The surge in European benzene pricing (first chart below) is likely a function of lower production as refiners adjust to account for the new COVID restrictions in the region, lowering short-term demand for jet fuel and gasoline. Prices in Europe are high enough today to justify shipments from the US but are more likely to result in shipments that were bound for the US heading to Europe instead. By contrast, US refining rates are edging higher, as the holiday season has created more demand for air travel and gasoline, despite the rise in COVID.
The decline in US and global chemical pricing this week (as discussed in today's daily) is a function of oversupply in the US and lower costs in the rest of the world. The US has had an incentive to produce everything for most of the year and has had essentially full capacity to do so since the beginning of the 4th quarter. This will have collided with seasonally weaker incremental demand in December and the recent abrupt drop in oil and gas prices to swing momentum very much in favor of buyers. Polymer prices have to date been more stubborn in the US, but we expect continued weakness here also through the end of the year.
It is increasingly likely that Hurricane Ida will add another leg of strength to US chemical pricing more broadly, with a host of prolonged production outage news and force majeure notices, giving momentum to some price increase announcements for September, some of which looked very speculative at the time they were made. Buyers will have an eye on continued pockets of supply chain disruption, strong demand in general, particularly for those levered to holiday spending, and the not insignificant fact that we still have almost three months of hurricane season to go! Note that two of the more disruptive storms of 2020 hit in October. We talk specifically about PVC in today's daily - See price chart below.