Oil: A Rollercoaster Ride

The oil market had experienced fluctuations driven by expectations of deeper production cuts at the OPEC meeting. Initially set for the weekend, the meeting’s postponement to November 30 had a brief impact on prices.

Brent futures for January settled at a slight increase of 1%, reaching $81.96 per barrel, while WTI closed at $77.10 per barrel with a 0.6% gain. The market’s attention is now on Saudi Arabia’s decision regarding the extension, gradual phase-out, or expiration of cuts, with significant implications for next year’s oil prices.

Gas: Holiday Softening

Amidst the Thanksgiving holiday week, Henry Hub gas prices softened, falling below $3 per MMBTU to settle at $2.890 on November 22—a notable 8.4% decrease. This reflects the struggle between increasing dry gas production and sluggish demand due to delayed winter onset.

The EIA reported a net withdrawal of 7 Bcf, leaving total inventory 6.8% above the five-year average. Anticipation is high for a surge in heating demand, exceeding seasonal norms, as below-average temperatures are forecasted.

European Gas: Opportunities and Declines

As of November 21, European underground storage levels slightly declined to 98.7% full. The TTF Futures front-month contract dipped to €45.849 per MWh ($14.06 per MMBTU) by November 22.

Lower European gas and LNG prices compared to Asia reignite opportunities for redirecting US-origin LNG cargoes to Asia instead of Europe.

Ethane: Facing Market Pressures

Mont Belvieu ethane prices continued their downward trend, closing at 20.44 cents per gallon on November 22, aligning with a significant decrease in natural gas prices.

The larger relative drop in natural gas prices compared to ethane suggests distinct market pressures. Absent a petrochemical sector recovery, expectations are for ethane prices to remain subdued.

Propane: Winter Challenges

Propane prices at Mont Belvieu Non-TET experienced a slight increase, closing at 63.44 cents per gallon, up 1.4%. This outpaced the marginal rise in crude oil prices.

Ongoing logistical challenges at the Panama Canal, coupled with high propane inventories, are expected to complicate propane flow, especially with the winter season intensifying.

Naphtha: Sensitive to Global Factors

In the Asian naphtha market, prices increased, closing at $656.00 per metric ton. Naphtha crack spreads improved, reaching -8.87 dollars per barrel, indicating a better margin despite rising prices.

The market remains sensitive to geopolitical and economic factors, and the reduction in daily vessel crossings at the Panama Canal is expected to intensify logistical challenges as the industry prepares for winter demand.

Authors

Tracy Cui
Associate Director, Energy Insights

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