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, February 2nd, 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.

Pablo Giorgi (00:42):

Today is Groundhog Day, a day when a semi mythical groundhog named, I can’t pronounce that.

Luka Powell (00:51):

I think it’s <laughs>, I’ve just forgotten it. I think it’s like Punxsutawney Phil? Anyway, he leaves his borough and if he sees his shadow, it will retreat to his den and winter will go on for six more weeks. If he doesn’t see his shadow, spring will arrive early.

Pablo Giorgi (01:12):

And today Phil did not see his shadow. That means winter will be over soon and it’ll be an early spring this year.

Luka Powell (01:22):

Let’s hope he is right. Nowadays it’s just a celebration, but it’s crazy how people used to be bullish or bearish on the weather and markets based on the predictions of a groundhog!

Pablo Giorgi (01:33):

Yeah, but you know what else has been bearish? The energy markets!

Luka Powell (01:38):

On 1 February, front-month NYMEX WTI crude futures settled at $73.82 per barrel, a $3.54 pullback from the previous Thursday. As the dust settles from the arctic blast, US crude oil production in January is expected to be over 400,000 barrels per day lower than the previous month, after months of explosive growth last year. A swift recovery is underway, with output bouncing back to 13.0 MMb/d as of last week, according to the EIA.

Nevertheless, commercial crude inventory in the US, though growing slightly last week, hit five-year lows again, similar to the levels seen in Sep/Oct last year when prices were about $10 higher than today’s level. The ongoing 2023/2024 winter season continues to yield marginal gains in local consumption, as the absence of sustained cold weather has failed to boost gas demand.

So far, US gas demand remains notably subdued for nearly all sectors. The US Lower 48 underground storage eroded by 197 Bcf for the week ending 26 January.

Luka Powell (02:41):

On 1 February, Henry Hub front-month futures settled at $2.189 per MMBtu, down $0.521 per MMBtu from the previous Thursday. This week, the US government decided to defer consideration of new LNG export terminals in the US to non-free trade agreement countries. In less than a decade, the US has emerged as one of the biggest global LNG exporters, alongside Qatar and Australia.

While the freeze on new approvals will not impact existing projects, it could lead to setbacks for a dozen pending LNG projects. The short-term market balance is unlikely to be affected as it would take years to bring the capacity online, but these delays in the long run will disrupt the global LNG supply, potentially driving up natural gas prices in regions heavily reliant on imports, while potentially decreasing prices in the US.

Pablo Giorgi (03:45):

Moving to NGLs, ethane prices increased, closing at 21.50 cents per gallon this thursday, up from 19.81 cents per gallon from the previous week, an 8.5% increase. This rise in ethane prices comes amid a notable decline in natural gas prices, which closed at 2.050 dollars per MMBTU, down from 2.571 dollars per MMBTU last week. The discrepancy between ethane and natural gas prices underscores specific challenges facing the ethane market, predominantly due to ethylene crackers ramping up after winter storm Heather.

Propane prices at Mont Belvieu increased again this week, rising to 93.50 cents per gallon this Thursday against 88.13 cents per gallon the previous week, a 6.1% increase. This rise contrasts with a decrease in crude oil prices. Prices increased this week even as exports saw a dramatic decrease, driven by strong domestic demand. Inventories continued to decline, further supporting prices.

That does it for energy, now onto ethylene.

Luka Powell (04:59):

Deals in the US spot market this week totaled 147 million pounds completed at the Texas and Louisiana hubs. Ethylene prices on a simple average basis increased, ranging between 19.25 and 21 cents per pound. Due to the Winter Storm in mid-January, there were some outages at derivatives units which decreased domestic demand, but overall, demand improved in January.

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

Pablo Giorgi (05:29):

The US polymer-grade propylene spot market was quiet this week, with 26 million ]pounds transacted for January delivery and 11 million pounds for February delivery. The January US Gulf Coast PGP 45-day weighted-average price settled at 48.77 cpp, an increase of 4.10 cpp from the December 45-day weighted-average price. The refinery-grade propylene spot market was quiet, with two pipeline deals recorded at 12.00 cpp.

Most units that experienced outages during Winter Storm Heather are back online. Enterprise’s PDH-1 and Invista both experienced operational disruptions this week. A turnaround at Dow’s PDH unit initially planned for April has been moved forward to February, while Enterprise has its PDH1 turnaround scheduled for early March.

These upcoming outages will compound the already tight propylene market. Inventories are expected to remain close to the five-year minimum. The propylene forecast has changed this week. See the NALO for more information.

Pablo Giorgi (06:32):

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

Luka Powell (06:49):

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 (07:01):

And 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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