China’s MTBE prices lowered in mid-December due to a sharp drop in crude oil prices and low demand for gasoline, despite prices of feedstocks being high. The prices are in a weak stage of consolidation.
Methyl Tert-Butyl Ether (MTBE) EX-Jiangsu prices dropped significantly, down by 3.03% from the previous week. The trend is part of the overall pressure that has been felt in the Chinese petrochemical market. The reason for the drop is a result of a combination of factors that have affected the petrochemical industry. These factors include the worldwide decrease in crude prices.
Crude oil markets have been imposing strong bearish pressure on the MTBE market during the week. The international crude benchmarks, WTI crude futures, as well as Brent crude futures, have broken below critical technical support lines as a result of renewed supply fears, reduced geopolitical supply risks in the wake of peace talks between Russia and Ukraine, as well as worsening macro conditions. The EIA's December 11 report made significant revisions upwards in supply projections, anticipating an average level of oversupply of 4 million barrels per day, consistent with high-frequency data indicative of increases in inventories. Further weight was imposed by reduced gasoline crack spreads in Europe and reduced global diesel demand.
This macro trend pushed the MTBE manufacturers in China to slightly lower prices in order to promote shipping. Despite the decline in prices, it was observed that the prices of feedstocks are high. This has restricted the magnitude of the cuts in prices. Despite the situation, the MTBE manufacturers are reportedly facing challenges in terms of margins with the prices of raw materials such as isobutylene and methanol.
On the supply side, the MTBE market experienced mixed trends in plant operations. Dechen Energy and Hebei Xinxinyuan started operations, but Shandong Chengtai and Yuhuang Shengrong suspended operations, leading to a slight decline in supply. However, the marginal decline in supply had minimal impact on the MTBE market as demand pulled in the downstream sector remained weak. The blenders and gasoline suppliers are cautious in their purchasing, which has been influenced by year-end inventory management and weak demand in the retail sector.
Exports contributed weak support, with the large players ditching initial shipments, helping to establish a temporary price floor for MTBE. However, according to analysts, the domestic market persists in a weak consolidation stage as fundamentals related to both supply and demand continue to offset each other.
Looking forward, the outlook on the Chinese MTBE market is expected to see the prices fluctuating in a tight trading range, dragged down by slow consumption for gasoline and lingering oversupply in the energy sector. Currently, there is no positive catalyst for MTBE production, even when considering high production
