Market looks for October increase in US methanol

24 September 2010 20:01  [Source: ICIS news]

A methanex plant in TrinidadHOUSTON (ICIS)--Rising crude oil values this week have spurred expectations of a 2-3 cents/gal increase in the October US Gulf methanol contract price, sources said on Friday.

The usual month-end anxiety over the contract assessment - with the September range at 105-108 cents/gal - has been heightened by a 6% jump this month in oil prices.

Historically, methanol prices have tracked crude values. A
large buyer said on Friday that NYMEX front-month crude prices around $76.40/bbl at mid-morning today supported a higher methanol contract price for October around $1.10/gal.

"The fundamentals absolutely do not support the current price," the buyer said.

The source added that another methanol rule of thumb calls for contract prices to be 15-17% higher than spot values. The current spot US methanol range of 95-96 cents/gal supports a higher contract price around 110 cents/gal, the buyer said.

The buyer estimated the chances for a rollover in the October contract at 30% and the chances for an increase at at 60%, with only a 10% chance it would go below the September range.

"If it comes down I'll be very surprised," the buyer said.

North American methanol supply issues also may be a factor in rumours of a higher contract price, the source added. Talk that the new Metor 2 plant in Venezuela was up and running could be overblown, the buyer said.

"Some say it's up and running, others say there have been some problems in the startup," the buyer said. "There's been so much confusion about that plant."

Calls to the Metor 2 plant were not returned this week.

A methanol seller said on Friday that an October contract price of 110/gal was a real possibility, but that it would probably be next week before the assessments are released.

Methanex and Southern Chemical Corp (SCC) historically have set the range of the monthly contract. Neither company had released an October assessment as of noon Friday.

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By: Lane Kelley
+1 713 525 2653

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