Silicone Oil Prices Turn Bearish Across the Globe Amidst Dropping Temperatures

Silicone Oil prices observed a bearish trend in the second month of the fourth quarter across the globe amidst the weakening of global demand and falling temperatures. Prices fell by 8% MoM in November, while YoY prices plunged by 21% in Europe as cost pressure continues to relax as energy and feedstock prices continue to deflate. Silicone Oil prices also showed similar bearish trends in America and Asia, with 4% and 2% MoM drops, respectively.

In the European markets, Silicone Oil prices observed a bearish trend as demand continued to remain weak overall while marginally offset by German markets. German markets observed increased logistic activities and sales of Silicone Oil. Feedstock natural gas prices deflated significantly with Europe destocking natural gas as suppliers are confident in European gas storage. NASA and Copernicus Institute have predicted a warmer winter with lower temperatures, providing impetus for the market to destock, causing natural gas prices to fall by 5% MoM. Silicone Oil markets followed the natural gas trend as market players continued to expect weak demand sentiment. Supply remained adequate with bouts of oversupply in multiple regions. Gas prices are expected to turn bullish in the coming months, with geopolitical conflicts in the Middle East and OPEC+ reducing supplies. Cost pressure continues to persist as high-interest rates prevail in the economy.

In the North American markets, prices of Silicone Oil declined as oil markets turned bearish as the US recorded a high oil output of 13 million bbl/day, making up for OPEC+ cuts amidst weaker demand sentiment to maintain feedstock pricing. US markets continue to observe upstream feedstock active destocking since Q2FY23 as the global economy underperforms. As per several sources,  Global interest rates continue to remain 40% higher than pre-COVID levels, with major countries suffering high debt burdens like Brazil, forcing nations to lower demand sentiment by keeping up the interest rates reflected in US retail data for October 2023. Silicone Oil feedstock turned bearish in North American markets at the beginning of November, while by the last week, as the temperature dropped significantly faster, feedstock Natural gas prices pulled up, forcing major Silicone Oil producers to undertake downturns.

Asian markets, on the other hand, continue to remain oversupplied due to Chinese volumes and high inventory stocks with lower absorption of coming volumes. Chinese manufacturing and logistics index continues to show a positive trend as stimulus by the government continues to support expansion in production and supply activities. Market experts reported that Chinese chemical recovery is partly built on debts offsetting any permanent gains in the future.

ChemAnalyst anticipates further weakening of Silicone Oil prices in Q4FY23 as price pressure cools off, coupled with weaker global demand sentiments. By February 2024, Silicone Oil markets are expected to move upwards as inflation eases, central banks gradually pull their hawkish stance, and demand picks up.