Market Insights – June 1, 2015

June 1, 2015 • Posted in Market Insights

Energy / Economy Overview

  • Oil prices increased at the end of last week to end very close to the prior-week levels despite continued forecasts of falling prices
  • The impact of globally high inventory levels is being offset by concern over conflict in the Middle East as ISIS set fire to a major Iraqi refinery north of Baghdad last week
  • Economic data released last week shows the US economy shrank by 0.7% Q1 due to harsh weather; also affecting the economy – impact of the West Coast port labor disputes and reduction in exports driven by the strong US dollar
  • However, the US economy is expected to grow by 2.1% in Q2 and 2.8% in Q3 driven by strong auto sales, a pickup in new-home construction lower consumer debt levels

WTI Crude Oil And Brent Crude Oil 060115

Texas Flood Impact

  • Flooding in the Gulf Coast area is causing railcar delivery delays in and out of the region
  • Railcar space was already tight and now tightened further due to delays
  • BNSF is re-routing rail traffic in the impacted areas thus causing delays
  • Union Pacific is reporting intermittent disruptions from San Antonio north to Dallas/Ft. Worth and eastward toward Houston
  • Flooding has not impacted US Gulf Coast production directly but the impact of the flooding on railcar movement has potential to disrupt production
  • Most major resin producers have limited silo storage and rely on railcars to store resin as it is produced

IHS Intel – Ethylene / Polyethylene

  • No NT Contract settlement yet for April or May
  • Buyers and sellers are working on a settlement covering both April and May
  • May NT contract price is forecasted at 34.5 cpp
  • May weighted average ethylene spot price was 36.65 cpp, up 1.52 cpp from April
  • The May increase ended a streak of seven straight months of decreases in the weighted average spot price
  • Williams Geismar is expected to restart on June 4, following an outage caused by a lightning strike
  • Reports indicate most PE grades remain in tight supply with LDPE and LLDPE grades being tightest while

HDPE appears to be in better supply

  • May PE contract prices settled up 5 cpp
  • Late last week ExxonMobil announced a 5 cpp increase effective July 1
  • Other suppliers are expected to follow
  • Spot PE prices in China have moved down 1 to 2 cpp depending on the grade
  • Success of the announced July increase on price trends in international markets between now and the end of July

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