Ecopetrol cuts 2020 planned investment by USD1.2 B

MOSCOW (MRC) -- Colombia’s majority state-owned oil company Ecopetrol has cut its planned investment for 2020 by USD1.2 billion amid the outbreak of the novel coronavirus and an increase in global crude supply, the company said, as per Hydrocarbonprocessing.

The oil and gas company now sees its 2020 investment at between USD3.3 billion and USD4.3 billion.

Oil companies have been affected by a heavy drop in demand amid the coronavirus pandemic and a price war started by Saudi Arabia and Russia after they failed to agree to extend their pact to cut output to support the market.

Ecopetrol’s updated investment plan, where it will invest in early-stage opportunities, is aimed at preserving its production and cash flow, safeguarding its investments and committing to social investments, the company said.

Ecopetrol will also cut costs by 2 trillion pesos ($487.81 million) through austerity measures that prioritize its operating activities and will restrict travel, sponsorship, and participating in events among other things, it said.

With regards to dividends, the company plans to pay all of the dividends to minority shareholders on April 23 but will pay just 14% of dividends to the majority holder. It will pay the rest of the dividends to the majority holder in the second half of the year, it said.

Shares in Ecopetrol have fallen 47.9% so far in 2020 and closed on Monday at 1,725 pesos each on the Colombian stock exchange. Production for the year is still expected between 745,000 and 760,000 barrels of oil equivalent a day, the company said.

Ecopetrol on December 25 to resumed production of high-pressure polyethylene (LDPE) in the city of Barrancabermeja (Barrancabermeja, Colombia), previously closed due to a shortage of raw materials - ethylene. This roduction with a capacity of 23 thousand tons of LDPE per year was closed for repair on November 18.

It was previously reported that Ecopetrol intends to double sales by 2023. Ecopetrol sees opportunities to expand sales of aromatics, LDPE, solvents, base oils and asphalt in Colombia and other countries.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.
MRC

MOSCOW (MRC) -- Oil rose more than USD1 as bargain hunters emerged after recent sharp falls due to the coronavirus pandemic and the price war between Saudi Arabia and Russia, but fears of a recession still dragged on the market, said Hydrocarbonprocessing.

Brent crude was up by 3%, or 89 cents, to USD30.94 a barrel by 0746 GMT, after hitting a high of USD31.25. U.S. West Texas Intermediate (WTI) crude rose 4.7%, or USD1.36, to USD30.06, having come off a high of USD30.21.

“Presumably, the market is getting supported by physical bargain hunters and short covering,” said Stephen Innes, chief markets strategist at AxiCorp.

The United States has said it will take advantage of low oil prices to fill its Strategic Petroleum Reserve (SPR), and other countries and companies are planning similar measures to fill storage tanks.

“But those storage facilities are rapidly filling. If storage does fill, quashing that demand, oil prices are sure to collapse further, and the global markets will then have to hope that the dispute between Saudi Arabia and Russia is resolved before we reach that point of no return,” Innes said.

Amid heavy demand loss from the global spread of the virus that causes COVID-19, Saudi Arabia and Russia started a price war after failing to agree to extend their pact to cut output to support the market.

Saudi Aramco has said it would likely carry over its planned higher oil output for April into May, and that it was “very comfortable” with an oil price of USD30 a barrel.

“Much focus is also falling on the Russians and Saudis, with no expectations for either side to blink unless oil collapses towards the USD15 region... If we see oil falls below the USD20 level, the Saudis may decide to come back to the negotiating table, however maybe just with OPEC and not the Russians,” said Edward Moya of Oanda.

Countries including the United States and Canada, and nations in Europe and Asia, in the meantime are taking unprecedented steps to contain the virus, severely crippling demand for crude and refined products including gasoline and jet fuel.

Gasoline refining margins in the United States, the world’s largest consumer of the motor fuel, plunged around 95% on Monday, briefly turning negative, as people stayed off the roads. U.S. President Donald Trump on Monday said economic disruptions from the spread of the coronavirus and measures taken against it could lead to a recession.

In Asia, margins for transportation fuels had also plunged after more countries imposed travel restrictions and curbed domestic movement as part of measures to slow the spread of the coronavirus.

As MRC informed earlier, Asian refiners may curtail jet fuel output by partially reducing processing as the fuel's value versus diesel plunged after the United States said it would ban European travellers to prevent the spread of the coronavirus. The regrade, which is the price difference between jet fuel and diesel with a sulphur content of 10 parts-per-million (ppm), fell to a discount of USD3.86 a barrel on Thursday, the lowest since Aug. 13, 2015, according to data from S&P Global.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC

MOSCOW (MRC) -- Oil refiners’ profits for transportation fuels fell further this week, with the margin for gasoline turning negative for the first time in more than a year, according to Refinitiv data, said Hydrocarbonprocessing.

The margins plunged to new multi-year or multi-month lows this week after more countries globally imposed further travel restrictions and curbed domestic movements as part of measures to slow down spread of the coronavirus.

Airlines and airports are facing a huge shock as they battle a cash crunch resulting from the coronavirus, while gasoline demand in the United States, the world’s largest oil consumer, is plunging as state and local governments advise people to stay home and businesses shut.

In Asia, refiners are now losing 78 cents on every barrel of gasoline they produce from Brent crude, their widest loss in 13 months. U.S. gasoline refining margins RBc1-CLc1 fell a whopping 95% on Monday - briefly turning negative - to settle at 28 cents per barrel, their lowest since December 2008.

Asian refining margins, or cracks, for jet fuel plunged to USD4.71 per barrel over Dubai crude, the lowest on record for Refinitiv data going back to March 2009. They were at USD7.70 on Friday.

“I don’t expect any recovery yet for jet fuel (margins), and I’m very much concerned (to know) if the current level is bottom yet ... But jet fuel will be the last to recover when the economy recovers,” a Singapore-based jet fuel trader said.

"The world has to wait for every country to go through this virus peak. Then demand will slowly come back, but my guess is probably not before late third quarter," she said.

Cracks for aviation fuel have shed nearly 70% since the beginning of this year as flight cancellations across regions led to unprecedented losses for airlines.

Asian refiners may have to curtail jet fuel output due to the weakening demand. Jet fuel cannot typically be stored for long periods as its quality would degrade, increasing the incentive for refiners to produce less of the fuel.

“When crude prices fell heavily early last week… it gave incentive to refineries to keep runs unchanged. Eventually, with virus-related situation developing, it’s now the second time for global refineries to think of run cuts again,” a Seoul-based middle distillates trader said.

As MRC wrote before, Saudi Aramco expects the coronavirus impact on oil demand to be short-lived and for consumption to rise in the second half of the year, Chief Executive Amin Nasser told Reuters in late February 2020.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.

MRC

MOSCOW (MRC) -- Saudi Arabia has stepped up efforts to squeeze Russia’s Urals oil grade out of its main markets by offering its own cheap barrels instead after their long-standing deal to support global oil prices fell apart, reported Reuters with reference to seven oil sources.

Cooperation between Moscow and Riyadh dramatically collapsed last week after Russia refused to support deeper oil output cuts desired by Saudi Arabia to fight falling oil demand as a result of the spread of the coronavirus outbreak.

Market sources told Reuters that state-controlled Saudi Aramco is trying to replace Urals in refiners’ feedstock around the world, from Europe to India.

"They (the Saudis) knock on all doors offering a lot and cheaply..." a source with a Western oil major told Reuters.

Saudi’s national shipping firm, Bahri, provisionally chartered up to 19 supertankers this week, with six of them set to take about 12 million barrels of Saudi crude to the United States, according to data and sources.

Saudi Aramco is in talks with European refiners, including big buyers of Urals oil like Finland’s Neste Oil, Sweden’s Preem, France’s Total, BP, Azerbaijan’s SOCAR, Italy’s Eni, the sources said.

The tactic has already started to pay off, with refiners ordering extra volumes of its crude for loading in April at "very attractive prices", the sources added.

Saudi Aramco, Neste Oil, Total, BP, Preem, Eni and SOCAR did not immediately respond to requests for comment.

Saudi Arabia will open the taps beginning on April 1, releasing 12 million barrels of oil per day (bpd) into the markets. Russia’s maximum production capacity is 11.80 million bpd, with Asia and Europe being key export markets.

Russian Energy Minister Alexander Novak said on Wednesday that Saudi plans to raise output was “not the best option”. Novak is meeting Russian oil companies on Thursday in Moscow.

"Riyadh is really mad at Moscow for their move in (the) OPEC meeting, so they target (the) Urals markets first", a source at a European trading firm involved in Urals trading said.

Market sources said that Saudi Aramco is trying to replace Urals in refiners’ feedstock in an attempt to punish Moscow and get the Russians back to the negotiation table.

On Saturday, the day after the landmark deal between the group known as OPEC+ fell apart, Riyadh slashed prices for its crude to customers worldwide.

Saudi Aramco may send an extra 1.5 million bpd to Europe in April alone, said the third source, who does calculations for a global trading house, said.

Oil wars between Russia and Saudi Arabia are not new: both were at a standoff before the OPEC+ deal three years ago. But now Riyadh is ready to go to as far as Belarus.

Russia and its ex-soviet neighbour failed to reach a new oil supply deal in January, meaning that Minsk started to look for Urals replacement.

"We’ve been working with Saudi Arabia since last year, there was a meeting in London last week... The prices are just wonderful," a source at a Belarus oil trader told Reuters.

Belarus said it would keep importing alternative crude oil even if supplies from Moscow are fully restored.

Saudi Arabia is also seeking to replace Urals crude in more unusual markets for the Russian grade such as India and the United States, traders said.

"There were phone calls over the weekend from Aramco to CEOs of majors and big independents about taking an increase in Saudi oil. My understanding is that this would be oil loading in April - reaching US in May and June”, a US market source said.

Indian refiners that had been increasing Russian oil purchases in recent months have also ordered extra Saudi oil.

Azeri state firm SOCAR ordered 3 million barrels from Saudi Arabia for loading in April for its STAR refinery in Turkey, which so far was processing mainly Urals, two sources said.

And France’s Total, one of the top Urals buyers, is in talks with Saudi Aramco to boost intake of Arabian barrels by some 600,000-700,000 bpd next month, another source familiar with the company’s plan said.

Neste Oil, Eni and Preem may also receive extra barrels from Riyadh, ranging from a one to three-four cargoes, traders said.

As MRC informed before, in October 2018, Saudi Aramco and Total launched engineering studies to build a giant petrochemical complex in Jubail. Announced in April 2018, the world-class complex will be located next to the SATORP refinery, operated by Saudi Aramco (62.5%) and Total (37.5%), in order to fully exploit operational synergies. It will comprise a mixed-feed cracker (50% ethane and refinery off-gases) - the first in the Gulf region to be integrated with a refinery - with a capacity of 1.5 million tons per year of ethylene and related high-added-value petrochemical units. The project represents an investment of around $5 billion and is scheduled to start-up in 2024.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC

MOSCOW (MRC) -- Jiangsu Sopo Chemical has planned to shut its No. 3 Acetic acid plant for a maintenance turnaround, according to Apic-online.

A Polymerupdate source in China informed that, the company is likely to halt operations at the plant, in end-March, 2020. The plant is expected to remain under maintenance for about 40 days.

Located at Zhenjiang in Jiangsu province, China, the No. 3 plant has a production capacity of 800,000 mt/year.

Acetic acid (AA) has been largely used with a wide range of applications such as a raw material for a synthesis of vinyl acetate monomer (VAM), cellulose acetate or acetate anhydrate, acetate ester and a solvent for a synthesis of terephthalic acid and so on.

VAM is one the main feedstocks for the production of ethylene-vinyl-acetate (EVA).

According to MRC's DataScope report, December 2019 EVA imports to Russia dropped by 4,1% year on year to 3,600 tonnes from 3,760 tonnes a year earlier, and overall imports of this grade of ethylene copolymer into the Russian Federation decreased in January-December 2019 by 17,8% year on year to 39,55 tonnes (48,09 tonnes in 2018).
MRC