How Strong is The Incentive to Integrate Refining and Chemicals – Aramco Moves Again

Daily Chemical Reaction

How Strong is The Incentive to Integrate Refining and Chemicals – Aramco Moves Again

Key Findings

• General Thoughts: Global chemical producer strategic outlooks will be a focus this earnings season, as the global market faces a steep production cost curve and stiff challenges to lift returns while growing low-carbon solutions.
• Supply Chain/Commodities: We discuss Aramco ambitions in China, rising country-level rhetoric towards others dumping excess product into their markets, and we display global ethylene margins to highlight the US advantage.
• Energy/Upstream: We expect crude-oil refiners to display strong margins in 1Q24, though recognizing that part of it was due to outages, and we discuss a few global LNG and crude-oil export capacity growth initiatives.
• Sustainability/Energy Transition: We provide a view of biomass market developments, with many of them facing considerable challenges without substantial subsidies, and we discuss cost issues facing offshore wind projects.
• Downstream/Other Chemicals: Global freight rates continue to moderate from YTD highs, though China rates to Western markets remain much higher than 2H23, which is helping some Western markets stay relatively tight.

Exhibit 1: Global average crude oil refinery and ethylene production margins have improved from YTD lows, though global crude oil refinery margins remain above pre-COVID (2019) levels while global ethylene margins are lower.

Source: Bloomberg, C-MACC Analysis, April 2024

See PDF below for all charts, tables and diagrams