Phillips 66: Chemical rates above 85pc in 2015

OREANDA-NEWS. Phillips 66 is forecasting global chemical operating rates "in the high 80pc" range during the first quarter, executives said on the company's earnings call today, adding that margins may narrow modestly this year on lower prices.

"Feedstock prices continue to fall faster than product prices," said chief executive Greg Garland. "As you go forward the feedstock and the derivative price narrows somewhat, but we still expect a good year for chemicals from a historical perspective."

Phillips 66 reported \$1.2bn in profits from its chemicals segment in the fourth quarter, a 23pc increase from the prior year.

Earnings from its olefins and polyolefins segment fell by \$11mn from the third to the fourth quarter due to downtime at its Port Arthur, Texas, cracker that was partially offset by business interruption insurance. Ethylene-to-polyethylene margins were steady in the fourth quarter, company officials said, adding that they expect to maintain a light feedslate despite global declines in naphtha prices.

"Because of the total chain in margins, ethane is still very preferred for us in the US as we maximize the value of the cracking slate," Garland said. "On the demand side we still see a lot of that in the US, and if you look at what happens in the world economy with lower crude, that is a good demand boost as well."

Declines in crude prices should help spur demand for chemicals, he said.

"I think people are discounting the impact of \$50/bl crude globally," Garland said. "The demand side of the equation is probably going to be better than what people are thinking. In terms of 2015 were are seeing fairly robust demand in the US for petrochemicals, Europe is kind of moving sideways, Asia weakened in the fourth quarter, but it looks like it's coming back to us. I think fundamental demand is going to be good for petrochemical production."