Market Insights: Navigating Recent Trends in Energy and Petrochemicals – Week of 1 January 2024
Oil Markets
The crude oil market experienced a shift in sentiment driven by concerns over disruptions in Middle Eastern supply. The forced shutdown of Libya’s Sharara oil field and escalating tensions in the Israel-Gaza conflict contributed to the unease. Despite initial price surges, the market later gave up some gains.
NYMEX WTI crude futures settled higher from the previous Thursday, while Brent closed lower. Lower fuel demand and subdued economic growth expectations led to a more bearish outlook, with first-quarter 2024 price forecasts revised down.
Gas Markets
Heightened heating demand is expected through mid-January due to colder-than-usual weather patterns. Gas production growth, particularly in the Permian Basin, shows signs of deceleration. Despite this, ample storage volumes mitigate sharp price increases.
In the US, Lower-48 gas storage only dipped, exceeding the five-year average. Henry Hub front month futures settled. In Europe, TTF prices remained flat. While colder temperatures are anticipated, the market fundamentals favor an oversupplied market.
Ethane
Mont Belvieu ethane prices increased to 19.75 cents per gallon, up 13.7% from the previous week. This rise contrasts with a moderate increase in natural gas prices. The significant increase in ethane prices is positive news for producers amid expectations of weak global ethane demand.
Propane
Propane prices at Mont Belvieu decreased to 68.94 cents per gallon, down 3.4% from the previous week. This decline contrasts with a slight increase in crude oil prices. The decrease in propane prices reflects market weakness as winter demand rises.
Challenges in transportation, vessel attacks, and limits at the Panama Canal complicate the free flow of propane.
Naphtha
In the Asian naphtha market, prices fell to $656.25 per metric ton, a 4.9% decrease from the previous week. Naphtha crack spreads tightened slightly to -4.02 dollars per barrel.
Reduced refinery runs in China and limited availability of discounted products from Russia contribute to a tighter naphtha market. Ongoing disruptions in transportation through key canals strain the naphtha supply chain.
Authors
Adrian Calcaneo
Vice President, Energy and Feedstocks | NGL & Naphtha
Tracy Cui
Associate Director, Energy Insights
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