Podcast by

Pablo Giorgi
Global Olefins

Luka Powell
Financial & Capital Markets

Luka Powell (00:17):

Welcome to the Olefins Weekly Wrap Up. Today is Friday, January 19, and I’m your host Luka Powell.

Pablo Giorgi (00:23):

And I am 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. How’s the weather over there, Pablo? I heard it was colder in Houston than it was in London this week.

Pablo Giorgi (00:48):

From Monday to Wednesday, temperatures went down to 20 Fahrenheit. Which is very unusual for Houston, but ever since the 2021 freeze, we have been seeing these cold spells every winter. Thankfully it has heated up again. You know what else is heating up? The energy markets!

Luka Powell (01:08):

On January 18, WTI crude front month futures rose by $2.06 per barrel compared to last Thursday, settling at $74.08 per barrel. Brent futures concluded at $79.10 per barrel, marking a $1.60 per barrel increase week-over-week. Geopolitical tensions persisted in the Red Sea with naval and air strikes involving the US, UK, and Yemen Houthi forces, raising concerns about potential disruptions to oil flow through crucial trade chokepoints. However, no major supply losses are currently anticipated, though delivered costs may rise due to increased shipping rates and insurance. US commercial crude inventory showed a decline of 2.5 million barrels standing 2% below the five-year average and 4% lower than the same period last year.

In natural gas, on January 18, Henry Hub’s futures slid nearly 13% from the previous Thursday to close at $2.697 per MMBtu. US weather forecasts show unusually cold temperatures that could affect production in crucial areas such as the Permian, Rockies and Appalachia. However, warmer-than-normal temperatures are expected by the end of next week, leading to a seasonal decrease in heating demand. Despite a significant drop in weekly inventory, total stock levels are still 10.5% higher than the five-year average. Spot Henry Hub prices experienced extreme volatility but settled below $3 per MMBtu.

Pablo Giorgi (02:41):

Moving to NGLs, ethane prices came back down this week, closing at 19.13 cents per gallon on 18 January, down 18.6% from the 23.5 cents per gallon from last week, and back to the previous week’s prices. Frac spreads are weak at just above 1 cent per gallon, reflecting the reduction in ethane demand due to a heavy maintenance season this quarter, coupled with the impact of the deep freeze in Texas this week, that brought down several ethylene crackers.

As of 18 January, propane prices at Mont Belvieu rose again to 92.06 cents per gallon, up from 79.63 of last Thursday, another 15% increase in a week. That puts propane at 52% of the price of WTI crude oil, the highest proportion since September 8th of 2022! The sharp rise in propane prices, outpacing that of crude oil, suggests a strong surge in demand, possibly driven by the Arctic Blast hitting North America this week, coupled with seasonal tightening in supply. On the other hand, logistical challenges at the Panama Canal, where only 18 vessels are allowed daily and 55 are currently queued, continue to create congestion.

That does it for energy, now onto ethylene.

Luka Powell (04:07):

Deals in the US spot market this week totaled 143 million pounds for January delivery and 32 million pounds for February delivery completed at the Texas and Louisiana hubs. Ethylene prices increased, ranging between 19.25 and 19.625 cents per pound for January delivery. The ethane forecast is expected to increase further throughout 2024 leading to a higher spot ethylene price forecast. Ethylene production cash costs are also up significantly this month given the rise in feedstock prices. Winter storm Heather brought below freezing temperatures to the Gulf Coast this week.

The Storm caused several operational disruptions. Outages were reported at Dow Freeport, Chevron Phillips Cedar Bayou, Motiva Port Arthur, Equistar La Porte, Exxon Mobil Beaumont, BASF Total Port Arthur, Bayport Polymers, and Formosa Point Comfort. Some producers are running at reduced rates until all conditions normalize. Adding to all these disruptions, a heavy turnaround season that started this month is driving the inventory levels to remain around the 5-year average in Q1, but slightly lower than December. Exports continue to be affected by logistics issues related to the Panama and Suez Canals.

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

Pablo Giorgi (05:37):

The polymer-grade propylene spot market was active this week, with 40 million pounds transacted for January delivery, most of which was done after the storm was gone. The January US Gulf Coast PGP 45-day weighted-average price is 47.76 cpp, an increase of 3.09 cpp from the December price. As a result of the winter storm, FCC units at Motiva Port Arthur, ExxonMobil Baytown, Flint Hill Resources Corpus Christi, and Total Port Arthur went down. Invista and Enterprise PDH-2 also went down, hampering on-purpose supply. These outages add to the already tight propylene market.

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

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

Luka Powell (06:27):

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

Pablo Giorgi (06:40):

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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