Crude hikes boost Chinese bitumen futures

Bitumen futures traded on China's Shanghai futures exchange (SHFE) rose by 134 yuan/t this week, bolstered by firm crude prices after Saudi Arabia said it would make a 1mn b/d voluntary crude output cut in February and March.

Brent crude futures were hovering at $54.73/bl today.

The heavily traded BU2101 contract closed today at Yn2,534/t for the prompt month, in the first trading session of 2021. The January contract is due for delivery by 15 January. This was an increase of Yn82/t or 3.3pc from the 6 January trading session and a rise of Yn134/t or 5.5pc from the 4 January trading session, which closed at Yn2,400/t.

The next heavily traded contract BU2103, due for physical delivery by mid-March, saw gains of Yn90/t to Yn2,628/t from the 6 January trading session. This was also up by 5.8pc from the 4 January trading session, which closed at Yn2,538/t.

Trading volumes during today's session for the main January contract (2101) fell by 115 to 922 contracts from the day before. Trading volumes for the next heavily traded contract BU2103 rose by 6,888 from the 6 January trading session to 39,746 contracts. Each contract is 10t.

Chinese physical bitumen cargo prices held stable this week, following a Yn100/t hike before the Christmas holiday. Domestic prices were at Yn2,700/t in east China and around Yn2,900-3,100/t in south China on an ex-refinery basis.

Demand is typically slow ahead of the lunar new year holiday, which falls in mid-February this year.

China's state-controlled Sinopec expects production at its Maoming refinery in south Guangdong province to fall slightly starting from January owing to the firming crude prices. The refiner did not specify by how much.

The rise in crude prices was the sole factor for the increase in bitumen futures, while domestic demand is stable so far this month.

Stockpiling has not started in most areas in China because of the later-than-usual lunar new year holiday this year, which starts on 12 February. Winter stockpiling typically occurs right before the lunar new year holiday, when prices are expected to soften.

By Liz Ng