Podcast: The Olefins Weekly Wrap Up – Episode 121
Financial & Capital Markets
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You can also read the transcript of this week’s podcast below.
Luka Powell (00:20):
Welcome to the Olefins Weekly Wrap Up. Today is Friday, May 19, and I’m your host, Luka Powell.
Pablo Giorgi (00:28):
And I am 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.
Pablo Giorgi (00:48):
Anything exciting happening this weekend?
Luka Powell (00:51):
On Saturday and Sunday, it is the Rugby 7s World Cup, which is taking place this time at Twickenham Stadium, where I will be supporting Great Britain.
Pablo Giorgi (01:02):
I love rugby. I’ll be cheering for the Pumas, Argentina’s national team.
Luka Powell (01:07):
Well luckily, Great Britain and Argentina will not be playing each other in the first round. But if they play later in the tournament, let’s hope for a tie.
Pablo Giorgi (01:17):
But you know what else is tied? The bulls and the bears in the energy markets!
Luka Powell (01:22):
WTI prices for June delivery settled at $71.86 per barrel on May 18, following U.S economic data which showed a higher likelihood of another interest-rate hike by the Federal Reserve which would see the dollar reaching a two-month high. On Wednesday, The US Department of Energy announced it is looking to begin refilling the SPR by purchasing 3 million barrels of sour crude. Offers are due by May 31st and scheduled for August delivery.
Henry Hub Natural gas prices settled at $2.6/MMBtu this Thursday. European natural gas prices plunged 6-7% and reached their lowest level in more than 23 months. For the first time since March 20, Northeast Asia was the most favorable notional market for U.S exports.
Pablo Giorgi (02:16):
Moving to NGLS, Purity ethane prices increased this week, from 19.63 cents per gallon last Thursday, to 21.56 cents per gallon this Thursday. Ethane remained between 19 and 22 cents per gallon for the last 30 days. Ethane frac spread, the difference in price between ethane and natural gas, has receded since the peak of 5.6 cents per gallon on May 4, going down to 4.3 cents per gallon on May 18.
Propane prices fell this week, non-TET barrels moved from 65.38 cents per gallon last Thursday to 62.88 cents per gallon this Thursday. According to the Energy Information Administration, inventories remain above the 5-year range maximum, at almost 64 million barrels, equivalent to 89.2 days of supply. That’s the highest level since December of 2022, and the highest level for the month of May since 2019. That does it for energy, now onto ethylene.
Luka Powell (03:21):
The US ethylene spot market was quiet this week, with deals totaling 113 million pounds at the Texas and Louisiana hubs. Ethylene prices settled at 14.38 to 18.00 cents per pound (cpp) for May delivery. The supply surplus that has been building in the market has so far not been affected by the outage at Shell Deer Park caused by a fire on May 5. The complex produces approximately 1.18 million metric tons per year. It is likely though, given the limited information that has made publicly, that at least one of the two olefins units at the site will be out for an extensive amount of time.
This “Black Swan” event has somewhat alleviated the oversupply in the market. Subtle supply builds for the next several months will continue to impact margins and effective operating rates. Effective operating rates continue to be estimated around 91%. This month, the Westlake Calvert City ethane cracker is down for a planned turnaround, but this will not impact the USGC market directly.
Luka Powell (04:28):
New demand expected to consume ethylene this year includes the startup of the Next Wave Energy Partners’ ethylene-to-alkylate plant which has now confirmed the commission of the steam system. Following this announcement, we estimate that feed in will take place in a few months. USGC terminals remain full and monomer exports remain at max rates. Freight rates from the USGC to Northeast Asia have come down from their peaks last month.
Additionally, lower natural gas prices have reduced terminal fees recently. Exports will however be capped this year as the expansion at the Enterprise terminal in Morgan’s Point is said to be delayed till end of 2024 or beginning of 2025. The ethylene forecast has changed this week. See the NALO for more information.
Pablo Giorgi (05:20):
The US polymer-grade propylene spot market was active this week, with 79 million pounds transacted for May delivery. There was also one refinery grade spot transaction this week. Polymer-grade prices were relatively stable this week at around 36 cents per pound. On operations, Heartland Polymers PDH unit shut down for an unplanned maintenance turnaround around mid-April. The unit is expected to be offline for 45 days.
Shell Deer Park facilities had a fire on May 5 that resulted on the whole complex being shut down. The outage is still being assessed and there’s no official timeline for returning to operations. The market is anticipating several months before supply from Shell returns. No major turnarounds are in the forecast. Inventories continue to increase as supply remains steady and demand lags.
Supply from PDH units should increase with Dow’s new FCDh unit starting up in Louisiana and Enterprise’s new PDH entering the market in July. The propylene forecast has not changed this week, see the NALO for more information.
Luka Powell (06:29):
And with that, let’s wrap up the Wrap Up.
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Pablo Giorgi (07:11):
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