Tellimer

Thai (Bualuang): Refining&Chemical-GRM and most chemical spreads moved southward

  • Headline GRM weakened WoW
  • Ethylene and Propylene spreads continued to fall WoW
  • HDPE and PP spreads decreased further WoW

Headline GRM declined last week, squeezed by slimmer crack spreads across most product categories. The COVID-19 resurgence in many Asian countries may reduce petroleum demand in the short-term, but we expect consumption of refined products to start picking up once the situation eases. And recovering demand should boost GRM in the months ahead. TOP is our refinery value pick, as its production cost efficiency makes its earnings profile relatively more leveraged for a rebounding GRM. Also, SPRC is a trading play on the “gasoline high season” theme.

Last week, most chemical prices and spreads continued to decline, due to falling upstream feedstock costs, sluggish regional demand, and abundant supply. Our top Chemical pick remains IVL, as it makes compounds that are molded into essential products (which are in even greater demand in the COVID-19 era). And there’s scope for upside to its long-term growth profile via future acquisitions. Furthermore, the second-quarter is normally a peak season for polyester chain products (IVL’s main products).

Headline GRM weakened WoW

The mean Singapore GRM declined by US$0.31 WoW to $1.40/bbl, squeezed by slimmer crack spreads across most product categories. Weak demand in Asia was tied to COVID-19 resurgence, increasing inventories in Singapore, and rising supply brought about by higher run rate at refineries pushed gasoline spread down by $1.72 WoW to $8.06/bbl (most negative for SPRC). However, strong demand in North America bolstered the gasoline crack spread to some extent. Also, weaker regional demand tied to rising COVID-19 cases and greater exports from Japan and Korea squeezed jet/kerosene and diesel spreads by $0.21 WoW to $4.73/bbl and by $0.45 WoW to $5.29/bbl (most negative for TOP).


Most Viewed See latest
Disclosures

This publication is being distributed by Tellimer solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not con...

Full Tellimer disclaimers