OXYFUEL NEWS via Individual Inc. An extreme shortage of
methanol has turned U.S. methanol markets upsidedown, with
producers and consumers scouring spot markets for product
and coming up empty. A mechanical problem at one plant and
delayed startups at several others have put the market in a
position of dire need, according to market watchers. But it is not
just the U.S. that is having difficulties, as other world markets
are
in similar positions.

"There is nothing out there," said one producer turned buyer.
"We have been trying to buy July barrels, and we just can't do it.
Our company may have to limit July contract sales to 50% of its
normal amount."

"I know of three methanol producers who are looking for spot
barrels to fill July contracts," added another market source.

Millennium Petrochemical's end of July force majeure is taking the
brunt of the blame for the supply shortage. "Millennium owed so
many people product that when they went down, other producers
who were depending on product from them were caught short,"
said a source.

The last recorded spot price remains at 62 c/gal, a deal done over
two weeks ago. Prices have not moved up to reflect the extremely
tight supply situation because no one has any product to sell. But
the current price is not the peak by any means, predicted analysts.

In May and June Methanex [MEOHF] bought heavily in the Gulf
Coast spot market. Reportedly, Methanex needed to shore up its
New Zealand production, forcing it to export some barrels to its
Asian customers. Methanex also sent some product to Brazil and
Mexico and is sitting on other barrels to shore up its contract
commitments, added a source. Consequently, "no one is
purchasing spot from Methanex," he said.

Methanex is the largest methanol producer and marketer in the
world, and its sales are truly global, said Kevin Budd, director of
investor relations and corporate communications for Methanex.
"Methanex often supplements its global supply chain by
purchasing product in one part of the world and transporting it to
another," he said. "Our key concern is security of supply to our
customers."

Imports May Be Delayed for Closer Markets

With global methanol consumers hunting for product, it is not
only the U.S. market that is dry. There are no uncommitted barrels
in the Caribbean until September, said a source.

With Statoil's 830,000metrictonsperyear plant failing to come
up on time, Europe has been pulling barrels out of the Americas,
said the source. But reportedly, one methanol cargo bound for the
East Coast is on route from Europe.

No product will be coming from Venezuela either, said Brian
Grigsby of CMAI. One of Venezuela's two plants its 690,000
metrictonsperyear SuperMethanol plant is currently in
summer turnaround.

Higher methanol prices will ultimately mean more imports, said
Rob Harvan of Bonner & Moore. But with the Caribbean dry,
traders will move further out, so it will take longer to get
barrels in.
Product will have to come from either the Middle East or Europe,
where transit time is a minimum of 2025 days, he said.

"In the coming weeks, more remote sources for methanol barrels
will come into the U.S. marketplace," said Harvan. "Higher prices
may also trigger the restart of closed U.S. methanol plants like
Texaco's Delaware City facility. Where product comes from
depends on how long prices remain high."

[Copyright 1997, Phillips Publishing]