US White Oil Prices Stabilise Amidst Surging Freight Charges and Uncertain Supply Conditions

In the second week of May 2024, the US White Oil market experienced a period of stabilization, a result of steady demand and consistent pricing of its primary component, Crude Oil. This unwavering Crude Oil pricing played a crucial role in maintaining White Oil prices without significant fluctuations. According to the Energy Information Administration (EIA), US crude oil refinery inputs averaged 17.1 million barrels per day during this period, showing an increase of 601,000 barrels per day from the previous week. With refineries operating at an impressive 94.3% capacity, the supply chain for White Oil within the country remained robust.

Concurrently, freight rates from Asia to North America saw a surge at the start of May 2024, with monthly charges escalating by over 50%. This surge necessitated the importation of White Oil into the US at elevated costs due to shortages of containers and vessels, compounded by the adoption of longer shipping routes to bypass congestion in the Red Sea. Furthermore, the looming implementation of tariffs and tax structures on Chinese Petrochemicals added complexity to the White Oil supply dynamics.

In response to these trade hurdles, Chinese manufacturers intensified their efforts to globalize their manufacturing, assembly, and distribution processes. This move aimed to navigate the challenges posed by trade barriers effectively. On a global scale, petrochemical manufacturing facilities in the US, Europe, and parts of northeast Asia faced closures due to China's overcapacity, exacerbating strains on the White Oil supply chain.

Demand-wise, White Oil experienced a moderation as optimism for US consumer spending waned in the second quarter of the year. Concerns over inflation, dwindling personal savings, and perceived weaknesses in the labour market contributed to this cautious consumer sentiment. Semi-discretionary spending, including personal care products and cosmetics, followed seasonal patterns, with downstream industries of White Oil witnessing reduced spending amidst persistent inflationary pressures, as reported by the US Department of Commerce, which noted a 0.3% increase. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased by 0.2% in April after a downwardly revised 0.7% rise in March, according to US Bureau of Labor Statistics.

Looking ahead, White Oil prices are expected to climb due to increased demand from downstream industries such as personal care and cosmetics, driven by seasonal trends. Additionally, the escalation of freight costs, driven by congestion in Singapore and the Strait of Malacca, is anticipated to further inflate import expenses of White Oil in the US market.