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UBS Investment Research
Asia Oil Explorer
E thylene and PX slumping
Ethylene declines; gasoline rebounds
The ethylene-naphtha spread fell 27% WoW to US$161/t, its lowest level since
Oct’09. However, propylene, PP, MEG and butadiene spreads have been
supportive of cracker profitability. The PX-naphtha spread fell 6.4% WoW closing
at US$441/t, a new low in 2011. The Reuters Singapore complex refining margin
index averaged US$8.7/bbl last week up from an average US$6.1/bbl the previous
week as gasoline rebounded.
US crude and product stocks decline modestly
The WTI crude oil price rose 1.3%, ending last week at US$96.2/bbl, while Brent
rose 5.7%, to US$117.8/bbl. A second week of strong gains pushed prices well
above four-month lows following IEA’s announcement to release 60mbbls of
emergency oil reserves. However, weak US jobs data and increase in interest rates
by China limited gains. According to the US Department of Energy (DOE), for the
week ended 1 July, crude inventories fell 0.9mbbls vs. Reuter’s consensus of a
2.3mbbls draw. Gasoline and distillate stocks fell 0.6 and 0.2mbbls, resp.
Refining stocks have outperformed in the past month
For the month ended 8 July and based on simple average performance, refining and
marketing stocks in Asia under UBS coverage rose 3.6%, while, on an average,
E&P and integrated stocks fell 0.9% and 0.1%, respectively.
Top picks
Our most preferred stocks in Asia are Sinopec, SinoTech, PTT Chemical, Reliance
Industries and SK Innovation.
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