The US Ethylene Market could soften amidst a dip in Natural Gas Prices

Natural gas prices in the US have been on the rise since the second week of March and have breached the USD 7/MMBtu mark in the third week of April where the weekly spot average was assessed at USD 7.3/MMBtu. Prices of Natural Gas liquids too have been rising in tandem with ethane closing the third week of April higher by two cents/gallon. The current week however, saw natural gas prices reach an inflection and an eventual dip was observed today with prices falling below the USD 7/MMBtu mark.

Ethylene contracts for April trade were assessed at USD 0.29/lb, while prompt May contracts too have transacted at the same price. Spot ethylene trade volumes have dipped for the first time this week in the month of April. Most ethane crackers in the Texas region have been facing severe cost pressure from high ethane feed prices since the mid-March period. Higher natural gas prices were another pain point throughout this period as they pushed up the operational costs.

The spot futures Ethylene price curve is expected to end up in backwardation as most deferred months’ offers have transacted below expected levels. Energy markets too are expected to see some softening in the coming weeks, provided all the macroeconomic and geopolitical factors remain unchanged.

As per ChemAnalyst’s assessment, the April natural gas price range should be between USD 5.75/MMBtu (support price) and USD 7.5/MMBtu (resistance range). This could lead to Ethylene prices seeing a dip, since the Natural gas market already reached the resistance range and are bound to see a downtrend in the next week.