6 December 2018
- Short-term supply conditions are overwhelmingly bearish. Our models picked up higher utilization rates (or lower outages) across both exporters and importers. This will likely push more supply into the market. As such, we expect naphtha crack prices to face further downward pressure. Our Implied Forward Supply Indicator picked up a further increase in the availability of physical supply. This, along with the increase in our Implied European Naphtha Inventory Index, are price negative developments.
- Overall short-term demand conditions are bullish. Petrochemical margins weakened as the combination of weaker product prices i.e. Ethylene and Propylene coincided with stronger product prices. Whilst we still pick up firm spot demand, this should soften as forward (2-4 weeks) demand is showing signs of weakness. We continue to pick up a further preference in naphtha over LPG as per our Substitution Indicator.
- Short-term macroeconomic conditions are overwhelmingly bearish. Lending conditions in the short-term tightened further, which should curb demand. With the latest macroeconomic data being made available, our global macro index shows renewed weakness in global manufacturing activity. This is expected to filter through to weaker downstream demand in the short-medium term. Previously supportive gasoline margins weakened which suggests further downside to naphtha crack prices.