Domestic refinery rate reductions prop up US RGP prices

Houston — US prompt spot refinery-grade propylene prices rose 0.75 cent on the day and 4.5 cents on the week to 17.5 cents/lb FD USG Friday, surpassing the year-to-date high reached January 2 at 16.5 cents/lb.

An April RGP trade was heard done at 17.5 cents/lb MtB-Pipe.

Refinery rate reductions have resulted in less upstream propane being produced, which means less propylene will be produced propping up prices, sources said.

RGP supply is "probably tight with all the FCC's dialed back," one source said.

RGP fell to an 18-year low at 9.25 cents/lb, the lowest price since S&P Global Platts began publishing the assessment in March 2002. RGP has recovered 8.25 cents or 89.2% since the record low three weeks earlier.

Domestic refinery utilization rates fell 1.5% on the week to 67.6%, Energy Information Administration data showed Wednesday.

Refinery rates were at 82.3% at the time of the 18-year low, according to EIA data.

The higher RGP prices have also narrowed the spread between polymer-grade propylene and RGP, sources said.

April PGP was assessed Friday at 25 cents/lb, taking the PGP-RGP spread to a 7.5-cent discount for RGP.

Last year, the PGP-RGP spread was 10.5 cents/lb, according to S&P Global Platts data. The PGP-RGP spread was last lower March 7, 2017 at 7 cents.

The source recalled a time when the PGP-RGP spread was even narrower. Pre-2005, the PGP-RGP spread was below 5 cents/lb, the source said.

"I think there were more splitters than RGP back then, so the spread was lower, closer to splitter operating costs," he saids