Petro update 10 Sep 2024
Naphtha price fell 6% WoW to US$639/t, the sharpest WoW drop since early June, tagging the steady drop in oil price, reflecting concern over oil demand despite OPEC+’s delay in starting the tapering in voluntary cuts to Dec from Oct. This also sparks concerns about weaker petrochemical product prices, although spreads widened WoW on a lag in adjusting product price to feedstock cost. We believe the heightened risk of inventory loss will deter product replenishing, as peak seasonal demand is past. We expect continued caution despite undemanding valuations.
Average PE/PP spread up WoW despite lower product prices. Average PE/PP spread rose 7% WoW to US$398/t from last week’s four-month low, backed by a 6% WoW fall in naphtha cost, although product prices also fell 1-2% WoW. We expect PE and PP prices to continue to adjust down in tandem with lower feedstock cost in the near term amidst more cautious buying due to uncertain demand and the move down in oil price. Average PE/PP spread in 3Q24TD is up 5% QoQ to US$396/t, driven by a 20% QoQ jump in LDPE-naphtha spread. We expect spread to weaken in 4Q24 on low seasonal demand and hesitant trading activities.
PX spread down to a 2.5-year low. Despite lower naphtha price, PX-naphtha spread sank 9% WoW to US$291/t vs. 12MMA of US$414/t, indicating slower demand and supply recovery after maintenance shutdowns. PX producers integrating to oil refineries continued to increase utilization rate at PX plants, as demand for gasoline was weaker than expected, especially in China. The market expects PX supply to fall in the near term due to temporary production cuts at several plants inside and outside China. (CCFGroup) This will reduce PX inventory in the near term. PX spread also fell 15% QoQ in 3Q24TD to US$360/t, the lowest since 1Q22.
PET price at an 11-month low. Bearish market sentiment pressed PET bottle chip price down 1% WoW to an 11-month low of US$890/t. However, against a greater decline in feedstock cost, integrated PET spread rose 32% WoW to 2024’s high of US$167/t vs. 12MMA of US$106/t. We do not expect the high integrated PET spread to hang around, as demand for PET bottle chips is entering the usual fourth quarter low season. Further, a wave of new capacity of at least 1.85mt in China will enter the market over Sep-Oct in addition to the gradual restart of 2.6mtpa capacity previously shut down. (CCFGroup) Average spread in 3Q24TD is up 20% QoQ to US$117/t (positive for IVL), outperforming other products and the best quarter since 2Q23.
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