21 December 2018
- Short-term supply conditions are marginally bearish. Our models picked up higher utilization rates (or lower outages) for exporters which would potentially mean higher supplies being made available in the market. The opposite is seen in key importers which should support prices going forward. Our Implied Forward Supply Indicator continues to pick up lower supply coming into the market in the next 2-4 weeks which is price positive. Our Implied European Naphtha Inventory Index, however continues to pick up higher than average inventory levels which has been a negative development.
- Overall short-term demand conditions are outright bullish. Petrochemical margins strengthened as weaker feedstock prices combined with firmer product prices. Our spot and forward demand indicators all pointed to continued strength throughout the rest of the year which should continue to support crack prices. Our implied LPG-Naphtha substitution indicator continue to suggest greater preference for naphtha in the short-term.
- Short-term macroeconomic conditions are bullish. Recent injections of credit in some economies e.g. China helped to improve overall lending conditions markedly which should go on to support demand. Short-term currency conditions weakened which is likely a price negative development, although it could change going forward as the dollar faces some downward pressure of late. Our gasoline margins indicator continue to rebound which remains firmly supportive of the ongoing rally in crack prices.