Europe methanol fluctuations driven by sentiment, not fundamentals

12 August 2011 16:56  [Source: ICIS news]

LONDON (ICIS)--Recent price movements in the European methanol market have been driven by changing sentiment, while fundamentals have remained stable, sources said on Friday.

Spot prices have gained and lost around €25/tonne ($36/tonne) FOB (free on board) Rotterdam over the past month, during which supply and demand have not significantly changed.

“We’re back at the same level we were five weeks ago, and fundamentally absolutely nothing has changed,” said a trader.

European prices were initially pulled up by a firming southeast Asian market, following outages at two plants in Brunei and Malaysia. This was exacerbated by outages in Saudi Arabia, Iran and Trinidad.

The market firmed over supply concerns, although no tightness actually emerged in Europe and there were widespread expectations of further gains.

Prices quickly dropped, however, and opinions were divided as to the cause.

Positive news regarding the off-line plants had allayed fears of tightness, some felt, while many thought the market had been spooked by the recent equity and crude oil losses. Of those plants that have had recent supply difficulties, many are either back online already, or will be in the near future.

Others considered the market movements to be driven by traders exploiting high levels of uncertainty.

The trader observed that the price movements were generally led by a small number of players trading one or two parcels, after which the rest of the market would trade 10–12 parcels at the same level.

One point on which all sources agree is that any potential negative impact on demand from the recent macroeconomic concerns will not take effect for at least three months, if not more.

($1 = €0.70)

For more on methanol visit ICIS Chemical Intelligence

By: Ross Yeo
+44 208 652 3214

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