US Oct, Nov petchem demand solid, oil demand falls - Fed

01 December 2010 19:58  [Source: ICIS news]

HOUSTON (ICIS)--US domestic demand for petrochemicals was strong in October and November, the Federal Reserve (Fed) said on Wednesday, while demand for oil products continued to decline amid higher prices.

In its periodic “Beige Book” report on recent economic performance across the country, the Fed described petrochemical demand as “solid”.

The analysis was given by the Fed’s Dallas-centred 11th district, which includes Texas, New Mexico and a part of Louisiana and is home to much of the nation’s petrochemical and refining capacity.

Ethylene and polyethylene [PE] producers reported that domestic demand increased moderately, and export demand stayed strong - driven by cheap natural gas versus relatively expensive oil and a weaker dollar,” the Beige Book said.

Likewise, demand for petrochemicals used in manufacturing, alumina and pulp and paper also improved, the report said.

Domestic orders for polyvinyl chloride (PVC) used in residential and commercial construction remained depressed, but exports were strong, according to the Beige Book.

Refiners, however, said conditions remained weak.

“Demand for oil products continued to decline and refiner margins were being squeezed by the rise in oil prices,” the Beige Book said. “Refinery utilisation rates stood just above 80%, down from 90% this summer.”

Pessimism in the 11th district was also fuelled by automobile sales that were slightly weaker over the mid-October to mid-November reporting period, by more than normal seasonality would suggest, the report said.

Automobiles are a crucial end-use sector for many chemicals and plastics.

However, contacts described the automotive outlook for 2011 as “cautiously optimistic”, with most predicting a modest growth in sales, according to the Beige Book.

Elsewhere, districts centred in Cleveland, Ohio, and Atlanta, Georgia, each recognised gains in chemical shipments, the report said.

Overall, the Beige Book said reports from its 12 districts indicated that the economy continued to improve, on balance, with manufacturing activity expanding in almost all districts.

However, housing markets remained depressed, with several districts reporting further weakening during the past six weeks, the Fed said.

The Fed is the US central bank.

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By: Ben DuBose
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