Daily Chemical Reactions

Tougher Than The Rest – Disruptions Support US Propylene, Oil Price Weakness Favors Lower Global Chemical Prices
December 6, 2023
Commodities Mentioned:
Plastics (PVC, PP, PE, PU, PC, PET, etc.), Clean Energy Minerals, Carbon Dioxide, Hydrogen, Natural Gas/NGLs, Crude/Naphtha
Companies Mentioned:
Enterprise Products, Dow, Eastman, PPG, Celanese, Heartland Polymers, ExxonMobil, Aramco, Venture Global, Shell, BP, Asahi Kasei, Clariant, Umicore, NewMarket, Repsol, ADM, Linde, Constellation, TotalEnergies, Rio Tinto, SK Global, Wanhua Chemical, Lummus, Toshiba, Adani Green, X-Energy, NGL Energy, NET Power, Crescent Energy, Chesapeake Energy, SilverBow, Tesla, BYD, Mitsubishi, Old Dominion, Campbell Soup, Volkswagen, Walmart

Daily Chemical Reaction

Tougher Than The Rest – Disruptions Support US Propylene, Oil Price Weakness Favors Lower Global Chemical Prices

Key Points:

  • Global crude oil price weakness will expedite chemical price declines and likely curb early 2024 forecasts, putting regional buyers of products in limited supply due to disruptions in a tough spot.
  • We discuss 2H23 US propylene market strength amid continued production issues, which have pushed domestic prices above Europe and Asia, cutting non-integrated buyer competitiveness.
  • Brent crude fell ~3.5% to below US$75/bbl, and US natural gas fell ~4.5% today, suggesting the production cost curve favors US chemical producers, but global prices face downward pressure.
  • We discuss the ExxonMobil business update, more takeaways from COP28 and impracticalities facing calls for a phasing out of fossil fuels, and EU CO2 prices falling to a new YTD low this week.
  • Negative macroeconomic data points and evidence of falling prices are increasing confidence that gov’t interest rate hikes are over, but conditions could notably worsen before they improve.

Exhibit #1: US spot PGP commands a premium above its 10-year average compared to ethylene and is likely to stay at an elevated relative level, especially if PDH production issues persist.

Source: Bloomberg, C-MACC Analysis, December 2023

See PDF below for all charts, tables and diagrams

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