7 June 2019
- Short-term supply conditions are marginally bullish. Lower outages remain in place for both importing and exporting countries as refineries take advantage of the recent slump in crude prices to increase their utilization rates. However, our forward supply indicator continues to point towards a steady reduction in cargo availability, which along with further drawdown in our implied ME inventory index oscillator, should support existing prices.
- Overall short-term demand conditions are bullish. Our implied petchem margins indicator continues to improve as the recent decline in feedstock prices aids profitability. While our assessment of spot demand remains weak, we continue to expect further improvements in forward demand (2-4 weeks ahead). Our Implied LPG-Naphtha substitution indicator finally turned bullish as we head into week 24. The recent weakness in LPG prices has heavily influenced the preference for naphtha in the last 5 weeks.
- We turn bullish in our assessment of short-term macroeconomic conditions. Short-term lending conditions have improved markedly. We believe this reflects ongoing efforts to mitigate the decline in overall macroeconomic conditions. The latest manufacturing data for key naphtha consumers was lower as weak downstream activity regained momentum. Our currency model also suggests continued downward pressure given the strength in the dollar. Our implied gasoline margins indicator turned bullish which should be a price positive development.