Aromatics & gasoline components overview (EPCA 2012 presentation)

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Aromatics & gasoline components overview (EPCA 2012 presentation)

  1. 1. Aromatics & Gasoline ComponentsOverviewSean Bartlett , Gasoline Components & Biofuels, EMEADavid Potter, Aromatics & Crude C4 Chain, EMEA
  2. 2. Agenda • Price trends in 2012 • Fundamentals behind the strength; recurring themes – Benzene – Toluene – MTBE • Where do we go from here?
  3. 3. NWE benzene & toluene in 2012 : A stellar year • Strong prices through the year • Record high benzene price of $1,506.50/mt on September 11 – Benzene premium over naphtha hits seven year high of $631.75/mt on June 8 • Record high toluene price of $1,445/mt on September 24 – Premium of toluene over gasoline hits $387/mt, September 20 Source: Platts
  4. 4. MTBE prices 2012 • All-time record outright price: - $1,603/mt FOB ARA on April 3 • Factor to Eurobob gasoline through Q3 second highest since 2002: - 2012 Q1-3 = 1.262 Source: Platts
  5. 5. Prices vs. 2008 Increase in product prices outstrips energy 2008 2011 2012 to Q3 2012 vs. 2008 (%) ICE Brent $98.31 $110.84 $112.16 +14.1 Gasoline $836.79 $973.93 $1,042.18 +24.5 Naphtha $791.29 $930.41 $935.18 +18.2 MTBE $947.92 $1,145,95 $1,315.60 +38.8 Benzene $1,020.66 $1,152.64 $1,260.72 +23.5 Toluene $889.90 $1,088.22 $1,200.01 +34.8 Source: Platts
  6. 6. Where does the strength come from? • Cracker rates reduced through the year – Reduced pygas availability – Reduced crude C4 and therefore raffinate-1 supply
  7. 7. Steam cracker margins suffer Source: Platts On The Net 7
  8. 8. Where does the strength come from? • Cracker rates reduced through the year. Reformers continue to run reduced in Europe and US. • Lighter feedstocks used – LPG’s used for large parts of the year due to favourable economics
  9. 9. European naphtha vs. propane Source: Platts On The Net
  10. 10. Steamcracker product yields
  11. 11. Where does the strength come from? • Cracker rates reduced through the year. Reformers continue to run reduced in Europe and US • Lighter feedstocks used • Inventories reduced: - ‘Just in time’ policies keep focus on prompt market - Credit constraints and payment terms - Production issues lead to price shocks - Lack of buffer volumes lead to increased volatility. Marginal demand sets direction
  12. 12. 2012: Backwardation rules from Q2 Brent Crude Gasoline Benzene • No incentive to store • All demand at prompt dates • Perpetual state of short-covering Source: Platts On The Net
  13. 13. Where does the strength come from? • Cracker rates reduced through the year. Reformers continue to run reduced in Europe and US • Lighter feedstocks used • Inventories reduced • Strength in the energy complex – Firm crude and strong economics for gasoline and gasoline blending, despite reduced demand overall
  14. 14. 2012: NWE benzene vs. naphtha Styrene Production issues demand Crackers reduced, pygas Dow’s Terneuzen kicks in constrained shutdown Average premium = $324.50/mt Source: Platts On The Net
  15. 15. Global benzene markets disconnected Source: Platts On The Net
  16. 16. Benzene backwardation Above the line = Backwardation Below the line = Contango Source: Platts On The Net
  17. 17. Toluene 2012: Also riding high • Production remains reduced in Europe • Production in the Americas is also hit • Imports to Europe from US cut back Source: Platts On The Net
  18. 18. Toluene: NWE still producing below capacity Western European Toluene: Production vs. Capacity 3000 2500 2000 Volume (KT) Capacity 1500 Production 1000 500 0 2007 2008 2009 2010 2011 Year Source: Platts
  19. 19. Firm US toluene reduces NWE importopportunities Source: Platts On The Net
  20. 20. MTBE prices 2012 Latin American Export Demand Extra imports kill factor Source: Platts On The Net
  21. 21. MTBE supply• Inventories depleted even though producers maximise run-rates: - Prolonged period of backwardation, lack of incentive to store - Sporadic feedstock shortages since July 2011 due to low utilization rates at NWE crackers (petrochemical margins poor)• External re-supply in NWE limited: - North West Europe/Singapore price spread at record highs, 2012 average $170/mt v 2011 average of $45/mt, but - Arab Gulf product committed term to Asia? - Increased demand for better/cleaner octanes in Arab Gulf - Backwardation and volatility in NWE price made moving product risky
  22. 22. Flows/Interregional dynamics
  23. 23. MTBE demand Demand maintained despite high factors to Ebob and gasoline backwardation: - Record high gasoline-naphtha spreads seen, $219.50/mt June 25; Strongest year for Ebob crack in history of Platts quote Marginal blending demand minimal due to gasoline backwardation, but refining margins on gasoline “never better” - South American demand for octanes unable to be satisfied by traditional sources of supply on the US Gulf Coast Main driver of large price movements.
  24. 24. Breaking the cycle • Economic conditions remain difficult, no incentive for the industry to change the current operational model • Energy complex backwardated right through the barrel • Volatility and backwardation discourages storing and inter-regional flows

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