Market Insights: Navigating Recent Trends in Energy and Petrochemicals – Week of 18 December 2023
In the ever-evolving landscape of global energy markets, recent events have sent ripples through various sectors, shaping the trajectory of oil, gas, and related commodities. This blog delves into the key developments that have influenced market dynamics, focusing on oil, gas, ethane, propane, and naphtha.
Oil Market Overview
The oil market experienced a second consecutive weekly gain, breaking a seven-week decline. The driving force behind this uptick was the disruption in maritime trade along the Red Sea, leading to increased costs for re-routing and insurance. Notably, ICE Brent futures climbed to $79.39 per barrel, and NYMEX WTI futures rose to $73.89 per barrel on 21 December. However, the momentum waned after Angola’s departure from OPEC, raising concerns about the unity of OPEC+.
Meanwhile, the US sustained its remarkable growth in oil production, reaching 13.3 MMb/d, a 10% increase from the previous year. The market remains uncertain, with factors such as OPEC cohesion, oversupply conditions, and demand concerns contributing to the volatility.
Near-term forecasts have been adjusted downward in response to these uncertainties.
Gas Market Update:
The Henry Hub price witnessed a modest increase to $2.572 per MMBTU on 21 December, driven by factors such as ample underground inventories and high domestic gas production.
Despite recent Red Sea attacks causing shipping concerns, both TTF and Asia spot LNG prices dipped due to muted demand in major regions. With below-normal heating demand expected to persist, limited price increases are anticipated in the near term.
Ethane Market Analysis
Mont Belvieu ethane prices declined to 18.12 cents per gallon, reflecting a 7.1% drop from the previous week. This contrasts with a slight increase in natural gas prices. The decline in ethane prices underscores reduced demand in the ethane market, attributed to overbuilt global ethylene capacity. This trend is expected to continue in the coming months.
Propane Market Insights
Propane prices at Mont Belvieu Non-TET experienced a marginal increase, closing at 68.00 cents per gallon, a 1.5% rise from the previous week. This contrasts with a more substantial increase in crude oil prices. The limited vessel capacity at the Panama Canal and recent vessel attacks in the Red Sea contribute to congestion, impacting the flow of products from the Middle East to Europe.
Naphtha Market Dynamics
In the Asian naphtha market, prices rose to 678.50 dollars per metric ton, marking a 2.3% increase. Naphtha crack spreads tightened, attributed to reduced refinery runs in China and lower Russian exports due to adverse weather conditions in the Black Sea. Vessel capacity constraints at the Panama Canal, along with disruptions in the Red Sea and Suez Canal transport routes, further strain the naphtha supply chain.
The global energy landscape is marked by intricate interplays between geopolitical events, production dynamics, and demand fluctuations. As we navigate these complexities, staying informed about the latest market developments becomes crucial for businesses and stakeholders alike.
Vice President, Energy and Feedstocks | NGL & Naphtha
Associate Director, Energy Insights