As virus destroys fuel demand, global refiners prepare run cuts

MOSCOW (MRC) -- Falling prices for crude oil are usually a good thing for global refiners - except when nobody is driving, reported Hydrocarbonprocesing.

Gasoline demand in the United States, the world’s largest oil consumer, is plunging. International flights are being grounded worldwide, slamming jet fuel demand.

Margins for producing transportation fuels turned negative in Europe and Asia, and briefly did the same in the United States, in a rapid response to international and domestic travel restrictions in scores of nations worldwide.

"What we are seeing is nothing short of unprecedented," said Tom Kloza, founder of the Oil Price Information Service, adding that demand destruction during this pandemic has exceeded what was seen in the wake of Sept. 11 and other disasters.

Crude oil prices have plunged this year, most recently after Saudi Arabia and Russia failed to reach agreement on limiting supplies. Both US crude and international benchmark Brent have tumbled below USD30 a barrel.

This would have been a boon for refining margins - but prices on gasoline and jet fuel have plummeted even faster this week, sapping refiners’ profitability.

Traders, all speaking on condition of anonymity, said it was extremely difficult for refiners to plan run rates due to daily changes in the situation. On Tuesday, Phillips 66 said it was cutting production at its Los Angeles refinery due to loss of demand.

Refineries must choose between extending maintenance while margins are so poor or ramping up to take advantage of cheap crude to fill up storage with refined products. However, once storage has been filled, refining rates would have to fall sharply, due to lack of demand.

In Europe, refiners are losing nearly USD7 on every barrel of gasoline they produce, an 11-year low. Differentials for jet fuel cargoes also fell to a record low.

Asian refiners are producing gasoline at a loss of 78 cents a barrel of Brent crude, lowest in 13 months.

US gasoline refining margins fell a whopping 95% on Monday to settle at 28 cents per barrel, lowest since December 2008. On Tuesday, they rebounded, but were still at a meager USD2 per barrel.

Asian refining margins for jet fuel plunged to USD4.71 per barrel over Dubai crude, lowest ever based on Refinitiv data going back to March 2009. They were at USD7.70 on Friday. In the United States, jet fuel prices when compared with the heating oil benchmark were at lows not seen since 2011 in both New York and on the Gulf Coast.

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

Numerous refiners have invested in costly large-scale projects to capitalize on projected increases in demand for low-sulfur shipping fuel in the first half of 2020 due to new maritime regulations limiting the use of high-sulfur fuels.

Now, though, those refiners may be particularly hard hit, as the virus has curtailed cruises and global shipments of goods.

"Refiners that invested in sophisticated upgrading equipment to produce low-sulfur fuel oil for ships may suffer another blow," said Phil Verleger, a veteran oil economist and independent consultant, in a note.

For example, PBF Energy’s market capitalization fell to less than USD1.3 billion on Friday, just USD300,000 more than it paid for Shell’s Martinez refinery earlier this year.

Following that purchase, PBF laid off members of its commercial business development team, according to a person familiar with the matter. The team had been looking strategic projects, acquisitions and other new business opportunities for the company.

PBF did not respond to a request for comment.

Italian energy group Eni said on Tuesday all its refineries in Italy were working normally except for two that had cut volumes for maintenance.

A spokesman for Repsol said the Spanish refiner had activated a global plan two weeks ago to ensure normal operation at all its facilities.

As MRC informed earlier, operations at Italian petrochemical producer Versalis (part of Eni) have not affected by emergency quarantine measures in the country. Italian Prime Minister Giuseppe Conte extended its emergency coronavirus measures Wednesday evening and announced the closure of "non-essential" commercial businesses. This follows the announcement of a nationwide lockdown on Monday, limiting movement for around 60 million people. Under these measures people will only be allowed to leave their homes for work or health reasons. Versalis has three steam crackers in Italy, capable of producing 1.675 million mt of ethylene, 750,000 of propylene and 285,000 mt of butadiene a year.

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

Saudi Aramco to reduce refinery runs in April, May to boost oil exports

MOSCOW (MRC) -- Saudi Aramco will continue reducing operations at its local refineries in April and May to boost the state energy company’s potential to export crude oil, a company official said. Reuters.

Saudi Arabia, the world’s top oil exporter, said on Wednesday it had directed Aramco to keep supplying crude at a record rate of 12.3 million barrels per day (bpd) in coming months and that exports were set to top 10 million bpd from May.

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

Israeli Oil Refineries Q4 2019 profit stays at zero

MOSCOW (MRC) -- Israel’s Oil Refineries (ORL) reported zero profit in the fourth quarter for the second straight year on Wednesday and said it had so far not seen a big impact to the company from the coronavirus outbreak, reported Reuters.

Its revenue in the quarter fell 13% to USD1.55 billion.

ORL, Israel’s largest refining and petrochemicals group, said the only hit to its sales has been in jet fuel sales in Israel, which comprise just 8% of the total fuel sector output.

It added, however, that stricter measures in Israel, in which citizens were ordered to stay at home as much as possible, could lead to a significant drop in demand for diesel and gasoline.

"If this happens, the company will act to divert its sales to export markets, reduce gasoline imports and if necessary, decrease production volumes and inventory levels. Oil Refineries is financially prepared to deal with the effects of the coronavirus," it said, citing a significant cash balance.

It added that the company has been sharply reducing its net financial debt and long term commitments. In 2019, net debt fell by USD113 million to USD855 million.

Its adjusted refining margin was USD4.8 a barrel in the fourth quarter, compared with Reuters’ quoted Mediterranean Ural Cracking Margin of - USD1.8 a barrel and USD6.1 a year earlier.

As MRC wrote before, ORL reported a 56% drop in Q3 2019 net profit on weakness in its polymers business and as refining margins fell. ORL, Israel’s largest refining and petrochemicals group, earned USD7 million in the third quarter, down from USD16 million a year earlier.

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

Oil up after three-day plunge but coronavirus curbs gains

MOSCOW (MRC) -- Oil prices bounced nearly 7% after a three-day selloff drove them to their lowest in almost two decades as demand plummeted due to the coronavirus and supplies surged in a fight for market share between Russia and Saudi Arabia, said Hydrocarbonprocessing.

Benchmark Brent, which has lost half its value in less than two weeks, got some respite as investors across financial markets assessed the impact of massive central bank stimulus measures. Brent crude LCOc1 jumped USD1.43, or 5.75%, to USD26.33 a barrel by 1045 GMT, after plunging to USD24.52 on Wednesday, its lowest level since 2003.

U.S. crude CLc1 gained $2.40, or 11.8%, to USD22.77 after dropping nearly 25% in the previous session to an 18-year low. But analysts said gains were likely to be temporary, as tumbling demand was compounded by the collapse this month of a deal on supply curbs between OPEC and other producers.

The drop in demand, particularly in transportation, is also leading to a rapidly growing glut in refined products such as jet fuel and gasoline. Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, which kicked off a price war with Russia that sent prices into tailspin, is planning to keep pumping at a record rate of 12.3 million barrels per day (bpd) for months.

"From April 1, about 4 million bpd could flood the markets, potentially pushing down crude oil prices into the teens,” Jefferies said in a note. “Unless somebody intervenes, no oil producer benefits from the current environment." But analysts have still been slashing growth forecasts for China, where the disease erupted, to the lowest levels in decades.

In the United States, where dozens of shale oil and gas drillers and services companies risk bankruptcy, senators on Wednesday urged Saudi Arabia and Russia to stop the price war during talks with the kingdom’s envoy to Washington.

The senators urged President Donald Trump to impose an embargo on oil from the two countries. Meanwhile, the spread of the virus elsewhere is showing no sign of abating, with governments resorting to lockdowns in a bid to contain the disease, hammering economies and raising the prospect of a global recession.

Central banks have moved to mitigate the spiraling economic and financial fallout, with the European Central Bank kicking off a 750 billion euro (USD820 billion) emergency bond purchase scheme after an unscheduled meeting on Wednesday.

“While the spreading of the virus has further to go and oil prices further to drop, we are now probably getting very close to peak fear in western and global financial markets,” said Bjarne Schieldrop, chief commodities analyst at SEB.

As MRC informed earlier, 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.

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

Clariant and Floreon announce collaboration to expand high-performance biopolymer applications to additional markets

MOSCOW (MRC) -- Clariant’s Additives business and Floreon-Transforming Packaging Limited announce an exciting new collaboration to further extend the performance properties and market potential of biopolymers, whilst preserving their environmental benefits, as per the company's press release.

By integrating the benefits of Clariant’s additives with Floreon’s proprietary material solutions, the collaboration aims to open up additional possibilities for plastic manufacturers and brand owners to consider biopolymers as a viable, low carbon footprint alternative to fossil-based plastics for both single-use and durable applications. Markets set to benefit from the new enhanced grades include rigid and flexible Packaging, Electrical & Electronic equipment (E&E), Hygiene products, Consumer goods and Automotive.

Floreon develops and markets proprietary compounds based on PLA and containing 70-90% renewable, plant-based raw materials, thus containing carbon sequestered from the atmosphere by plants. They are typically mechanically tougher than traditional PLA and can deliver significant energy savings in processing. Floreon compounds are recyclable and they can also be composted via industrial composting. That makes Floreon’s materials viable for applications where, at this stage, contamination with food waste and organic matter make mechanical recycling unfeasible.

Clariant’s industry-leading portfolio of sustainable additives includes a wide range of bio-based additives, which reliably deliver both high performance and sustainability to the plastics value chain. Introduced at the K 2019 Plastics Trade Fair under the Exolit® OP Terra, Licocene® Terra and Licocare® RBW Vita trade names, they help to reduce fossil resource intensity and enable more sustainable material choices. Clariant’s experts will support the Floreon development team to enhance the performance possibilities and processing characteristics of bioplastics.

The scope of benefits is vast. Examples include achieving less energy use and faster cycle times by increasing the processing efficiency or adding completely new properties to the material. Product manufacturers will have the possibility to tailor compounds to suit specific processing technologies and applications, including in some cases those where bioplastics have so far not been able to meet the challenges of demanding conditions or environments.

Shaun Chatterton, CEO, Floreon-Transforming Packaging Limited, said: "Brand owners and plastic converters are seeking more sustainable material solutions to offer their customers, driven by goals ranging from recyclable solutions and improving waste management to lowering carbon footprint and reducing resource use. Floreon can really contribute towards these goals. As a small business, our team is very excited to be able to take the benefits of biopolymers to new heights by drawing on Clariant’s extensive capabilities in developing additives focused on the performance needs of the plastics industry. Floreon has the potential to transform not just packaging but many industries, and we expect to launch our first product from this collaboration into market during the first half of 2020."

Stephan Lynen, Head of Business Unit Additives, Clariant, commented: "We are excited to be working together with Floreon using the advantages of our range of sustainable additives to close the performance gap between biopolymers and other materials. This is just another way we can contribute to giving the plastics value chain a greater choice of options for meeting sustainability targets and consumer demands, and in doing so, support the transformation to a circular economy. For society, our environment, and future generations, it is our responsibility to continuously improve sustainability performance and reduce carbon footprint and waste."

Clariant’s collaboration with Floreon constitutes together with Clariant’s EcoCircle, a corporate-wide initiative supporting the transition from a one-way plastics value chain to a circular plastics economy, another step forward to jointly develop new circular materials and technologies together with partners from the entire value chain to enable a circular economy.

As MRC reported earlier, in early March 2020, Sabic announced that it has purchased additional shares in Clariant, increasing its holding in the company from 24.99% to 31.5%.

We remind that SABIC Europe, an affiliate of SABIC, conducted a maintenance work at its cracker No.3 at Geleen site in the Netherlands last autumn. The planned maintenance started in September and lasted around 2 months. The company operates two steam crackers in Geleen which are capable of producing 1,250,000 tons/year of ethylene and 675,000 tons/year of propylene in total.

Earlier last year, SABIC took off-stream its SABIC Olefins 4 cracker owing to technical issues on May 10, 2019. Further details on duration of the shutdown could not be ascertained. Located in beek, the Netherlands, the cracker has an ethylene production capacity of 690,000 mt/year and a propylene production capacity of 360,000 mt/year.

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.

Clariant AG is a Swiss chemical company and a world leader in the production of specialty chemicals for the textile, printing, mining and metallurgical industries. It is engaged in processing crude oil products in pigments, plastics and paints.
MRC