US Propylene Market Holds Steady Trend Amid Crude Oil Price Fluctuations

In the first week of November 2023, the price of Propylene in the US market remained stable, primarily attributed to a balanced gap between demand and supply. A significant factor influencing this stability was the 3% decrease in the price of feedstock Crude Oil in the US market. Commercial Crude Oil inventories in the United States, excluding those in the Strategic Petroleum Reserve (SPR), increased by 0.8 million barrels from the week ending October 20 to the week ending October 27, as reported by the US Energy Information Administration (EIA).

The data from EIA's latest weekly petroleum status report indicated that Crude Oil stocks in the country, excluding the SPR, were 421.9 million barrels on October 27, compared to 421.1 Mn barrels which was recorded on October 20. This marked a notable decrease compared to the 436.8 Mn barrels as on October 28, 2022. In contrast, SPR stocks remained relatively stable at 351.3 million barrels on October 20, but significantly lower than the 399.8 Mn barrels as on October 28, 2022.

During this week, the demand for Propylene within the downstream Polypropylene industry remained relatively low to moderate. This trend was in alignment with overall global market conditions, where the demand for Propylene saw a similar level of moderation. Notably, no new orders were observed during this period, which, while potentially raising concerns, can also be viewed as a sign of stability in product pricing. The absence of new orders indicated a temporary equilibrium in the market, with Propylene prices maintaining their current levels.

In October, the domestic Chinese Propylene market experienced a notable decline with significant fluctuations. This downturn was primarily influenced by international oil price reductions that followed the holidays, weakening the Polypropylene market and creating a bearish sentiment in the industry. This bearish sentiment eroded industry confidence, leading to a gradual decrease in Propylene prices.

However, a significant shift was observed in the middle of the month when downstream industries began restocking at lower prices. This coincided with a robust rebound in Crude Oil prices, leading to a notable upswing in Propylene prices. While this price surge was positive for the Propylene market, it also increased cost pressure on downstream Polypropylene manufacturers. In response, price adjustments were made to maintain profitability.

According to ChemAnalyst, the price of Propylene is expected to decrease, primarily due to the anticipated decline in the price of its feedstock, Crude Oil. This downward trend in crude oil prices can be attributed to the Biden administration's decision to relax sanctions on Venezuelan crude oil, which is expected to increase shipments of Venezuelan crude oil to the US and Europe. However, this move may also result in reduced deliveries from other key sources like Canada, Mexico, and Colombia. As a consequence, the overall supply dynamics of Propylene are likely to be influenced by these changes in the Crude Oil market, potentially leading to a decrease in its price in the coming weeks.