US methanol spot slips on drop in Europe, weak Asia demand

Source: ICIS News

2019/01/11

HOUSTON (ICIS)--US methanol spot barge prices this week slipped following a price decline in Europe and weakening demand in Asia, even as crude prices jumped.

Spot methanol prices on Friday seemed to be settling within the weekly range of 101-102 cents/gal, down about 1 cent/gal from the previous range.

Methanol historically tracks crude oil, which hopped up almost 8% this week based on Friday mid-morning prices for benchmark West Texas Intermediate that rose over $53/bbl at one point before falling back.

Crude prices rose as the dollar continued to strengthen and the Federal Reserve indicated a flexibility toward changing policy if the economic outlook turns negative, which was seen as supportive of future oil demand.

In Europe, spot methanol prices fell to a 14-month low before lifting slightly, ending the week about 5-9 cents/gal below US spot. The European market seemed mostly unmoved by Equinor’s Norwegian outage, with supply still healthy, including a vessel arriving from Venezuela.

In Asia, methanol demand remained relatively weak, with supply said to be balanced to long. Domestic prices in South Korea were a little softer. In Taiwan, major end-users rolled over contracts, but sentiment was weak because of high inventories.

This week’s spot slippage also widened the gap between US methanol contract and spot prices, which is currently about 31 cents/gal and has prompted talk that contracts will have to drop again for February.

Contract buyers usually get a considerable discount, ranging from 15-20%. The following chart shows that spot buyers still have an advantage over contract buyers.