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Combination of Fundamentals Triggers Overnight Surge in PGP

Heavy producer buying, tight supply, strong demand, record crude oil prices, and the start of the summer driving season were primary catalysts for a surge in June Polymer-Grade Propylene (PGP) prices on Wednesday.

Following the Memorial Day holiday, June PGP levels began the week early Tuesday with bid/offer levels at $.65-$.75/lb. By midday on Wednesday, June PGP traded twice at $.80/lb. Market sources also reported June PGP deals at $.81/lb and $.82/lb. Volume sizes of the transactions were not disclosed.

Industry participants tied Wednesday's increase to one producer buying at higher levels. There were no further details of production issues in the market.

Sources said back in May that another producer, Dow, will undergo maintenance for 60-90 days at its 750,000 mt/year PDH unit in Freeport, Texas. Dow has not confirmed any operational issues at the PDH unit.

Meanwhile, crude futures continue to pressure commodity markets.

Brent futures hit $71.48/bbl on Wednesday, the highest since January 2020, before it settled at $71.35/bbl for a $1.10/bbl increase on the day. WTI futures hit $69.00/bbl, its highest levels since October 2018, before it settled at $68.83/bbl for a $1.11/bbl gain. Analysts are forecasting higher prices, coming on the back of growing demand during the summer driving season, which began this week and is back at pre-pandemic levels.

The start of the summer driving season also coincides with the beginning of the US hurricane season, which market sources warn could also send commodity prices higher.

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