Stabilised Demand Amidst Low Inventories Leads Raffinate Prices to Rise in the US Market

In October 2024, Raffinate prices in the U.S. market have increased, fuelled by tightening stock availability amid a stability in demand from the MTBE market. The Energy Information Administration (EIA) reported a rise in U.S. Raffinate upstream crude stocks last week, even as fuel inventories saw a significant decline, with gasoline demand hitting its highest level in nearly three years due to the impact of consecutive hurricanes. While crude inventories exceeded expectations, gasoline and distillate stocks collectively dropped significantly, mainly due to stockpiling efforts ahead of Hurricane Milton's expected landfall in Florida.

The current Raffinate supply landscape is shaped by several factors, including low operating rates at Raffinate production facilities. This has placed additional strain on supply, even as demand from downstream industries like MTBE production remains consistent. Furthermore, rising crude oil prices historically correlate with increased Raffinate prices, although the EIA notes a decrease in crude oil inventories and a boost in refinery runs, which could tighten market conditions even further.

Despite moderate Raffinate’s downstream MTBE supply levels and continued low operating rates for MTBE units, the short-term domestic Raffinate downstream MTBE supply appears somewhat stable. However, the EIA has adjusted its 2024-2025 crude oil price forecasts downward, citing concerns over slowing global demand growth. Geopolitical risks, particularly in the Middle East, continue to loom, with the EIA predicting Brent crude prices to average around $85 per barrel in 2024 and $80 in 2025, along with similar adjustments for WTI prices. While OPEC+ production cuts have reduced global inventories, output is anticipated to rise by mid-2025, driven by increases from the U.S., Brazil, and Canada.

In the U.S. Raffinate downstream gasoline market, prices have recently averaged lower than in the same period last year, amid fluctuating demand driven by seasonal factors, such as the hurricane season, which affects refining and distribution. Although recent price drops are noted, demand remains steady, supported by a resurgence in travel and commuting post-pandemic. Nonetheless, economic uncertainties and recession fears could influence future consumer spending on gasoline. Regional price disparities are also apparent, with prices significantly lower in the Gulf Coast compared to the West Coast.

According to ChemAnalyst, Raffinate prices are expected to rise, primarily driven by increasing feedstock naphtha prices and a generally optimistic outlook for upstream crude oil stocks, which are perceived as insufficient in the market. However, expectations for a substantial increase in demand from downstream sectors like MTBE and MEK remain limited, leading to a cautious sentiment in the downstream market in the coming weeks.