North American methanol contracts for December dropped by 11-15 cents/gal on postings by Methanex and Southern Chemical this week, marking the lowest monthly average for those producers this year.
A deep dive in spot prices this month and especially in the past week foreshadowed the 8.4% decrease in contracts, prompted by declining Asian prices and plunging crude values.
Methanex posted 141 cents/gal for December, and Southern Chemical 142 cents/gal. The individual prices of the two producers historically have set the range for monthly contracts.
The drop still leaves a wide gap between contract and spot barge prices, which this week have dropped to 104 cents/gal for December delivery.
Spot prices began November at 124.5 cents/gal and have dropped 16% this month. For methanol buyers who can purchase both contract and spot material, there remains an advantage to buying on spot, as the following chart shows.
Methanol historically tracks crude, which is down 21% since early November on rising US oil stockpiles. Oil prices closed at a new yearly low Wednesday but edged up Thursday to $51.61/bbl in morning trading. Since hitting the yearly high in early October, benchmark West Texas Intermediate has dropped by 32%.
The outlook for January pricing differs between the short-term and long-term.
Price history over the past five years gives a small edge to increases in January, but the past decade favours a flat or down posting for the month. On a net basis, cumulative decreases over the past decade are more than four times the size of the increases.