Price Fall in India
In the last week, there have been no particularly fundamental incidents in the international arena, the effects of which could have serious repercussions on the economic trend of the market. The only noteworthy point is the ongoing war between Russia and Ukraine after 155 days. Attacks on Ukraine’s western fronts continue. On the other hand, Europe has raised interest rates by around 0.5% in the last week after 11 years. The reason for this increase lies in the fact of inflation of 8.6% in Europe in 2022.
The price of oil has fluctuated less than in previous weeks. Brent crude has fluctuated in the USD 102-108 range. The reason for this increase was Russia’s threat to Europe to stop shipping its gas there. At the time of writing, it was trading at the USD 108 level. The current potential threat to the international market is the massive COVID-19 outbreak in several countries. However, with proper vaccination, fewer mortality rates are expected. In our report last week, our team mentioned that despite the fact that there was a recession in the various regions, vb prices may have fallen by up to 16%, causing some momentum in the market. Although some markets like India were worried about lower bitumen prices by their local refiners, they had been buying more compared to previous weeks, which may be a sign of the mentioned momentum. The market is waiting for the next announcement from India on August 1 regarding its bitumen price and the amount of its reduction which should be around US$20-25.
What Lies Ahead?
Previous estimates called for further declines tempered by strengthening crude prices. Knowing that last week and after a 16% drop in bitumen price in Iran, when packaged bitumen prices reached below $400 FOB Bandar Abbas after 6 months, it seems that bitumen prices are falling after India and if there will be no particular fundamental event in the market, there will be an appropriate pull in the market depending on the prices available. On July 27, Singapore’s bulk bitumen was at US$553-557, roughly US$10 growth, and Korea’s 60/80 bulk bitumen was at US$498-502, stable. Due to falling bitumen prices in Iran, its rates were attractive to other markets, so they are looking for an arbitrage opportunity and trying to buy from Iran instead of Singapore.
Given the downward trend in exports in recent months, transportation costs are falling accordingly and it may be another effective factor in market dynamics besides the falling bitumen price. It must be admitted, however, that the market has not yet found its attractive shape and the demand is much lower than expected.
