It was a very nervous week of trading for both the energy and resin markets. The threat of a double punch from Erin and Dean brought on frightening reminiscence of the devastating twin hurricanes of 2005. After a pleasantly non-eventful hurricane season last year, this current weather market has encouraged some resin buyers to consider building some defensive stocks.
Towards the end of the week, hurricane forecasters predicted that Dean could reach the fiercest level of 5 and projected its potential path cone through the Gulf, which included landfall along the greater Houston area. As of late edits to this report, Dean's path has now been revised further south and will hopefully spare industry infrastructure.
Tropical storm Erin indeed dumped a deluge of rain over the Houston area, forcing the temporary shutdown of several crackers. This storm coupled with an unrelated fire at one of the nations 10 largest refines was enough to pop August RBOB futures $.084/gal to close at $2.0385/gal on Friday. Spot RGP ceased it recent slide to stay around $.47/lb this past week.
The risk of extreme supply-chain interruptions caused Natural Gas prices to power higher this week, adding another $.19/mmBtu to the previous week's $.73/mmBtu gain to close just above the $7/mmBtu level. Spot Ethylene bounced a bit from last weeks low, recovering $.0125/lb with the most recent trade for August delivery at $.4625/lb.
Crude had come under pressure earlier in the week after OPEC officials commented that the slowdown in the US and world economies would likely limit near-term demand growth. Then Crude Oil prices rallied as the storms approached, ultimately closing the week up $.51/bbl to $71.98/bbl, near the middle of its $4/bbl range.
All eyes must now be focused on these current weather patterns as just the projected path of Hurricane Dean can influence energy, feedstock and resin markets. If it the hurricane hits Houston hard, these market will likely take off higher, if the storm stays south travelling through Mexico, these markets will likely give up much of their recent weather premium.
(The Plastics Exchange)