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Insight | Time:Sep 1 2017 2:33PM
Hurricane Harvey impacts gasoline,supporting PX cost
 
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NYMEX September gasoline futures closed up 25.5 cents, or 13.5%, to $ 2.1399 / gallon yesterday, hit a new high since June 10, 2015 and the cumulative increase this week has reached 28% after Harvey's catastrophic flooding caused widespread outages of energy operations along the Gulf Coast.


 
Other aromatics products such as styrene and benzene all responded positively, but only PX market kept largely calm. PX prices only moved up evidently in Europe, but remained relatively stable in Asia and U.S.

  
First of all, the PX production loss of the US is not serious. As of last night, only Exxonmobil's PX units were shut with capacity of 875kt/year, 19.4% of the total PX capacity of 4.5 million tons / year in the United States.

Exxon Mobil reported that its Baytown refinery and Beaumontl refinery in Texas, U.S. were shut down. 400+200kt/yr and 275kt/yr PX units were heard involved respectively.

Flint Hills Corpus Christi was heard to restart its largest Crude Distillate Unit (CDU) yesterday. The refinery was shut down on Aug 25 caused by hurricane Harvey and 280+370kt/yr PX units were involved.

BP reported its Texas City chemical plant was not affected by hurricane Harvey. It has 550+400+350kt/yr PX units.

The production loss of PX in U.S will surely push the local price up, but has not reflect in the market due to the temporary suspension of the market, as well as the global PX pricing focus in Asia. 

Why is the European PX up? This is another question. European PX production capacity is only 2.7 million tons / year. Nor suffered an accidental loss. PX prices in Europe were pushed up mostly by oil and aromatics market. The firmer US gasoline will certainly lead the stronger European oil product market due to the arbitrage trading between the two regions. The aromatics output is relatively fixed in Europe, and need condensate oil and naphtha which are both used in oil blending. Therefore, the strength of the European oil blending market, will certainly drive all aromatic products prices up.

It is clear that Asia is the global PX pricing center, more than 80% of the production capacity is in Asia (including the Middle East).


Demand from China is the key factor influencing Asian PX prices, but now PX inventory remains high in China.

 
Did the hurricane affect the PX prices? Certainly yes. The loss of PX production in US may be easily made up by Asian goods. But the impact of higher cost has been reflected in the PX prices. September ACP was settled at $820/mt, $10/mt higher than August's, mainly attributed to the higher naphtha prices as major PX suppliers in Asia seems to be not confident in the PX market .
   
However, the PX market may be driven by another logic. Strong gasoline, naphtha and other oil products are affecting crude oil. Afterwards, hurricane Irma may visit the Gulf of Mexico and US crude oil inventories continue to decline, so the rise of oil prices may form a trend.

For PX market fundamentals, the speculation may be on the expected restart of new and old PTA units and turnaround of PX units in the fourth quarter. 

In short, the hurricane provides support to cost of PX. In addition, agreement on September ACP indicates continuous positive impact from PTA market. PX market may not be pessimistic later, although the supply remains surplus.
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