Buyers expect US methanol October contracts to rise at least 5 cents/gal on tightening supply in Trinidad, sources said on Tuesday.
The latest natural gas cutback on the tiny Caribbean island that began earlier this month has already pushed up spot barge prices, which currently stand at 143-144.5 cents/gal.
The spot increase should lead to a raise in the October contract, sources said. One buyer said the current contract discount of 15% enjoyed by large buyers would justify an increase of almost 10 cents/gal, however unpleasant the hike.
“There’s plenty of room to absorb [an increase of] at least 5 cents/gal,” the buyer said.
Another buyer agreed. “That’s what I’m expecting,” he said. “But I’m hoping for three cents/gal.”
Methanol contract prices have jumped by solid double-digit percentages during the past year on constant natural gas curtailments to producers in Trinidad and on European price runups.
Methanex and Southern Chemical, which historically have set the monthly range with their postings, issued 132-133 cents/gal in October 2012.
Even if the two suppliers roll their September postings of 159-160 cents/gal – however unlikely that may be – it would still leave contracts with a 20% gain over the past year.
Industry executives often say methanol tracks crude oil, but over the past 12 months methanol has surpassed the gain of futures for benchmark West Texas Intermediate (WTI) crude, which are up about 12% since late September 2012.
During that period, contract methanol has more closely tracked its major feedstock, natural gas, with US Henry Hub natgas futures rising almost 24%.