WTI crude oil prices are up almost 4% the past two weeks to a spot price of $88.10/barrel. Brent crude oil is higher as well with pricing up a little over 2% to a spot price of $89.06/barrel. These are some of the highest crude oil prices since 2014.
Crude oil prices continue to perform well as expected by most industry analysts.
The market remains extremely concerned about the Russia-Ukraine standoff along with OPEC nations failing to deliver on their announced production increases. OPEC and its ally nations have agreed to input production by 400k barrels/day each month. In January, the estimated production increase was only 210k barrels/day.
Refined crude oil products continue to be in strong demand as folks continue to drive, travel, consume, and heat homes. What’s interesting to us here at BlueClover is that despite the sharp increases in Omicron cases globally, consumer demand remained strong highlighting global covid fatigue. The demand for refined products did not plummet like it did in the spring of 2020. As we enter year 3 of Covid-19 as a part of our lives, more and more people are adjusting to living with covid from living to avoid covid.
In earlier Brainfood reports, we highlighted how capital is pouring into green energy products which is limiting the money spent by fossil fuel companies on further investments. We mentioned how the money in green projects may have a relative worse return on investment versus the fossil fuel companies as the need for energy products such as crude oil grows but less Capex is spent in that space. Well on Tuesday, Feb 1, Exxon Mobil Corp reported its highest profit since 2014 at $23 billion for the 2021 year. Many stock analysts expect Exxon to raise their dividend later this year and purchase back stock in a push to distribute earnings to the investors instead of into more exploration and production of crude oil.
With the colder weather in place along the East Coast and a concern about freezing temperatures in Texas later this week, Natural Gas prices are up almost 9% to $4.68/mmbtu in Henry Hub, LA.
There is serious concern among analysts in the natural gas industry about the upcoming freezing weather in TX. Dallas is expected to reach a high of 25 degrees on Thursday and remain below freezing all of Thursday and Friday. The reason for concern is there are some reports that Natural Gas production in the Permian Basin (West Texas) dropped by about 20% in the first weekend of January 2022 as a result of cold weather.
Plastics Feedstocks (Naphtha, Ethane, and Propane)
- All global plastics feedstock streams are up on account of the higher energy pricing.
- Naphtha prices (CIF Japan) continue to rally, increasing almost 5% since our last report to $806/mt
- Ethane prices jumped over 17% to a spot price of 43.625 cents per gallon (cpg)
- Propane prices increased around 13% to 130.375 cpg.
- Ethylene prices in the Enterprise system in Mont Belvieu, TX decreased by 8% to a spot price of 41cpp. To keep ethylene pricing in perspective, it was 34cpp four weeks ago so despite the two week drop its still up 21% for the month of January.
- Physical PGP prices in Enterprise’s system in Mont Belvieu, TX have increased 7.5% from a spot price of 54cpp to a spot price of 58cpp.
- The January calendar average for PGP in Mont Belvieu, TX as reported by PetroChem Wire was approx. 55cpp.
- BlueClover had been predicting 55cpp for the 1st quarter average physical PGP prices but continue to believe there is more upside risk to this estimate for the final two months of the 1st quarter.
- Propane prices moving higher is contributing to the higher PGP prices as PDH units seek good returns for their assets. We have discussed our view on the 20cpp or higher gross margin in previous reports.
- Refinery Grade Propylene in pipeline has remained at approx. 24cpp for several months in a row. Companies with assets that split RGP (from the pipe) into PGP are seeing a tremendous return.
- BlueClover’s most recent estimate of flat for January contract PGP realized correctly as January contract PGP settled at 56cpp, unchanged from December.
- Our estimate for February contract PGP is up 5cpp.
- Polypropylene prices are trending higher. Widespec HomoPP railcars that may have transacted in the mid to upper 60s over the December-January time frame are increasing into the low to mid 70s.
- The export opportunities on prime products is very limited however widespec PP can find homes in certain export markets.