Market Insights – Week of July 13, 2015

July 15, 2015 • Posted in Market Insights

Energy / Economy Overview

  • After trading in a narrow band since May, oil prices finally dropped below the $60/bbl mark last week
  • Brent and WTI both dropped about $6/bbl to end at $58.73 and $52.74 respectively on speculation that Iran will exacerbate an already oversupplied market
  • Risk factors including Greece’s possible exit from the Eurozone, China’s falling stock market prices, and a potential deal with Iran had been keeping prices up
  • Last week’s lower prices reflect weak fundamentals as supply continues to outpace demand.
  • Brent is expected to average $59.30/bbl this year, rising to $65.50/bbl next year, while WTI is expected to be $54.55 and $57.90 for the same period—with significant volatility
  • Estimated OPEC production in June is now 31.6 MMbbl/day, the highest since summer 2008, when tight oil markets drove Brent to over $140/bbl.
  • Demand remains strong and is expected to rise by 1.3 MMb/d in 2015, but it is insufficient on its own to balance the market before late 2016

IHS Intel

  • IHS reports the June ethylene Net Transaction (NT) contract price settled last week  at 33.75 cpp, a decrease of 0.75 cpp from the May contract price
  • For the first time in quite a while there appear to be very minimal constraints on PE production due to improved supply of ethylene.  Market buyers are focusing on near term needs and production is expected to be high in June and July.  Exports will need to continue to be a viable option to balance out inventories as a result
  • PP production will be challenged slightly in July with planned outages while demand is expected to stay steady with prices still very competitive on a global basis.   Producers continue to push for margin enhancement with tight supply and demand marketconditions and the likelihood of implementation remains high through the second quarter

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