Can’t Pass The Gas – Permian Bloated With Oversupply; N. America Natural Gas Benefits High, Asia & Europe Struggle

Key Findings

General Thoughts: Cheap North American natural gas is not a new benefit for its chemical industry, but its benefits have become pronounced amid feedstock and other issues abroad, spurring myriad global strategic actions.
Supply Chain/Commodities: While US natural gas is in surplus, driving even better ethylene economics, we see rising interest in coal-to-chemicals, which may also likely undercut naphtha-based production in Asia and Europe.
Energy/Upstream: Free natural gas in the Permian will likely attract more investment to exploit the arbitrage, and while there may be more pipes and more LNG, it could also spur industrial investment locally, like Oxy’s DAC plans.
Sustainability/Energy Transition: E-cracking in Europe may seem like the only way to decarbonize ethylene, given CCS limitations, but we question how much capacity will be left in Europe by the time power is cheap enough.
Downstream/Other Chemicals: We flag the YTD improvement in North American chemical rail traffic, the March uptick in US industrial activity, and we flag ABB equity hitting an all-time high after a strong start to 2024.