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NOTE: for full details on the criteria ICIS pricing uses in making these price assessments visit www.icispricing.com and click on “methodology”.
Subscriber note: ICIS is considering deleting the following assessments: HS STRAIGHT RUN PREMIA: M100 CIF CARGOES MED and M100 CIF CARGOES NWE. A new assessment will be added for LS STRAIGHT RUN PREMIUM OVER ICE BRENT: FOB CARGOES NWE. Please send any comments to the editor.
FUTURES DAILY SETTLEMENTS
| | MON | TUE | WED | THUR | FRI |
| NYMEX Heating Oil (cents/gal) | 311.92 | 311.95 | 309.93 | 314.63 | 316.82 |
| NYMEX RBOB (cents/gal) | 272.82 | 270.64 | 264.42 | 263.68 | 260.38 |
| NYMEX NATURAL GAS (dollars/MMBtu) | 3.696 | 3.745 | 3.652 | 3.649 | 3.584 |
MONDAY
The markets opened in positive territory and gained ground in early hours’ trading before becoming rangebound through to the European opening. However, prices then fell sharply amid concerns that the ongoing eurozone debt crisis could hit global economic growth and curb demand for oil. Italy became the new focus of attention with Prime Minister Berlusconi facing a vote of no confidence. The trend quickly reversed as the euro rallied in the currency markets and prices were back in positive territory before the US markets opened. They rallied again to hit new highs, but then eased off to become fairly rangebound through to the close with Brent posting larger gains than the NYMEX, although a late rally saw the latter close just off its highs.
December Brent closed the day up $2.59/bbl at $114.56/bbl, having traded a range between $111.26/bbl and $114.88/bbl.
December West Texas Intermediate (WTI) closed the day up $1.26/bbl at $95.52/bbl, having traded a range between $93.23/bbl and $95.66/bbl.
TUESDAY
The markets opened in marginally positive territory, but lost ground through the early hours before rallying before the European markets opened. They dipped back in early trading before surging sharply higher as the renewed argument over the Iranian nuclear programme once again raised concerns over supply disruptions if further sanctions are imposed on oil exports from the major OPEC producer. Some of the gains were given back prior the US opening, but they then spiked to new highs. However, the trend quickly reversed and Brent plunged to briefly dip into negative territory, whereas the NYMEX held on to the gains somewhat better. Both rallied again in late trading on news that Italian Prime Minister Berlusconi was going to resign, boosting hopes of an easing of concerns over the country’s debt crisis. However, Brent again struggled to hold the gains, whereas the NYMEX closed just off new highs.
December Brent closed the day up 44 cents/bbl at $115.00/bbl, having traded a range between $114.20/bbl and $116.48/bbl.
December West Texas Intermediate (WTI) closed the day up $1.28/bbl at $96.80/bbl, having traded a range between $95.23/bbl and $96.89/bbl.
WEDNESDAY
With the weekly US stock figures published late on Tuesday by the American Petroleum Institute (API) showing a smaller-than-forecast build on crude and an unexpected draw on gasoline, the markets opened in mildly positive territory and gained a little ground in relatively steady trading through the early hours. However, once Europe opened for business, prices fell sharply on news that Italian funding costs had hit a new record of 7%, sparking fears among investors over debts held by the eurozone’s third largest economy. The decline levelled off before the US markets opened, but prices then plunged to new lows. They had recovered a little prior the appearance of the stock figures from the Energy Information Administration (EIA). These showed unexpected draws on crude and gasoline, plus a much larger-than-forecast draw on distillates, which helped prices recoup even more of the earlier losses. However, while the NYMEX soared into positive territory, briefly posting 3-digit gains before slumping off again, Brent languished down in negative territory. A late bout of aggressive selling knocked Brent down to new lows, but the NYMEX held up a little better.
December Brent closed the day down $2.69/bbl at $112.31/bbl, having traded a range between $111.78/bbl and $115.75/bbl.
December West Texas Intermediate (WTI) closed the day down $1.06/bbl at $95.74/bbl, having traded a range between $94.54/bbl and $97.84/bbl.
THURSDAY
The markets held steady around the previous day’s closing levels through the early hours, but took a quick dip as Europe opened to the scenario that the eurozone debt crisis had now moved away from Greece to a larger problem in the form of Italy. However, the trend quickly reversed as reports that Chinese crude imports had risen gave some support. Some easing of fears over the Italian crisis also boosted prices further and gains of over a dollar were soon seen. Prices eased off a little before the US markets opened, but they were given another boost by better-than-expected US trade and jobless claims data. The ever volatile market saw a good portion of the losses wiped out as the US dollar gained in the currency markets, but yet another rally boosted crude prices to new highs before easing back prior the close.
December Brent closed the day up $1.40/bbl at $113.71/bbl, having traded a range between $111.30/bbl and $114.13/bbl.
December West Texas Intermediate (WTI) closed the day up $2.04/bbl at $97.78/bbl, having traded a range between $95.20/bbl and $98.35/bbl.
FRIDAY
The markets opened in negative territory, but gained ground through the early hours to have recouped the losses by the time Europe opened for business. After an initial dip, prices rallied strongly on hopes that moves by Greece and Italy could stifle fears of the eurozone debt crisis spreading to other countries. However, the euphoria proved to be short-lived and the gains were given back steadily for the rest of the session. News that the Italian senate had voted to approve the proposed austerity measures took prices back up again as the US markets opened and they continued to climb. Some positive US consumer data added further upward impetus and 3-digit gains were soon the order of the day. A good portion of the gains were subsequently given back, but while Brent then became rangebound through to the close, the NYMEX finished with a late rally to get back close to the highs.
December Brent closed the day up 45 cents/bbl at $114.16/bbl, having traded a range between $113.06/bbl and $114.91/bbl.
December West Texas Intermediate (WTI) closed the day up $1.21/bbl at $98.99/bbl, having traded a range between $97.35/bbl and $99.20/bbl.
SUMMARY
Over the course of the week December WTI was up $4.73/bbl, while December Brent gained $2.19/bbl.
Overview
Naphtha cargo prices held steady for the first half of the week, before dipping in line with crude oil values on Thursday. Arbitrages are closed to Asia and to the US. Demand from the gasoline sector has declined this week, and interest from the petrochemical industry remains minimal. This week's range of $874-903/tonne CIF NWE compares with $841-886/tonne CIF NWE the previous week.
Oversupply expected to worsen on subdued demand
While interest in naphtha remains feeble, with few outlets for European material and buying taking place mainly on a hand to mouth basis, some of last week’s oversupply has cleared. Stocks in the Amsterdam-Rotterdam-Antwerp (ARA) region are thought to have tightened to 51,000 tonnes from 61,000 tonnes the previous week.
However, signs point to the oversupply worsening, with what is described as a wave of cargoes due to arrive in Europe between 20-30 November and no indications of demand for naphtha improving.
The consensus is that a stronger contango would be required in order to encourage buying and storage of material. It is not possible to predict whether this will occur within the foreseeable future.
Crack Spread
The December crack spread weakened to minus $11.95/bbl on Monday afternoon, then softened further to remain between minus $12-13/bbl for the rest of the week.
This weak spread is again attributed to suppressed demand and an oversupplied market. Furthermore, as most participants do not expect the situation to improve in the near future, the crack spread is likely to remain in deep negative territory.
Arbitrages
The arbitrage to Asia remains closed, as has been the case for many weeks. By Friday the east-west spread for December prices was around $7-8/tonne, similar to that seen a week earlier.
While depending on factors such as freight rates and the grade of naphtha in question, it is generally thought that a spread of at least $15/tonne is required in order to open an arbitrage east.
Nevertheless, a cargo of heavy naphtha is believed to have been booked from the Mediterranean to Asia regardless of the closed arbitrage, in order to prevent stocks in the region building further.
While an arbitrage to the US has recently been open for light grades of naphtha, by Friday it had closed, with no further volumes thought to be required for US gasoline blending at present
According to a trader, one cargo above normal contracted volumes has been booked for Brazil this week, although this could not be confirmed elsewhere.
Gasoline sector
Demand from the gasoline sector has declined this week, with last week’s premium gasoline-naphtha spread of $77/tonne having narrowed to around $55/tonne, discouraging the purchasing of naphtha for gasoline blending.
A weak gasoline crack spread exacerbates the situation, and the approaching year-end also dissuades the building of stocks.
Petrochemical industry
Weakened interest in end-products resulting from fears for the global economy continues to see overall petrochemical demand reduced. It is thought that cracker run rates are now around 75%.
There has been no change in petrochemical buyers’ choice of feedstock, with the ongoing wide price spread between propane and naphtha continuing to make lower-priced propane the first choice.
This situation is highly unusual, with the seasonal switch from propane to naphtha usually coming into effect in September, when thoughts turn to the purchase of propane as heating fuel. However, mild weather across much of Europe has kept the propane market long and prices low. While it had been expected that a change would occur in November, some market participants foresee the current situation persisting for the coming weeks.
By Friday, December prices for propane were around $55-58/tonne below those of naphtha, little changed from that seen a week earlier.
US Gulf Naphtha
| N+A naphtha differential to 13.5 RVP unleaded gasoline (DEL) for week ended 11 November in cents/gal |
| | 4 Nov | Mon | Tue | Wed | Thu | Fri |
| Discount | -5.00/ -5.00 | -5.00/ -5.00 | -5.00/ -5.00 | -5.00/ -5.00 | -3.62/ -3.62 | -3.62/ -3.62 |
| Paraffinic naphtha differential ranges, week ended 11 November in cents/gal |
| | 4 Nov | Mon | Tue | Wed | Thu | Fri |
| vs Natural gasoline | +5.50/ +5.50 | +5.50/ +5.50 | +5.50/ +5.50 | +5.50/ +5.50 | +3.50/ +3.50 | +3.50/ +3.50 |
Naphtha differentials strengthen further on tumbling spot gasoline prices
The US Gulf (USG) market for heavy naphtha was quiet, with some chatter but no deals confirmed. The continuing spiral downwards for gasoline spot prices, however, strengthened naphtha differentials further.
Naphtha differentials at the end of the week were marked at 3.75 cents/gal under 13.5 Reid Vapor Pressure (RVP) gasoline on the Colonial Pipeline, compared with a discount of 5 cents/gal the prior week.
Naphtha for the week of 4 November was bolstered in part by strong demand from such market players as CITGO and Valero, but demand for naphtha weakened.
As naphtha demand weakened, so did gasoline spot prices. The drop in the gasoline spot price reflects weak gasoline demand, and the price directly results in a drop for absolute naphtha prices.
Demand for naphtha, however, was not as weak as for gasoline. Therefore, naphtha was assessed stronger to offset some of the loss in gasoline.
USG 13.5RVP naphtha on the Colonial Pipeline slipped by 8 cents/gal for the week ended on 11 November, from $2.735/gal on 7 November to $2.555/ga. Absolute naphtha prices, however, moved lower by 6.5% cents/gal, from $2.6825/gal to $2.5188/gal.
US Gulf naphtha assessed stronger, despite no confirmed trades
On 7 November, the naphtha market held steady on the USG with strong demand holding the strong differentials, even as gasoline move higher. There were no confirmed deals on 11 November, but a couple refineries were suspected to still be looking for product.
Prices for absolute spot naphtha gained 8.25 cents/gal on the rise in gasoline futures and strengthening of trades spot gasoline market.
On 9 November, heavy naphtha differentials held steady with a quiet market. A steep drop in gasoline futures, along with weakening gasoline differentials for the Gulf coast, led to a fall of 7.25 cents/gal in naphtha prices, however.
The discount for USG heavy naphtha against 13.5RVP Gulf coast unleaded gasoline on the Colonial Pipeline strengthened to a discount of 3.62 cents/gal on 10 November from a discount of 5 cents/gal earlier. This came on the continually weakening US Gulf spot gasoline market.
Also on 10 November paraffinic naphtha was assessed weaker, at a premium of 3.5 cents/gal over natural gasoline on decreased chemical demand. Demand was down as a result of turnarounds and operational problems at facilities.
Spot ethylene prices drop, lower price margins
| ETHYLENE PRICE | |
| CTS/LB | Contract, USG DEL | Spot, USG DEL pipeline |
| 4 Nov | 54.00 | 48.75 |
| 28 Oct | 54.00 | 50.13 |
| Contract Margins | |
| CTS/LB | Ethane Feed | Naphtha Feed |
| 4 Nov | 11.22 | 9.12 |
| 28 Oct | 10.57 | 13.60 |
| Spot Margins | |
| CTS/LB | Ethane Feed | Naphtha Feed |
| 4 Nov | 10.23 | 4.66 |
| 28 Oct | 10.94 | 6.84 |
October contract margins for ethylene were revised lower by 0.46 cents/lb, which reflects the recently settled lower October ethylene contract price.
Spot ethylene prices dropped by about 2.5 cents/lb from the week of 28 October.
Spot ethylene margins based on ethane feedstock also weakened, falling by 0.71 cents/lb. Spot margins based on processing naphtha fell by 2.18 cents/lb. This was a result of the lower spot ethylene prices and a drop in co-product credits.
US Gulf spot gasoline drops on falling gasoline futures and Gulf coast supply glut
A 10 cent/gal drop from 7-11 November for gasoline futures, along with general spot market weakness from the gasoline supply glut, caused USG spot gasoline prices to tumble by about 15 cents/gal.
On 4 November, USG gasoline differentials surged, as gasoline futures lifted as well. Scheduling for the five-day lifting cycle on the Colonial pipeline, where space has been limited by allocations, caused higher bids.
On 4 November, USG 13.5RVP unleaded spot gasoline prices were about 8 cents/gal higher than the prior trading session for a range of $2.7325-2.7350/gal.
But prices on the spot market and futures market primarily trailed down the rest of the week.
On 8 November, the weaker spot differentials were partly a result of Total operators restarting a fluid catalytic cracker (FCC) at its 232,000 bbl/day Port Arthur refinery in Texas following a seven-week turnaround.
Evidence of the gasoline inventory glut became more apparently on 9 November when the US Energy Information Administration (EIA) reported that regional stockpiles remained high. Stockpiles were near the 20-year record of 81.25m bbl in February.
USG 13.5RVP unleaded gasoline traded at $2.6125-2.6150/gal, with differentials weakening by 1 cent/gal.
Spot differentials continued to slip on a lack of buying interest, with low demand. Sellers had to reduce offers to persuade buyers to purchase product and find room to store it.
| EUROPE FEEDSTOCKS OVERVIEW |
ICE gasoil futures settled on Monday at $984.50/tonne, then fluctuated before finishing at $999.25/tonne on Friday afternoon.
The 0.1% sulphur gasoil barge market saw four to five trades each afternoon during the first half of the week, falling to one by Thursday. Activity picked up by Friday, however, with nine trades taking place in the afternoon.
The recent tightness has eased slightly, with gasoil stocks in the Amsterdam-Rotterdam-Antwerp region thought to have risen from 1,932,000 tonnes last week to around 1,964,000 tonnes.
Subdued interest in the product is exacerbated by low water levels on the river Rhine, which are causing difficulties with transport. Freight rates have been pushed upwards and there are restrictions on loads, with vessels in some areas only able to carry around 50% of their normal capacity.
By Thursday, the gasoil crack spread was reasonably strong at around $18/bbl.
Premiums over November ICE gasoil were at parity to plus $1/tonne early in the week, similar to those seen a week earlier. Thursday’s switch to premiums over December ICE gasoil saw a trade at plus $18/tonne.
Activity declined further in the gasoil cargo market, with no trades, bids or offers reported on several afternoons.
A trader elaborated that there is little incentive to buy material in light of a steep backwardation of around $10/tonne between December and January prices, relatively mild weather across much of Europe, and the forthcoming year-end discouraging the building of stocks.
As with other gasoil markets, some of the recent tightness has eased due to a combination of subdued demand, closed arbitrages from Europe and the completion of some refinery turnarounds.
The paucity of activity during much of the week meant that premiums were not available.
The German 50ppm gasoil barge market was exceptionally quiet market this week, with just one trade on Wednesday afternoon.
High flat prices are thought to be deterring purchasing, with many buyers thought to be holding back to wait for lower prices. Mild weather and end-consumer stocks of around 61% make holding back relatively easy for now.
Low water levels on the river Rhine are limiting transport, with vessels in some locations forced to carry only 50% of their normal loads.
Premiums over November ICE gasoil softened to $22-29/tonne, down from those seen in the mid to high $30s/tonne a week earlier.
The ultra low sulphur diesel (ULSD) cargo market also saw very low activity levels, with just one trade on Monday and on Tuesday afternoon.
As with other distillate markets, the combination of a steep backwardation and the approaching year-end is discouraging buying.
Premiums over December ICE gasoil were at $50-55/tonne, at a similar level to premiums over November ICE gasoil seen the previous week. No trades, bids or offers were reported on Friday.
The ultra low sulphur diesel (ULSD) barge market also experienced decreased activity levels, with four to six trades most afternoons, and ten on Friday. This compares with 16 to 19 trades seen on two days last week.
By Friday premiums over December ICE gasoil were at $38-40/tonne, slightly down from premiums over November ICE gasoil seen a week earlier.
The fuel oil market remains little changed, with demand from Singapore persisting. However, rather than the very large crude carriers (VLCCs) that have recently headed east, this week sources had only noticed smaller cargoes being booked for Singapore.
Demand for bunker fuel is described as reasonable.
The high sulphur market remains quite tight, while the low sulphur market has also tightened slightly from last week’s balanced state. This is attributed to a slightly improved general demand.
The price spread between high sulphur and low sulphur fuel oil has widened from $20/tonne last week to around $26/tonne.
By Friday, the average price of 1% sulphur material was $684.65/tonne FOB ARA, compared with last week’s figure of $657.80/tonne FOB ARA. For 3.5% sulphur material, it was $658.15/tonne FOB ARA, compared with $634.85/tonne FOB ARA a week ago.
European propane prices experienced increases this week despite lengthy supply, with sources attributing firmer values to elevated crude oil prices.
There is evidence of petcrochemical demand but sources say that the $70/tonne discount of propane to naphtha is not sufficient enough to attract any additional demand. They add that propane prices need to remain depressed in order to attract buying interest and soak up floating storage supplies. However, even if demand for propane increases it is unlikely there will be an immediate tightening of availability due to oversupplied conditions.
Last week propane was trading at a $77-78/tonne discount to naphtha and this increased to $80-85/tonne early on this week. However, by Friday the propane discount to naphtha had decreased to levels of $70/tonne. It is thought that the propane versus naphtha spread in December is around $59/tonne.
Butane prices saw more mixed results, with large cargo prices increasing due to lack of availability while small cargo values decreased in light of lower demand. It is thought that large cargoes are being exported to the Mediterranean region where high prices are achievable due to the opportunity for exporting to markets such as Turkey and Morocco.
Demand from northwest Europe is quiet, however, with many buyers covered for butane for the rest of November. One buyer reports a fair amount of selling interest from producers who are examining the possibilities of importing from the Arabian Gulf of Africa.
While 2010 saw an exceptional end to the year for both propane and butane due to extreme wintery conditions and tight supply, 2011 is seeing an equally exceptional end-of-year scenario whereby supply of both products is healthy and demand for LPG for heating fuel remains low due to relatively mild weather conditions.
Demand for VGO softened further this week, while supplies improved, particularly from the US.
Arbitrages from Europe were closed, adding to downwards pressure on premiums.
Premiums over front month Brent for high sulphur material fell from $7/bbl to $5/bbl, while for low sulphur material they slipped from $9/bbl to $6/bbl. Such a decline in premiums is unusual for this market.
Gasoline moves independently of oil, fall steeper on European debt crisis
As a globally traded commodity, gasoline decoupled from West Texas Intermediate (WTI) crude in response to the economic crisis in Europe. WTI is traded domestically, so investors respond to how the US economy is impacted by Europe. Gasoline trades across the globe, so prices react to how global economies are impacted.
Gasoline initially moved higher, following oil on Wall Street optimism that Europe would solve its debt crisis and Greece would agree to the bailout. But on 8 November, gasoline stopped tracking so closely to WTI. Prices fell as investors pulled money out from gasoline, in part to the weaker US dollar in relation to the euro.
The following day, gasoline tumbled more than 6 cents/gal, while WTI fell about 2 cents/gal. A surprising draw for gasoline inventories was not enough to sway traders’ attention from economic volatility in Europe. Falling equities pressured the petroleum complex lower as worries mounted concerning Italy’s debt situation.
Gasoline prices fell slightly on 10 November. Low demand for gasoline, which for the past month has been about 5.6% below demand for the same time period in 2010, pared gains for gasoline and prevented futures from feeding off gains in the crude market. Crude reached a three-month high at its settlement on 10 November.
Gasoline inventories fall on unseasonably low production and higher demand
US motor gasoline inventories tumbled by 2.1m bbl, to 204.2m bbl for the week of 4 November, according to the US Energy Information Administration (EIA). The 1% drop in inventories primarily results from a fall in product rates and imports, with a slight uptick in demand.
Gasoline inventories fell from the upper region of the average inventory amount for this time of year to a middle ground for the average inventories. In the same week last year, inventories were 6.2m bbl higher, at 210.3m bbl.
Demand for motor gasoline made nominal gains for the second consecutive week, moving up by 153,000 bbl/day. Demand was at 8.671m bbl/day. For the week ended 21 October, gasoline demand was about 8.5m bbl/day.
Demand remains unseasonably low, despite the gains in consumption. The four-week average for motor gasoline is 8.572m bbl/day compared to 9.080m bbl/day for the same four weeks in 2010. The average in 2010 was 5.6% higher than the 2011 four-week average.
Production of motor gasoline dropped by 4.1%, from 9.068m bbl/day to 8.699m bbl/day for the week of 4 November. This was far below production at this time in 2010, which was 9.021m bbl/day. The four-week production average was consistent with the same time in 2010, with 8.906m bbl/day for the week of 4 November, compared with 9.096m bbl/day the prior week.
The lower production also matched up with the fall in utilisation for the week of 4 November, down to 82.6% from 85.3% the prior week.
Finally, imports for motor gasoline slipped to 750,000 bbl/day for the week of 4 November from 781,000 bbl/day the prior week.
Refinery utilisation rates drop to lowest in about 6 months
US refinery utilisation averaged 82.6% for the week of 4 November, down by 2.7 percentage points from the prior week. Rates fell the hardest on the US Gulf and in the US midwest.
The rate of 82.6% is the lowest since the beginning of summer and reflected turnarounds and maintenance.
On 2 November, ExxonMobil’s 344,500 bbl/day Beaumont refinery and Shell’s 327,000 bbl/day Deer Park refinery, both in Texas, experienced short power interruptions.
The Beaumont refinery’s coker wet gas compressor tripped off line on 3–4 November, resulting in flaring, according to the Texas Commission on Environmental Quality (TCEQ). ExxonMobil operators were restarting the compressor and expect minimal impact to production.
In the midwest, BP’s 403,000 bbl/day Whiting refinery in Indiana began its turnaround process.
Natural gas slips on influence of higher inventory levels
A supply overhang in the natural gas market suppressed trading through the week ended on 11 November. In addition, mild weather forecast for the next week keeps buyers tepid to enter the market.
Natural gas futures fell by 5.3% through the week to settle at $3.584/MMBtu on 11 November, compared with $3.783/MMBtu on 4 November.
On 10 November, the EIA released a bearish inventory report for the week of 4 November that showed stocks inching higher to flirt with record levels. The inventory report offset early morning gains for natural gas as slightly cooler temperatures tempted some buyers.
The EIA reported total domestic gas inventories up by 37 billion cubic feet (bcf) at 3,831bcf for the week of 4 November. Analysts expected a build of 33bcf.
Spot ethane trades under 90 cents/gal for the first time in three weeks
On 9 November, ethane spot trades on the US Gulf dropped below 90 cents/gal for the first time since 13 October on lower demand and cracker outages.
Ethane gains were pared in the past two weeks, in part because of weakened demand, with trades holding mainly between 90–93 cents/gal, according to ICIS Pricing. Ethane traded at 99.25 cents/gal on 6–7 October, moving up from 81.75 cents/gal on 4 October.
There has been less demand and fewer buyers in the market, but there is no clear reason for this. Ethane remains the favoured feedstock for chemical companies as normal butane prices drive higher on gasoline blending demand.
In the past two weeks, there have been some operational problems at Gulf coast ethylene crackers that could have reduced ethane demand.
On 1 November, Eastman Chemical was recovering from a compressor trip the previous day at its 358,000 tonne/year Longview cracker in Texas.
LyondellBasell’s 1.75m tonne/year Channelview ethylene crackers in Texas were down on 21 October from a power outage. Market sources said the crackers would remain off line for two weeks. The restart of the crackers had not been confirmed.
These events were unlikely to be significant enough to affect market demand for a drop in ethane spot prices by 10 cents/gal.
Spot ethylene prices drop, lower price margins
| ETHYLENE PRICE | |
| CTS/LB | Contract, USG DEL | Spot, USG DEL pipeline |
| 4 Nov | 54.00 | 48.75 |
| 28 Oct | 54.00 | 50.13 |
| Contract Margins | |
| CTS/LB | Ethane Feed | Naphtha Feed |
| 4 Nov | 11.22 | 9.12 |
| 28 Oct | 10.57 | 13.60 |
| Spot Margins | |
| CTS/LB | Ethane Feed | Naphtha Feed |
| 4 Nov | 10.23 | 4.66 |
| 28 Oct | 10.94 | 6.84 |
October contract margins for ethylene were revised lower by 0.46 cents/lb, which reflects the recently settled lower October ethylene contract price.
Spot ethylene prices dropped by about 2.5 cents/lb from the week of 28 October.
Spot ethylene margins based on ethane feedstock also weakened, falling by 0.71 cents/lb. Spot margins based on processing naphtha fell by 2.18 cents/lb. This was a result of the lower spot ethylene prices and a drop in co-product credits.
LPG prices rise on crude’s strength, and isobutane prices surge on alkylate demand
Liquid petroleum gas (LPG) pricing followed crude oil pricing instead of natural gas or gasoline prices, with gains through much of the week.
Propane and normal butane held within established ranges seen through recent weeks, with propane ranging from $1.4375-1.4875/gal and normal butane ranging from $1.8050-1.8325/gal.
Propane and normal butane prices are expected to see gains at an increased rate on increased normal butane gasoline blending and winter heating needs for propane, particularly used in the midwest.
Strong prices for a gasoline octane-booster alkylate caused a spike of 20 cents/gal for its feedstock isobutane.
On 31 October, Mont Belvieu isobutane out of Texas had a price range of $2.0850–2.1100/gal. Isobutane is the feedstock for alkylate production. On 7 November, isobutane prices jumped to $2.29/gal. Prices continued to increase to $2.42/gal.
Buying for isobutane jumped on eagerness to make more profitable alkylate, sources said.
Alkylate is a blendstock primarily for premium gasoline. It has been priced at least 28 cents/gal above spot gasoline.
VGO premiums sink as gasoline profit margins tumble
Vacuum gas oil (VGO) premiums to West Texas Intermediate (WTI) crude narrowed as gasoline prices continued to weaken at an exponentially faster pace than crude.
For the week ended on 11 November, gasoline futures dropped by 4.6%, while WTI climbed by 3.6% from 7-11 November. On 9 November, gasoline profits for refineries processing WTI fell to $15.32/bbl, the lowest since 9 February.
Refiners are less inclined to go out of their way to purchase spot VGO as a means to produce motor gasoline. The spot market price for low-sulphur (0.5% maximum) VGO is $24.50/bbl over WTI crude, while high-sulphur VGO (2.0% maximum) is $22.00/bbl over crude. This was down from more than $30/bbl over WTI for low-sulphur VGO the prior week.
Spot VGO purchased for $24.50/bbl higher than crude yielding gasoline priced at $15–16/bbl over crude would result in a loss of close to $10/bbl.
This has significantly reduced spot demand for VGO.
VGO prices on the spot market have not collapsed because supplies remain thin. With the premium of Brent crude to WTI, the US Gulf is still not seeing imports of VGO from Europe. Available spot VGO is almost completely made up of domestic barges.
At week’s end, low-sulphur VGO was assessed at a premium of $22.50/bbl to WTI crude, while high-sulphur VGO was assessed at $20.00/bbl over crude oil.
Production news
Total operators began restart of a fluid catalytic cracker (FCC) at its 232,000 bbl/day Port Arthur refinery in Texas following a seven-week turnaround.
| Historical Stocks | 10/29/2010 | 10/28/2011 | | Change | |
| Crude Oil | 368.2 | 339.5 | -7.8% | -28.7 | m bbl |
| Gasoline | 212.3 | 206.3 | -2.8% | -6 | m bbl |
| Jet Fuel | 45.8 | 45.8 | 0.0% | 0 | m bbl |
| Distillate | 164.9 | 141.9 | -13.9% | -23 | bbl/d * |
| Residual | 40.6 | 36.3 | -10.6% | -4.3 | bbl/d * |
| Propane/Propylene | 64.5 | 60.3 | -6.5% | -4.2 | bbl/d * |
| figures in thousand bbl | | | | | |
| Cumulative Daily Demand | 10/29/2010 | 10/28/2011 | | Change | |
| Total Products Supplied | 19,200 | 19,058 | -0.7% | -142.0 | m bbl |
| Gasoline | 9,111 | 8,987 | -1.4% | -124.0 | m bbl |
| Jet Fuel | 1,407 | 1,435 | 2.0% | 28.0 | m bbl |
| Distillate | 3,753 | 3,807 | 1.4% | 54.0 | bbl/d * |
| Residual | 490 | 494 | 0.8% | 4.0 | bbl/d * |
| Propane/Propylene | 1,058 | 1,018 | -3.8% | -40.0 | bbl/d * |
| figures in thousand bbl | | | | | |
| Gasoline | 21-Oct | 28-Oct | | Change | |
| US Stocks | 204.9 | 206.3 | 0.7% | 1.40 | m bbl |
| PADD 1 | 52.9 | 52.0 | -1.7% | -0.90 | m bbl |
| PADD 3 | 70.3 | 72.5 | 3.1% | 2.20 | m bbl |
| Production | 8,939 | 9,068 | 1.4% | 129 | bbl/d * |
| Demand | 8,501 | 8,518 | 0.2% | 17 | bbl/d * |
| Imports | 675 | 781 | 15.7% | 106 | bbl/d * |
| * figures in thousand bbl |
| Distillate | 21-Oct | 28-Oct | | Change | |
| US Stocks | 145.5 | 141.9 | -2.5% | -3.60 | m bbl |
| PADD 1 | 58.3 | 57.9 | -0.7% | -0.40 | m bbl |
| PADD 3 | 45.9 | 44.7 | -2.6% | -1.20 | m bbl |
| Production | 4,403 | 4,653 | 5.7% | 250 | bbl/d * |
| Demand | 4,249 | 4,374 | 2.9% | 125 | bbl/d * |
| Imports | 147 | 122 | -17.0% | -25 | bbl/d * |
| * figures in thousand bbl |
| Propane/Propy. | 21-Oct | 28-Oct | | Change | |
| US Stocks | 59.1 | 60.3 | 2.0% | 1.20 | m bbl |
| PADD 1 | 6 | 6.5 | 8.3% | 0.50 | m bbl |
| PADD 3 | 25.3 | 25.7 | 1.6% | 0.40 | m bbl |
| Production | 1,128 | 1,155 | 2.4% | 27 | bbl/d * |
| Demand | 1,085 | 978 | -9.9% | -107 | bbl/d * |
| Imports | 82 | 87 | 6.1% | 5 | bbl/d * |
| * figures in thousand bbl |
Source: US Energy Information Administration (week ended 4 November)
