Gulf petrochemical exports, riding on high oil prices and increased production capacity, have surged in value in the past quarter.
But as production in the GCC and China continues to grow in the next two years, a supply glut could hurt those gains, analysts say.
The value of exports from Saudi Arabia, the Middle East's largest petrochemical producer, increased 32 per cent in the third quarter. This coincides with a rebound in the price of ethylene, a building-block petrochemical, which has gained about 14 per cent in the past two months - from about US$1,055 per tonne at the start of October to about $1,205 per tonne this week.
Much of the increase in production can be traced to new Gulf facilities coming online, including nine steam crackers in the past three years, said Tony Potter, the managing director of Chemical Market Associates in Dubai.
By 2012, the GCC region and Iran will have doubled production capacity to 30 million tonnes of ethylene per year, from 15 million tonnes in 2007, it is forecast.
That projected rise includes Qatar Petroleum and Shell's agreement to jointly explore a $6 billion (Dh22.03bn) petrochemicals complex, the Abu Dhabi-owned ChemaWEyaat's plans to build an industrial city to house one of the world's biggest benzene plants, and Saudi Aramco's joint venture with Dow Chemicals, based in the US, for a production centre in Al Jubail that has been valued at $17bn to $25bn. Gulf producers expect that boost in supply to be absorbed by China, which has added more than 5 million tonnes of ethylene capacity on its own turf in the past two years.
"The question is: will China's growth slow down?" Mr Potter said.
"But at the moment it's still going strong."
As planned steam crackers use up feedstock allocations, Gulf production levels could become more vulnerable to temporary shutdowns, he added.
"Now that they've invested, they've sort of used up the readily available ethane," Mr Potter said. "If there's any sort of interruption upstream, it can have an impact."
But he did not expect regional production fluctuations to affect pricing, traditionally determined by North American and western European producers who rely on naphtha, a light oil, as their main feedstock.
Oil prices will be hard to predict next year, taking into account a long-term increase in petrochemicals demand alongside paper trading of oil on speculative markets, Mr Potter said.
Dr Abdulwahab al Sadoun, the secretary general of the Gulf Petrochemicals and Chemicals Association based in Dubai, said Asian demand would be sufficient to absorb additional supply, and that the GCC retained advantages in shipping proximity to east Asia and its relatively new infrastructure.
"I expect the expansion drive in Saudi Arabia and the Gulf to gain momentum in the next few years," Dr al Sadoun said. "There is strong demand for the product."
The dramatic increase in production by Gulf companies could signal an eventual attempt to price European and North American manufacturers out of the market, said Samuel Ciszuk, a regional energy analyst for IHS based in London.
"What a lot of [Middle East] producers would be hoping for would to be to create some sort of bloodbath," Mr Ciszuk said.
Gulf producers, particularly in Saudi Arabia, have recently become the subject of anti-dumping charges from countries such as India, which accuse Gulf companies of selling goods below the cost of production.
* with Bloomberg