Where Do Oil Producers Go for Love? Global Refinery Margin Slump to Likely Persist, Ethylene Margin Surge to Reverse

Daily Chemical Reaction

Where Do Oil Producers Go for Love? Global Refinery Margin Slump to Likely Persist, Ethylene Margin Surge to Reverse

Key Findings

• General Thoughts: The global refinery margin average has fallen to multi-year lows while the global spot ethylene production margins have surged to multi-year highs, combining to support many crude-to-chemical ambitions.
• Supply Chain/Commodities: Global spot ethylene production margins reflect a multi-year high, and we think more production and lower prices will reverse the recent global margin surge by yearend but unlikely to 2023 levels.
• Energy/Upstream: We discuss US natural gas use in power generation rising above expectations, as producers look likely to increasingly struggle to keep pace with demand, and the collapse in global refinery margins in 3Q24.
• Sustainability/Energy Transition: We discuss the North American clean energy push, driving many major utilities into offtakes to keep pace with demand, and the role of batteries in markets with wide daily power price spreads.
• Downstream/Other Chemicals: We discuss the recent decline in global freight rates, as we view the drop in Asia to Europe rates as risk to premium European prices, and flag US port strike concerns with possible disruptions.

Exhibit 1: Global spot integrated ethylene production margins, on average, have surged higher YTD relative to global crude oil refinery margins, with global spot ethylene margins outperforming refinery margins YTD and since 2011.

Source: Bloomberg, C-MACC Analysis, September 2024

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