Petrochemical Industry High Stocks, Low Margins: Cheap Crude and Gas Fuel Ethanol Production

Editor: Dominik Stephan

In the US, large crude stock build, small product stock draw, and widening commercial stock excess. In Japan, crude stocks build despite higher runs, NYC-based Pira Energy Group reports.

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(Picture: PROCESS)

As Pira found out, the US crude stocks built, but less than the build for the same week last year, so the crude stock deficit increased. The four major refined products built as opposed to a draw last year, so the deficit for this group narrowed. In combination, crude and the four major refined products are in deficit -17.8 million barrels. All other product inventories drew less than last year’s draw, widening out the year-on-year excess.

Japanese Crude Stocks Build Despite Higher Runs

Crude runs rose and imports were sufficiently high to build crude stocks. Finished product stocks also rose slightly. Gasoline demand was fractionally lower and stocks built slightly. Gasoil demand was strong and stocks drew. Kerosene demand was surprisingly strong and yield declined, such that stocks built only fractionally and less than would have been expected. Refining margins remain soft with all the major product cracks weakening modestly.

World LPG Prices Plummet

Prices of LPG fell by 10% or more in most key markets last week amid broader energy and financial market weakness. U.S. LPG stocks continue to build to ever higher record levels. Strong price competition by naphtha in Asia has led to subdued petrochemical purchasing, while an unplanned cracker upset in the Netherlands has left the NWE butane market looking long. Perhaps the only bright spot is increased propane demand in Europe in a tighter prompt market, as U.S. arrivals of the product have remained low.

Ethanol Prices and Margins Decline

The descent in U.S. ethanol prices continued though Thursday October 2, driven by building inventories and falling consumption. Cash margins for ethanol manufacture declined for the seventh consecutive week to the poorest level since the beginning of February.

Ethanol Output Increases

US ethanol production rebounded to 901 MB/D the week ending October 3 from a six-month low 881 MB/D during the preceding week as some plants completed their maintenance turnarounds. Stocks were down 177 thousand barrels to 18.7 million barrels.