Middle East and North African (MENA) petrochemical companies will see better margins within the next two quarters and operating rates are likely to inch higher even as a severe demand slowdown could test the exporting ability of the region, Credit Suisse said. Credit Suisse upgraded Yansab (Yanbu National Petrochemical Co), Sahara Petrochemical Co and Advanced Petrochemical Co to "outperform" from "neutral," but downgraded Industries Qatar to "neutral" from "outperform." "We believe the worst is over for margins of primary derivatives of ethylene and propylene," the brokerage said and raised its price forecasts on ethylene products and polypropylene. Margins of key primary derivatives of ethylene and propylene underwent heavy decline following the second quarter of 2011 - a trend that continued well into the fourth, in some cases to decade lows, noted Credit Suisse. A Chinese slowdown would impact world demand and operating rates significantly for MENA manufacturers. While stagnation in Europe could affect MENA companies, it will not hit them as badly as it hits their European counterparts, the brokerage said. "Petrochemical plants with a strong operating track record can offer access to attractive cash flows," said Credit Suisse and listed Yansab and Advanced Petrochemical as "attractive" stocks. This week, petrochemical stocks have been on the rise over rising fuel costs. The petrochemical index up 0.4 percent on Feb 8. Oil prices were expected to trend higher as an improved US economy and geopolitical risk in the Middle East weigh on markets, OPEC said. The Organization of the Petroleum Exporting Countries in its monthly market report for February found prices were moving up. This, said OPEC, was attributed to a “bullish” US economy and “revived geopolitical tensions in the Middle East, which helped to boost the risk premium in crude oil prices.” It added, however, that demand for oil would drop from 1 million barrels per day to 900,000 barrels per day for 2012. OPEC said some of its optimism was offset for uncertainty in the economic viability and the credit downgrades for some European countries. “Recent economic setbacks have pushed the global demand forecast lower,” OPEC said. OPEC said its members need to provide around 30 million bpd to the global market for the year, a decline in the forecast from the January report.
