Luka Powell
Financial & Capital Markets

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You can also read the transcript of this week’s podcast below.

Luka Powell (00:19):

Welcome to the Olefins Weekly Wrap Up. Today is Friday, July 14th, and I’m your host, Luka Powell.

Pablo Giorgi (00:27):

And I’m Pablo Giorgi.

Luka Powell (00:30):

And together as Chemical Market Analytics, we recap the top events moving the ethylene and propylene markets over the past week. The design of this podcast is to complement the content from the North America Light Olefins weekly service, otherwise known as the NALO weekly. This week I am in Abu Dhabi, so quite a change from the London weather but much more similar to Houston. Like what you’re having, Pablo.

Pablo Giorgi (00:55):

Wait, you left London, the center of sports this week with Silverstone and Wimbledon to be in the center of a humid desert?

Luka Powell (01:06):

I did, but you know what else Abu Dhabi is at the center of? The energy markets!

On Thursday, July 13, WTI settled at its highest level since April 25, with the August contract closing $1.14/bbl stronger at $76.89/bbl after spending much of the afternoon trading above $77/bbl, largely due to weakness of the dollar. Additionally, there were reports of a likely interruption to Libyan supply, which could strip the market of around 300,000 b/d of light sweet crude, in turn instigating some additional gains in a bullish market.

The latest EIA energy outlook forecasts that the Brent crude oil spot price will average $78 per barrel in July, increasing to about $80/b in Q4 this year and to around $84/b in 2024. This forecast is based on the expectation that global oil inventories will decline over the next five quarters.

Natural gas settled at $2.55 per million btu on Thursday, down from $2.61 last week. The EIA expects the Henry Hub spot price to rise over the next few months, following a narrowing of natural gas production declines against the existing surplus of inventories compared with the five-year average. The EIA forecasts that Henry Hub prices will average more than $2.8 per million btu in the second half of this year, up from 2.4 dollars per million btu in the first half of this year.

Pablo Giorgi (02:40):

Moving to NGLS, Purity ethane prices continued their rally this week, going from 26.31 cents per gallon last Friday to 33.22 cents per gallon this Thursday. Ethane prices continued to increase more than natural gas and the frac spread is now just above 16 cents per gallon.

On June 23rd, the frac spread was just above 4 cents per gallon. Despite the rally, other NGLs are also increasing in price.

Non-TET Propane prices went from 56.13 cents per gallon last Friday to 61.63 cents per gallon this Thursday. Propane price ratio to WTI crude oil increased, and is now in the mid 30s percent. The weekly EIA propane stocks report showed another smaller-than-projected increase. Inventories rose by 2.67 million barrels to 83.79 million barrels in the week ending July 7th. Days of inventory rebounded to 106.4 but are still lower than 2 weeks ago, when they were at 111. 3 days.

That does it for energy, now onto ethylene.

Luka Powell (03:53):

Deals in the US spot market this week were much more active compared to last week, totaling 123 million pounds completed at the Texas and Louisiana hubs. Ethylene prices on a simple average basis increased, ranging from 14.75-16.75 cents per pound (cpp) for July delivery.

Despite sluggish demand and rising inventory levels, producers have yet to reduce operating rates. Margins continued to fall in July as spot prices couldn’t keep up with the increase in cash costs, driven by the more expensive feedstocks.

A pipeline explosion and fire outside of the Ineos Chocolate bayou plant was reported on July 13. Workers are in the process of isolating the fire. The content of the pipe and cause of the explosion are unknown at this time, but no injuries were reported.

Regarding ethylene demand, Bayport polymers started up its new PE plant in June, while Nova is expected to startup its new PE line this month. In addition, Next Wave Energy Partners’ ethylene-to-alkylate plant is expected to come online in the next couple months.

The ethylene forecast changed this week. See the NALO for more information. That does it for ethylene, now onto propylene.

Pablo Giorgi (05:08):

The US polymer-grade propylene spot market was quiet this week, with 27 million pounds transacted for July delivery. Prices decreased this week, going from 34 cents per pound last Friday, to 32 cents per pound this Thursday.

Despite prices decreasing only 2 cents per pound, PDH margins decreased more, as propane prices increased during the week, increasing costs by another 2 cents per pound. Enterprise products has started up their PDH 2 unit and achieved on-spec production.

Nevertheless, they’ve had some hiccups since, as is normal at this stage. Heartland Polymers is back up producing propylene and PP, while Phillips 66 issue at their New Jersey refinery and PP plants will take a couple of weeks more to be solved.

The propylene forecast has not changed this week, see the NALO for more information.

Luka Powell (05:58):

And with that, let’s wrap up the Wrap Up.

Pablo Giorgi (06:02):

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Luka Powell (06:40):

Don’t forget to subscribe to our podcast on Soundcloud, Spotify, or wherever you get your podcasts, and give us a like or leave a review if you enjoy it. And if you have questions or want us to cover something more specific, you can send us an email. Until next time.

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