Repercussions of Britain's decision to leave the EU have not yet been seen impacting expectations of olefin contract prices for July.
The European petrochemicals market on Monday was still taking a stock of the implications of the results of the referendum, while the butadiene monthly contract for July settled at Eur665/mt FD NWE, up Eur15 from June.
In the week leading up to the so-called Brexit vote, spot butadiene deals in Europe were heard at ascending numbers, with trade sources citing tightened supply. This followed firm indications from across the Atlantic, where nominations by three US petrochemicals producers for July were at 36 cents/lb (Eur723/mt), a rollover from June.
Fears of the referendum's impact on petrochemicals began at crude, where heightened concerns about the global economy sent oil futures plunging on Friday. Dated Brent crude settled down $1.41 at $47.48/b.
Naphtha, assessed Friday at $407.25/mt CIF NWE, saw a day-on-day decline of $14.75/mt, tied to crude. A fall in naphtha, the primary feedstock for olefins production in Europe, was expected to reverse some of the bullish expectations in olefin contract prices for July. However, the UK referendum results pushed the British pound to lows against the dollar not seen in more than three decades.
The dollar soared against a basket of currencies including the euro, negating some of the effect of a cheaper dollar-denominated naphtha.
The euro fell to 1.1123 against the dollar on Friday, compared with 1.1361 on Thursday. With a falling euro working against declining naphtha prices, European producers are not expected to see dramatic cost savings this week.
Bullish sentiment surrounded both ethylene and propylene July contract price expectations prior to the exit decision and prevailed this week.
"No movements on negotiations; I want a rollover but the first offers have been at a plus 25 [euros from June]," a buyer involved in ethylene contract negotiations said.
S&P Global Platts' ethylene CP indicator was assessed at Eur942/mt FD NWE on Monday, flat from Friday. With ethylene last settled at Eur935/mt on May 27, a small increase was assessed on the strength of coproduct propylene. Platts' propylene July CP indicator was assessed at Eur676/mt FD NWE on Monday, Eur23.5/mt above June, reflecting higher propylene spot prices.
