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India refiners getting rare oil cheap as China demand slows

February 25/2020

MOSCOW (MRC) -- Indian refining companies are snapping up rare crude grades as the coronavirus outbreak curtails China’s demand for processing, executives and traders said, with prices for some grades falling by as much as 15%, said Hydrocarbonprtocessing.

Chinese refiners have slashed output by at least 1.5 million barrels a day in February, or over 10 percent, after the virus outbreak hit domestic fuel demand, leading to swelling stocks.

"Opportunity for Indian markets is more in the context of what is happening in China and in recent times we received crudes which are appearing to be attractive as compared to their value earlier,” said R. Ramachandran, head of refineries at Bharat Petroleum Corp.

Refiners in India, the world’s third-biggest oil importer, rarely get the opportunity to buy suitable grades from areas like the Mediterranean and Latin America due to higher freight rates.

However, shipping rates have plunged by nearly half since the virus outbreak, and after the U.S. partially lifted sanctions on part of Chinese shipping firm COSCO. BPCL will receive a million barrels each of Brazil’s Sapinhoa and Mediterranean CPC blend in April, Ramachandran told Reuters.

It is also scouting for a million barrels each of Angola’s Palanca, a grade BPCL processed years ago, and Nigerian Okoro “as pricing appears attractive” for April, he said. “This is an opportunity for Indian refiners to buy new and rarely purchased grades that are available at cheaper rates,” said Sri Paravaikkarasu, director for Asia oil at consultancy FGE.

Asia’s spot premiums for Middle East, Russian, West African and Brazilian crude have all dropped this month with grades favoured by Chinese buyers, such as ESPO, Lula and Angolan, hurt the most. “For the Brazilian and CPC blend we have seen crude cost lower by 10-15% compared to what we used to see,” Ramachandran said.

Ample crude supplies allow other buyers to shop around and buy crude cargoes at cheap prices, although some Chinese refiners are also still chasing cheap supplies. “For March-loading, April-arrival West African crude cargoes, premiums have dropped across-the-board,” said a West African crude trader.

“Different crude grades are reacting differently... In general, most grades were down more than USD1. Rare grades are very cheap,” the trade source said. National oil companies in China buy a lot of Middle Eastern heavy crudes and medium grades, while independents process medium-to-heavy sweet grades from Latin America and Africa.

“In spot tenders we are seeing a reduction in premiums. We are seeing offers for sale of new grades. Opportunities have increased,” said M. K. Surana, chairman of Hindustan Petroleum Corp (HPCL).

“We are seeing offers for rare grades from Africa like Angolan Nemba and U.S. crude like WTI Midland at very competitive rates.”

As MRC informed earlier, Henkel AG & Co. KGaA (Dusseldorf, Germany) announced that Henkel Adhesives Technologies has officially inaugurated its new production facility in Kurkumbh, India, near Pune. With a total investment of about EUR50 million, the business unit aims to serve the growing demand of Indian industries for high-performance solutions in adhesives, sealants and surface treatment products. Designed as a smart factory the new plant enables a wide range of Industry 4.0 operations and meets the highest standards for sustainability.

Also, State-run oil supplier CPC Corp., Taiwan has recently opened a representative office in New Delhi as part of its plans to set up a plant in India and forge ties in the petrochemical industry here.

As MRC informed earlier, CPC Corporation took one of its naphtha crackers off-stream on 8 November 2019 for major maintenance work. The cracker number 4 remained offline for about 65 days and resumed operation by mid of January 2020. The No. 4 unit has an annual capacity of 380,000 tons/year of ethylene and 193,000 tons/year of propylene.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, petrochemistry, India.
Category:General News
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