Daily Chemical Reaction
Firing the Jets – USGC Production Should Surge as Skies Improve in Asia; Lifts Odds of 2H Turbulence
Key Points:
- Multiple factors (expanding oil-to-gas ratio, surging Asia ethylene spot markets, etc.) move in favor of USGC petrochemical production and export hikes – the current landscape as notably favorable for US vinyl producers.
- We discuss supply/demand mismatches leading to commodity price/margin volatility and our view that 2H20 per-unit profit headwinds will remain stiff.
- Other items of note today range from oil-and-gas commentary, to concerns with Asia butadiene oversupply, to a possible Westlake vote of confidence.
See PDF below for all charts referenced
Chart of the day: Shifts in the global petrochemical cost curve shifted positively for US petrochemical producers this week. As displayed in our chart of the day, Singapore and NW Europe naphtha values have roughly returned to their 2019 avg. levels relative to Brent Crude (which has risen ~15% alone this week relative to a largely unchanged USGC natural gas price), and we note a ~40% increase WoW in NW Europe naphtha values compared to a 1% uptick in USGC ethane