Podcast: The Olefins Weekly Wrap Up
Financial & Capital Markets
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Welcome to the Olefins Weekly wrap-up. Today is Friday, December 16th, and I’m your host Luka Powell.
And I am Pablo Giorgi.
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, the World Cup Finals of this weekend, Pablo, who do you think will win?
Don’t jinx it. I’m not talking about it until next week.
Next week is also when most of us will be going on a holiday break. So things are starting to quieten down, but you know what is not taking a break for the holidays, the energy markets.
WTI prices at Cushing for January delivery settled at $76 and 11 cents per barrel on December 15th, up $4 and 65 cents per barrel from the previous Thursday. Prices have increased as refineries have been looking for ways to replace Canadian crude oil that usually flows through the Keystone Pipeline. The 2,700-mile Keystone pipeline shut down on December 7th after a rupture in Kansas spilled an estimated 14,000 barrels of crude oil, the largest leak in the pipeline’s history. More than 600,000 barrels of crude oil flow through the pipeline system each day from the Canadian province of Alberta through the Midwest and to the US Gulf Coast. It is one of nearly two dozen that passed through the oil storage facilities at Cushing, Oklahoma. The delivery point for West Texas Intermediate crude oil is negotiated at the New York Mercantile Exchange or Nymex. Nevertheless, prices came off around $1 per barrel on Thursday after the pipeline’s operator announced it had started part of the pipeline again.
Henry Hub natural gas prices settled at $6 and 97 cents per million Btu on Thursday, up from $5 and 96 cents per million Btu last Thursday. Although the National Oceanic and Atmospheric Administration’s seasonal outlook continues to be for a warmer-than-average winter next week, most of the country will be impacted by an Arctic blast that should bring very low temperatures. The latest EIA short-term energy outlook forecasts US natural gas production to average 100.4 billion cubic feet per day next year, up from last month’s forecast of 99.7 billion cubic feet per day. According to the EIA, although we continue to expect natural gas production in the Permian Basin to be limited early in 2023 by the lack of pipeline capacity to bring associated natural gas production to the market, we expect these constraints will be resolved earlier than we had previously assumed. Moving to NGLs Mumba view, ethane prices closed at 39 points 13 cents per gallon on December 15th, up from 34 point 19 cents per gallon last Thursday, bringing the month-to-date average to 37 points 17 cents per gallon. The frac spread, the difference between ethane and natural gas prices is negative again. This is a sign of an oversupplied market that needs ethylene and derivative exports to increase to balance itself. On the Propane side, Mont Belvieu non-TET barrels prices closed at 67.88 cents per gallon on December 15th, up around 2.50 cents week over week. That represents 37% of WTI crude oil prices still a very low proportion, especially for this time of the year. That does it for energy. Moving on to ethylene.
The US ethylene spot market was active this week with deals totaling 57 million pounds completed at Texas and Louisiana hubs. Overall, ethylene prices remained relatively stable through most of the week, increasing slightly on Thursday, where it closed at Mont Belvieu at 20.88 cents per pound against an average month to date-at 19.55 cents per pound. If natural gas and ethane prices rise during the upcoming cold spells, this will transfer into higher ethylene prices. No operational disruptions were reported this week while the outages at Eastman Longview and B A S F Total Port Arthur continued. As a result, the ethylene surplus persists amid weakening demand. US ethylene inventories are above the five-year maximum level and will likely remain high over the next few months. As mentioned last week, polyethylene exports increased reaching 2.1 billion pounds in October, the largest amount since January 2021. More polyethylene capacity from Bayport Polymers and NOVA Chemicals is expected in the first half of 2023. Shell’s, new cracker in Pennsylvania should reach full capacity in the second half of the new year. While these higher exports are an improvement, a greater increase is necessary to help clear the market. The forecast for ethylene has changed. Check out the Nalo Weekly for more details.
The polymer-grade propylene spot market was active this week with 40 million pounds recorded for December delivery. Overall, prices stayed low for the first part of the week around 29 cents per pound on December 13th. Enterprises p DH had an outage due to a power failure. In addition to the ongoing Invista PDH maintenance turnaround, tightening the market and driving prices higher. On Thursday, December 15th, polymer grid prices went up to 32.75 cents per pound for December delivery. Enterprises PDH was originally expected to come back in a couple of days, but it might have instead started the maintenance work scheduled for February of next year, and that should take two to three weeks. The refinery grade problem market was mute with no deals recorded this week. The polymer-grade propylene forecast was changed this week. Check out the Nalo for more information. And with that, let’s wrap up the wrap-up.
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. If you have any questions or would like us to cover something more specific, you can email us. The nalo weekly wrap-up will take a break for the next couple of weeks, and we’ll be back until January 6th. Happy holidays, everyone. Until next time.
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