Gulf refineries have strong showing

HOUSTON (ICIS)–Refinery utilisation rates continued strong performance along the Gulf Coast and wider Texas region from mid-July through August, while the high US dollar continued to hamper petrochemical exports, a report by the Federal Reserve Banks revealed on Wednesday.

The report, also known as the Beige Book, is published eight times a year and offers a summary of economic conditions across the 12 US banking districts, with each district branch collecting data on performance areas such as manufacturing, construction, consumer spending and wages.

Results were similar to those reported in July, where Gulf refineries performed well and chemical export demand was weak.

According to the most recent report, oil prices fell roughly $15/bbl over the past six weeks, reaching the lowest level since 2009. Gasoline and diesel prices also fell, while natural gas prices moved up slightly.

The report noted that some midstream construction projects were being delayed for the foreseeable future, and domestic sales of polyvinyl chloride (PVC) had been lacklustre in 2015 due to softer demand growth and increased imports.

The manufacturing sector had mixed results, with one brick producer attributing a slight rise in demand to improved weather conditions, while a copper wire producer said demand was better after five soft months due to wet weather.

One fabricated metals manufacturer said that the building boom was getting stronger, and an aerospace manufacturing contact said the airline industry was doing “great” and would perform well in the future.

Overall sales of low-to-mid-priced homes remained strong, though most contacts noted slower activity due to seasonal weakness and softness in new home sales at higher price points affecting the demand.

Demand for oil field services remained depressed, as lower oil prices dampened outlooks.

In addition to job cuts, further cuts to capital spending have been announced, although these are likely to be smaller than the initial round, and are expected to be the last round of cuts for 2015, the report said.

Multiple contacts said that the credit situation was worsening for small to midsize producers as balance sheets deteriorate, and the likelihood of a significant increase in oil prices has declined. Overall, more contacts said they were resigned to “lower for longer” oil prices.

Outlooks for the next two quarters were negative, the report said.