Podcast: The Olefins Weekly Wrap Up
Financial & Capital Markets
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Luka Powell (00:14): Welcome to the Olefins Weekly wrap-up. Today is Friday, February 3rd, and I’m your host Luka Powell.
Pablo Giorgi (00:21): And I am Pablo Giorgi.
Luka Powell (00:23): 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 American Light Olefins Weekly service, otherwise known as the NALO Weekly. This week I am back in London recovering after a week of skiing, which was a lot of fun, but I definitely spent most of my time falling down the mountains rather than skiing. So I’m in a little bit of pain from that.
Pablo Giorgi (00:54): But you know what else has been falling this week? The energy market.
Luka Powell (01:00): So just like me, oil market optimism took a fall this week when on February the second, the Nimex front-month contract fell by $5.13 per barrel from the previous Thursday to close the session at $75.88 per barrel as the market weighed the impact of inventory data. This downward pressure on prices in part came from the EIA reporting a six consecutive build in crude stock, pushing the curve above the five-year rate average. A rise in gasoline and distillate stocks despite relatively low refinery utilizations indicated weak demand though both inventories are firmly below the five-year band. Today, EU countries are negotiating a deal based on a proposal to set price caps on Russian oil products instead of a ban. All 27 Euro EU member states will have to approve the proposal, which would set a price cap of a hundred dollars per barrel on premium Russian oil products such as diesel and a $45 cap per barrel on discounted products such as fuel oil.
Luka Powell (02:03): On February 2nd, Henry hub closes the session at $2.46 per million BTUs reaching new lows in recent records. The weekly EIA storage fell following the five-year average trend. At the same time, the milder the normal weather conditions are likely to keep both demand and prices weak despite Phil the groundhog, seeing his shadow yesterday, forecasting a further six weeks of winter. Moving to NGLs Mont Belvieue ethane prices hovered around 25 cents per gallon, but surged during the latter half of the week, rising to 27.50 cents per gallon on the 2nd of February, despite low natural gas prices. This upward momentum is driven by improved cracking demand as crackers have resumed operations after the winter storm, which lends support to expand the ethane frack spreads. Enterprise announced plans to open a new ethane export terminal by 2025 in its latest earnings call. However, no details regarding the facility’s capacity have been announced yet.
Luka Powell (03:08): On the propane side, on February 2nd, prices in Mont Belvieue for non-tech barrels decreased to 80.3 cents per gallon. A sharp correction of 13.5 cents per gallon compared to last Thursday. Propane inventory witnessed another seasonal drop of 2.4 million barrels per EIA data but remained well above the five-year average. We expect the stock trajectory will stay close to the upper bound of the five-year range exiting the winter as production picks up. From the petrochemical consumption perspective, the enterprise’s PDH two is slated to come on stream in the late second quarter. That does it for energy. Moving on to ethylene.
Pablo Giorgi (03:49): The US ethylene spot market was active this week with DIOS totaling 46 million pounds at the Texas and Louisiana Hubs less active than last week. Ethylene prices were less volatile this week with a range of 21 to 23 cents per pound for February delivery. Margins on a weighted average basis were relatively stable this week. To date, only Bay Port polymers remain offline because of winter storm Elliot. Inventory levels are now estimated to be within the five-year average due to the loss of supply from the freeze but are expected to rise this month as demand remains weak. Of the plants that experienced power outages due to severe weather that passed through Houston on January 24th, only Shell Deer Park remains offline. Some downstream plants in the area took a direct hit that impacted ethylene demand as well. The ethylene forecast did not change this week.
Pablo Giorgi (04:47): See the NALO for more information. The polymer-grade propylene spot market was somewhat active this week with volumes totaling 20 million pounds for February. Delivery prices decreased to 43 cents per pound for February in large part due to easing supply constraints. The refinery grid spot market was active with three pipeline deals recorded for February delivery at 18 cents per pound. On-purpose supply has improved with the restart of the Enterprise Mont Belvieu PDH unit although maintenance is ongoing at Invista’s PDH unit. Steam cracker and FCC propylene availability are already improved versus last month as most units affected by the severe weather and the winter freeze are back online. Due to historically low polypropylene operating rates, monomer consumption into PP is relatively low. Most non-PP derivatives are also struggling with weak domestic demand and monomer uptakes should be low as well. Inventories have dipped below the five-year average. After supply fully rebounds, the market should return to a long position. The Propylene forecast has not changed. See the NALO for more information.
Luka Powell (05:57): 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 if you’d like us to cover something more specific, you can send us an email. Until next time.
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