Luka Powell
Financial & Capital Markets

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Luka Powell (00:13): Welcome to the Olefins Weekly wrap-up. Today is Friday, February 10th, and I’m your host Luka Powell.

Pablo Giorgi (00:21): And I am Pablo Giorgi.

Luka Powell (00:24): 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. So Pablo, any news to share with us this week?

Pablo Giorgi (00:45): News, what news? It’s Super Bowl week.

Luka Powell (00:51): Well, I’ll also be watching from London this weekend to see the Philadelphia Eagles versus the Kansas City Chiefs. I think it’ll be a crazy one.

Pablo Giorgi (01:01): But you know what else is crazy? The energy markets.

Luka Powell (01:07): WTI Prices at Cushing for March delivery settled at $78.06 per barrel on February 9th, increasing by $2.18 from the previous Thursday. The EIA report last Wednesday showed total commercial crude oil stocks have built, continuing the trend of the proceeding six weeks. The cumulative build over this period amounted to 36.9 million barrels, and the SPR remains stable at 371.6 million barrels. The EU ban on Russian seaborne crude oil product imports, including diesel and naphtha, began this week. Russian diesel will be capped at a hundred dollars per barrel. A $45 price cap will also apply to products that settle at a discount. Similarly to the price cap on Russian crude buyers outside of the EU can continue to access Western insurance and cargo financing as long as they comply with the price cap. In response to these caps from next month, Russia will cut oil production by 500,000 barrels a day, the equivalent of almost 5% of Russia’s production or 0.5% of the world supply.

Luka Powell (02:16): Despite a strong inventory draw for the week ending 2nd of February, the market remains sluggish as though are no signs of more frigid weather to come. Moving to NGLs Mont Belvieu, ethane prices on Thursday averaged 25.80 cents per gallon, a decline of 1.60 cents per gallon from last Thursday. This decrease follows the pattern observed in the natural gas market. The frac spread is still healthy nevertheless. Low ethane prices have supported competitive ethylene costs from the United States Gulf Coast, especially as naptha regains strength against crude oil. Despite a strong inventory draw for the week ending 2nd of February, the market remained sluggish as there were no signs of more frigid weather to come. In its short-term energy outlook., the EIA forecast that Henry Hub natural gas spot prices would average 3.4 million per barrel this year, or 30.5% lower than the 4.9 million dollars per barrel forecast from last month. On the propane side on Thursday, non-tech prices in Mont Belvieue saw a significant boost rising by 6.4% to reach 85.50 cents per gallon from the previous Thursday. This price hike came after the EIA reported a substantial inventory withdrawal combined with an overall strengthening in crude oil prices. Since the winter storm production has struggled, falling roughly 0.2 million barrels a day against the pre-storm levels, though slightly above the figures at the same time last year. Exports have remained robust, but attention was being paid to the upcoming operation of three new PDH plants in China, which are expected to come online in the first quarter and consume around 80 million barrels a day of propane if running at maximum capacity. As the season heating demand diminishes, we expect the stock will return to the upper bound of the five-year range as production picks up and the exports will be the key mechanism to inventory management. That does it for energy. Moving on to ethylene.

Pablo Giorgi (04:20): The US ethylene spot market was active this week with deals totaling 112 million pounds at Texas and Louisiana hubs, much more active than last week. Ethylene prices trended lower this week, ranging from 17.13 to 21.75 cents per pound for February delivery. Margins on a weighted average basis were relatively stable again this week. To date, Bay Port polymers are still offline as a result of winter storm Elliot. Shell’s Deer Park plant remains offline due to the tornado that hit Houston on January 24. Additionally, ExxonMobil’s Baytown mixed feed cracker is currently offline for planned maintenance, but is expected to restart at the end of this month or the beginning of the next month. Inventory levels are now estimated to be within the five-year average due to the loss of supply from the December freeze, but are expected to recover this month as the demand remains weak.

Pablo Giorgi (05:29): The ethylene forecast did not change this week. See the NALO for more information. The polymer-grade propylene spot market was somewhat active this week with volumes total in 27 million pounds for February delivery. Prices reversed course and increased all the way up to 51 cents per pound to blame the lack of availability at the Mont Belvieue hub. The refinery-grade spot market was not active. Supply was reduced again as enterprises PDH shut down on Wednesday morning. Splitters at Mont Belvieue were also using less propylene. Maintenance continues at Invista’s PDH unit. Demand continues to be low on all derivatives. The propylene forecast has changed. See the NALO for more information.

Luka Powell (06:16): And with that, let’s wrap up the wrap-up. Join us in Houston at the World Chemical Forum, a new three-day event set for September 2023 that will redefine chemical industry conferences. It’s presented by us, Chemical Market Analytics with participation from the Wall Street Journal and Barron’s. This conference will provide you with deep-dive insight into your commercial challenges and enable you to take immediate action to meet them. Don’t miss out and register now. 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 you’d like us to cover something more specific, you can send us an email. Until next time.

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