Luka Powell
Financial & Capital MarketsLuka Powell (00:1

Luka Powell (00:16):

Welcome to the Olefins Weekly Wrap Up. Today is Friday, December 15th, and I’m your host Luka Powell.

Pablo Giorgi (00:24):

And I’m Pablo Giorgi.

Luka Powell (00:26):

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 holidays are right around the corner, and I’ll be spending it in London for the first time. What are you up to, Pablo?

Pablo Giorgi (00:51):

I’ll be going with the family up north to Jackson Hole, Wyoming.

Luka Powell (00:56):

But you know what else is up? The Energy Markets!

OPEC+’s Q1 2024 supply cuts haven’t given the oil market the boost it needs. Prices dropped $5-7 per barrel post-announcement in November but recovered slightly by Thursday. On December 14, WTI hit $71.58 per barrel, and Brent futures rose 3.5% to $76.61 per barrel. Bearish sentiment is clear in speculator net long positions, hitting historic lows.

On the demand side, refinery slowdowns and reduced Chinese runs due to margins and quotas are expected, leading to a softer demand. We project Brent to average $82 in 2024 and $78 in 2025. In the US natural gas market, Henry Hub’s front-month futures hit a six-month low due to warmer winter forecasts. Expected heating degree days in December are 1% below the 10-year average, with a 5% drop forecasted for January, per EIA estimates.

Record-high dry gas production and high inventories create downward price pressure. Last week’s EIA data showed a 55 Bcf withdrawal, but it remains 6.5% above the five-year average after a significant prior decline. On December 14, NYMEX gas prices closed at $2.392 per MMBTU, down 7.5% from the previous Thursday.

Pablo Giorgi (02:24):

Moving to NGLS, Mont Belvieu ethane prices increased a bit since last week. Going from 18.50 cents per gallon last Thursday to 18.78 cents per gallon yesterday. The frac spread recovered from non-existent to just above 3 cents per gallon this Thursday, on weaker natural gas this week.

On the propane front, prices at Mont Belvieu Non-TET were stable at 69.08 cents per gallon, from 69.38 last Thursday. The week was quite volatile, though, with prices ranging from 65 to 70 cents per gallon. With the increase in crude oil prices this Thursday, propane is again under 40% of the price of WTI. Propane inventories continue to be at a five-year high.

That does it for energy, now onto ethylene.

Luka Powell (03:17):

The US spot market was very active this week, with deals totaling 188.5 million pounds completed at the Texas and Louisiana hubs. Ethylene prices on a simple average basis decreased, ranging between 16.5 and 19.25 cents per pound for December delivery.

Ethylene supply along the US Gulf Coast is expected to improve this month and operating rates are forecasted to reach the mid-80s, which has not happened since last summer. The capacity restraints of the last several months caused by numerous planned and unplanned cracker outages have been resolved apart from Shell Deer Park, which is not expected to come back online until early 2024.

Another wave of maintenance turnarounds are planned for the first quarter of 2024, which will constrain capacity again and cause inventory levels to fall below the 5-year average until later in the second quarter.

The ethylene forecast has not changed this week. See the NALO for more information.

Pablo Giorgi (04:15):

The US polymer-grade propylene spot market was active this week, with 50 million pounds transacted for December delivery. Prices increased slightly, from 45 cents per pound (cpp) last Friday to between 46.25 and 47.00 cpp this Thursday.

On operations, Enterprise’s PDH-2 unit continues its unplanned turnaround after a fire earlier in the month, and it is expected to be down until late December or early January. This is keeping the market tight. Enterprise PDH 1 and Dow Freeport PDH units have turnarounds scheduled for the late first quarter and early second quarter of 2024.

The propylene forecast has not changed this week. See the NALO for more information.

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

Luka Powell (05:05):

Join us at the Global Plastics Summit from February 27 to 29 in Houston, Texas. Come see leading global experts discussing pivotal impacts and initiatives shaping the plastics industry.

Pablo Giorgi (05:17):

Don’t forget to subscribe to our podcast on SoundCloud, Spotify, apple, or Google Podcasts or whatever 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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