Podcast: The Olefins Weekly Wrap Up – Episode 125
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 June 30th and I’m your host, Luka Powell.
Pablo Giorgi (00:26):
And I am Pablo Giorgi.
Luka Powell (00:28):
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. We’re back this week after I was away last week for a music festival
Pablo Giorgi (00:51):
Wow. How was it? Who was your favorite artist?
Luka Powell (00:55):
Tough question! There were 3,000 acts so plenty of amazing performances.. But I really loved watching the Chicks and of course Elton John’s last ever performance was pretty special.
Pablo Giorgi (01:10):
3000 performers?! That is crazy.
Luka Powell (01:14):
It was crazy. So while I had the best time, I’m pretty happy to be back on stable grounds.
Pablo Giorgi (01:21):
But you know what else is on stable grounds? The energy markets!
Luka Powell (01:26):
On Thursday, June 29, WTI prices for August delivery settled at $69.86 per barrel. Prices have been stable, hovering around the $70 mark. This comes as the market grapples with various factors. Most pertinently, the potential for rising interest rates and concerns about a global recession. Furthermore, OPEC has indicated this week that it will discuss making the latest production cuts permanent during their upcoming meeting.
Additionally, there is the uncertainty surrounding the declining US crude oil inventory, which now sits 6.6 million barrels below the five-year average. The U.S. oil and gas rig count increased by four rigs this week, breaking a six-week decline which totaled 60 rigs, and bringing the total count to 747. Although this is an improvement, it is still 14% lower than the 866 total at the beginning of the year.
Pablo Giorgi (02:26):
Moving to NGLS, Purity ethane prices increased this week, going from 22.25 cents per gallon last Thursday to 25.38 cents per gallon this Thursday. Although it was a big increase for one week, natural gas continues to be the main driver there is just a delay as natural gas prices increased more than ethane earlier in the month.
Non-TET Propane prices decreased one cent from last week to 53.63 cents per gallon this Thursday. Propane price ratio to WTI crude oil continues to be in the low 30s, at 32% this Thursday.
Propane inventories in the US increased by 2.6 million barrels in the week ending on June 23, according to the Energy Information Administration, reaching 79.6 million barrels, equivalent to 111.3 days of supply.
Last year in this same week, the propane inventory was at 52.5 days of supply. 111 days is the highest value since august of 2016. That does it for energy, now onto ethylene.
Luka Powell (03:34):
Deals in the US spot market this week totaled 123 million pounds completed at the Texas and Louisiana hubs. Ethylene prices on a simple average basis decreased, settling at 14.00-16.13 cents per pound for June delivery.
Producers continue to produce at high operating rates as long as margins remain positive. The spot margin over the weighted-average cash cost is expected to average around over 3 cents per pound this month. Therefore, we anticipate producers will run at high rates.
The restart of the Formosa Point Comfort mixed feed unit that went down last year will be dependent on improving market conditions. Inventory levels for this month are estimated to be slightly higher than the five-year average but are expected to surge above the five-year range by July if producers don’t slow down and demand remains low.
Based on estimated terminal fees and freight rates, the price deltas between the US Gulf Coast and other regions are not enough to yield positive margins and the arbitrages are technically closed.
Though freight rates have come down significantly after peaking in late March, European and Asian prices have fallen at a faster rate with freight rates lagging. Trade data will show the impact of the closed export arbitrage within the next few months.
The ethylene forecast changed this week. See the NALO for more information.
That does it for ethylene, now onto propylene.
Pablo Giorgi (05:06):
The US polymer-grade propylene spot market was quiet this week, with 17 million pounds transacted for June delivery. Prices came back down this week, after a couple of weeks of price increases. After peaking at 36 cents per pound last Thursday, prices decreased to the low 30s, mostly between 32 and 33 cents per pound.
The last deal recorded this reporting week, from Friday to Thursday, was 33.25 cents per pound this Wednesday. Prices came down after some supply constraints were resolved last week, especially in some refinery grade splitters.
The June 45-day weighted-average price is now 33.30 cents per pound, a decrease of 2.19 cents per pound from the May 45-day weighted-average price. The June polymer grade contract settled this week at 35 cents per pound. A lot of supply is coming to the US market in the next few weeks.
Heartland Polymers PDH unit is restarting in Canada, while Phillips 66 should restart their FCC and polypropylene plant in the Northeast soon.
Pablo Giorgi (06:11):
In Texas, Enterprise Products is about to start up their new PDH unit with a capacity to produce 750 thousand metric tons of propylene per year, or 1.8 billion pounds. The forecast remains bearish, as no incremental demand is coming to offset the new supply.
The propylene forecast has changed this week, see the NALO for more information.
And with that, let’s wrap up the Wrap Up.
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Luka Powell (07:14):
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