US Propylene Oxide Prices May Recover as Hurricane Risks Threaten Gulf Coast Supply

Feedstock economics weakened considerably during late August. Propylene prices declined as domestic inventories increased and crude-oil values softened. The EIA reported US commercial crude inventories at 428.9 million barrels, 1% above the five-year average. The OPEC+ decision to increase crude production by 188,000 barrels per day in September added further pressure to upstream pricing. Lower propylene costs reduced production expenses and weakened sellers’ ability to sustain firmer PO offers.

PO demand in the downstream polyether polyols remained low because construction activity continued to struggle. US homebuilder confidence stood at 34 in July, marking the 15th consecutive month below 40. Higher mortgage rates, elevated housing costs, and economic uncertainty continued limiting construction activity. Furthermore, 37% of builders reported price reductions, while 63% offered sales incentives. These conditions encouraged downstream consumers to maintain controlled inventories and purchase only immediate requirements, restricting PO procurement.

Supply availability improved after a major Gulf Coast unit LyondellBasell resumed operations in early August following its July outage. The return of production helped normalize regional availability and reduced concerns regarding prolonged shortages. However, supply conditions could become more volatile if severe weather affects Gulf Coast chemical facilities. Producers may also adopt precautionary shutdowns if hurricane conditions threaten operating safety, potentially tightening PO availability temporarily.

Market participants remained cautious through late August, with limited spot transactions and controlled inventories. Buyers avoided substantial commitments because of uncertain downstream demand and expectations of seasonal destocking. Competitive import offers also restricted sellers’ pricing power.

The near-term outlook for PO is cautiously bullish. Atlantic hurricane activity may disrupt chemical plants and logistics hubs across the US Gulf Coast, while precautionary shutdowns could temporarily reduce availability. Weather-related disruptions may also affect propylene supply and transportation, creating upward pressure on production and delivered costs.

Additionally, rising transportation expenses and potential delays could encourage buyers to secure material earlier, supporting firmer PO pricing. However, elevated propylene inventories and weak polyether-polyol demand may limit the magnitude of any recovery. Overall, PO prices are expected to gain support if weather disruptions tighten supply, although sustained improvement will depend on downstream construction activity and feedstock developments.