Market Insights

Market Insights

Podcast: The Olefins Weekly Wrap Up – Episode 120


Podcast by

Pablo Giorgi
Global Olefins

Luka Powell
Financial & Capital Markets

Our podcasts are available on all leading platforms including SoundCloud, Spotify & Apple.

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, May 5th, and I’m your host, Luka Powell.

Pablo Giorgi (00:27):

And I am Pablo Giorgi.

Luka Powell (00:29):

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.

Pablo Giorgi (00:47):

So Luka, anything exciting happening this weekend?

Luka Powell (00:51):

Yes, indeed. This weekend it is King Charles’ coronation, which is taking place in London, so spirits are high!

Pablo Giorgi (00:59):

But you know what isn’t high this week? The energy markets!

Luka Powell (01:06):

Crude oil pricing is continuing its downward trajectory. WTI prices for June delivery settled at $68.56 per barrel on May 4. On 27 April, WTI front-month contract price settled at $74.76 per barrel, and ICE Brent closed at $78.61 bbl, This follows higher interest rates and negative consumer spending. While China’s demand continues to trend upwards, it is slower than previously expected. Russian-originated refined products have forged ahead with export bouncing back to 5.7 million barrels per day in March, reaching 75% of the historical pre-Ukraine invasion average.

Asia naphtha prices have been falling alongside softer crude valuations. The weak naphtha crack spreads, continue to unveil loosening fundamentals driven by persistent sluggish petrochemical demand, extensive turnarounds. In addition, Russian barrels successfully making their way to Asia will likely keep the supply at a comfortable level, pressuring the crack spreads.

On the other hand, demand for heavier naphtha grades remained resilient thanks to robust gasoline consumption coping with rising driving demand. Henry Hub natural gas prices settled at $2.1/MMBtu this Thursday, relatively stable compared to crude oil. This is largely because it was already cheap in the first place. In an oversupplied market, cost drives prices and there wasn’t much room for prices to fall any further. In Europe, natural gas prices dropped 2-3% and descended to their lowest level in more than 22 months.

Pablo Giorgi (02:56):

Moving to NGLS, Mont Belvieu prices declined this week. Purity ethane declined slightly, going from 21.13 cents per gallon last Friday to 19.56 cents per gallon this Thursday, as natural gas didn’t lose much ground either. Propane prices fell more this week, non-TET barrels moved from 74 cents per gallon last Friday to 63 cents per gallon this Wednesday, and then rebounding on Thursday and closing at 64.88.

According to the Energy Information Administration, average propane consumption during the three coldest winter months (December, January, and February) averaged 1.1 million barrels per day, the lowest on record since EIA started collecting the data for those three months, with warmer-than-normal temperatures. As a result, propane inventories are now above the 5-year maximum, at 58 million barrels.

That does it for energy, now onto ethylene.

Luka Powell (03:54):

The US ethylene spot market was quiet this week, with deals totaling 96 million pounds at the Texas and Louisiana hubs. Ethylene prices trended lower this week, closing between 14.88 to 18.75 cents per pound for May. Inventories were revised down based off lower first quarter production reported by the American Fuel and Petrochemical Manufacturers Trade Association (AFPM) and higher first quarter demand reported by the American Chemistry Council (ACC). Inventory levels are expected to rise again this month after bottoming in March, due to supply returning to the market.

Supply builds this month and next month will impact margins and effective operating rates. Supply returning to the USGC market includes the Bayport Polymers (Baystar) Port Arthur ethane cracker delayed restart, the Shintech Plaquemine ethane cracker outage, and the Chevron Phillips Sweeny mixed feed unit planned turnaround.

In Canada, the NOVA Chemicals’ ethane cracker in Corunna, Ontario was said to have restarted last week after being offline for nearly a month after experiencing an unplanned outage that prompted the company to declare force majeure on polyethylene. The export arbitrage window to Asia was marginally open this week while the trade arbitrage to Europe was closed. The USGC export terminals continued to operate at full rates.

The ethylene forecast has changed this week. See the NALO for more information.

Pablo Giorgi (05:27):

The US polymer-grade propylene spot market was quiet this week, with 14 million pounds transacted for May delivery. There were no refinery grade spot transactions this week. Polymer-grade prices fell this week along with crude oil and propane. Last Thursday, propylene crossed the 40 cents per pound threshold, trading at 38.75 cents per pound. This week, prices went down to 35 cents per pound on Thursday. If this price level incentivizes additional derivative exports, prices could stabilize. However, with an oversupplied global market, we can expect even lower prices.

On operations, Heartland Polymers PDH unit shut down for an unplanned maintenance turnaround last week. The unit is expected to be offline for 45 days. Refinery maintenance turnaround season this spring was heavier than usual, but it’s almost over. Inventories continue to increase as supply remains steady and demand lags. Supply from PDH units should increase with new capacity entering the market in July.

The propylene forecast has changed this week, see the NALO for more information.

Luka Powell (06:33):

And with that, let’s wrap up the Wrap Up.

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Pablo Giorgi (07:13):

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. And if you have questions or want us to cover something more specific, you can send us an email. Until next time.

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