governmental banks, opened its first branch in Riyadh, Saudi Arabia’s capital. This step is expected to expand the use of the Chinese Yuan in economic and commercial affairs and foster business relationships among BRICS members.
In Europe, there is a notable shift in economic indicators, with the inflation rate turning one-digit for all 20 Eurozone members for the first time since November 2021, marking a 21-month milestone.
Turning our attention to the bitumen market, Singapore’s HSFO CST180 experienced significant price increases, reaching $528 USD after a period of stability. Meanwhile, Singapore’s bulk bitumen price has climbed back above $500 USD, while South Korea’s bitumen price settled at $430 USD. Bahrain’s bitumen price remained unchanged at $440 USD.
In Europe, bitumen prices have seen a slight uptick, and in India, reports suggest an impending $10 USD increase in bitumen prices on September 15, following a surge observed on September 1. This would mark the second consecutive month of rising bitumen prices in India.
The Iranian market, which previously endured a period of recession, has experienced a turnaround. The base price of all petrochemical products in Iran has surged by approximately 38% following a decision by the Iran Mercantile Exchange (IME). Additionally, refineries engaged in fierce competition, pushing prices up by as much as 45%. Consequently, bitumen prices in Iran have once again witnessed an increase.
With the ongoing shortage of containers, the conclusion of the monsoon season in many markets, crude oil prices exceeding $90 USD, and fierce competition among manufacturers, it is prudent for the construction industry to prepare for rising bitumen prices across all markets.