Market Insights – Week of July 20, 2015

July 20, 2015 • Posted in Market Insights

Energy / Economy Overview

  • Crude prices remained bearish last week as market signals pointed to weaker demand and stronger supply
  • Brent moved just under $57 per barrel and WTI moved to just over $50 per barrel
  • Despite the Iran deal, sanctions are not expected to be lifted until 2016
  • Bearish crude prices are being driven by growing global production; US inventory builds in both crude and gasoline stocks
  • Downside demand risks for crude are increasing from Greece’s potential exit from the Eurozone as well China’s stock market declines
  • US refinery operating rates are at an astounding 95.3%, according to the EIA, the highest values seen since late-2005
  • Natural gas prices in the US rose slightly to $2.92 per MM Btu (NYMEX)
  • Reports indicate that natural gas has surpassed coal as the primary source for electric power generation in the US

IHS Intel – Ethylene / PE

  • Ethylene spot market was very active last week but prices were mostly flat
  • Deals for July delivery ranged from 34.25–35.25 cpp and deals for August delivery completed between 35.0–35.375 cpp
  • July ethylene NT contract price is forecast at 32.75 cpp, a decrease of 1.0 cpp from the June NT price
  • July PE will be flat as producers have already delayed their 5 cpp increase
  • China’s import market fell $5-$15/MT last week on weak demand, but producers will still drive exports to balance North American supply
  • Logistics for exports appear to have improved versus recent months, but concerns about trucking availability persist
  • Preliminary ACC numbers indicate that June operating rates declined slightly to 93.2%, but domestic sales were the strongest of the year
  • Inventory fell by 252 mm. lbs. vs. May, reducing inventory days by 6 days

IHS Intel – Propylene / PP

  • PGP contract prices settled on Thursday down 3.5-cpp from June to 36.5
  • PGP forecast for August is for flat pricing from July
  • PGP prices in Q4 are expected to be soft with the Dow PDH unit starting in October and with propane and butane cracking economics forecast to remain competitive through the end of this year
  • PP producers are indicating demand continues to exceed supply and they are seeing many requests to supply new customers
  • PP housewares and fiber markets are the tightest segments and growth in these segments is being restrained
  • Direct customers are indicating to IHS they expect August spread increases in addition to July spread increases
  • IHS expects a drop in PP operating rates in July due to planned outages
  • As a result, IHS forecasts a spread increase over monomer of 4 cpp for July which would result in a PP increase of half a cent

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