ExxonMobil evaluating significant near-term spending cuts due to coronavirus pandemic

MOSCOW (MRC) -- ExxonMobil said late Monday that it is looking to reduce spending significantly as a result of market conditions caused by the coronavirus disease 2019 (COVID-19) pandemic and commodity price decreases, reported Chemweek.

"Based on this unprecedented environment, we are evaluating all appropriate steps to significantly reduce capital and operating expenses in the near term," said Darren Woods, ExxonMobil chairman and CEO. "We will outline plans when they are finalized."

ExxonMobil had previously said that it expected capital and exploration expenditures of up to USD33 billion in 2020, compared with capital and exploration spending of USD31.1 billion last year. ExxonMobil’s chemical capital expenditures were USD3.3 billion in 2019. It has not disclosed a 2020 capex forecast for chemicals.

Woods said that ExxonMobil has faced numerous market downturns throughout its long history and has experience operating in a sustained low-price environment. "We remain focused on being a safe, low-cost operator and creating long-term value for shareholders," Woods said.

The company said it is closely monitoring the COVID-19 pandemic and has adjusted work arrangements to ensure a healthy work environment and support communities where it operates.

As MRC informed before, in September 2019, ExxonMobil announced plans to spend GBP140 million over the next two years in an additional investment program at its Fife ethylene plant, which has a capacity of more than 800,000 t/y.

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.

ExxonMobil is the largest non-government owned company in the energy industry and produces about 3% of the world's oil and about 2% of the world's energy.
MRC

MOSCOW (MRC) -- U.S. gasoline refining margins fell a whopping 95% on Monday - even briefly turning negative - with the cost of gasoline plunging faster than crude oil in anticipation that the coronavirus will keep people off the road and in their homes, said Hydrocarbonprocessing.

The coronavirus pandemic has infected 180,000 people worldwide and caused over 7,000 deaths, prompting governments to order travel restrictions and business closures.

U.S. gasoline demand is plunging as businesses shut and state and local governments advise people to stay home. U.S. gasoline refining margins RBc1-CLc1 settled at 28 cents per barrel on Monday, their lowest since December 2008, another signal that economic activity appears to be contracting.

“Oil prices have been dropping hard enough. For product prices to outpace them signals a huge shift in demand expectations,” said Matthew Smith, director of commodity research at ClipperData. Refiners process crude oil into a number of products, chiefly motor gasoline, heating oil and diesel fuel. Normally, gasoline margins rise as driving season approaches, and distillate margins - for making heating oil and diesel - rise in the winter months.

The United States consumes about 9 million barrels per day of motor gasoline, but fuel demand is now expected to fall by roughly 2 million to 2.5 million bpd in the next three to four weeks, said Per Magnus Nysveen, senior partner at Oslo-based energy research firm Rystad Energy.

Congestion in major cities worldwide has been dropping sharply, according to TomTom, which makes navigation technology. Headed into the evening rush hour on Monday, congestion in New York City was down by 37% from last year’s average. In Chicago, it was down 24%.

Such declines have not yet shown up in U.S. official data. As of March 6, the four-week average for motor gasoline supplied by refiners - a proxy for demand - was up 1.7% from the year-ago period, according to U.S. Energy Department figures.

The margin to produce distillate products is at USD14.95 a gallon, a relatively healthy margin. Heavy-duty tractor-trailers use diesel, a sign that traders believe demand for shipped goods will be less affected as people take deliveries at their homes.

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 USD5 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) -- DIC Corp. (Tokyo, Japan) tells CW that it has restarted operations at most of its sites in China since February, according to Chemweek.

Plants closed for longer than normal at the Lunar New Year due to coronavirus disease 2019 (COVID-19). The company did not identify any severe impact on demand in February, due to COVID-19. "We are taking a close look at the impact in March," it adds.

The company informs CW that in China, there have been minor delays with logistics, but the situation is generally back to normal except for in Hubei Province.

DIC says that the recent crash in crude oil prices will provide it with a positive impact through a reduction in raw material costs.

As MRC reported earlier, in December 2019, DIC Corporation announced that it had increased the annual polystyrene (PS) production capacity of its Yokkaichi Plant, in Yokkaichi, Mie Prefecture, to 216,000 metric tonnes, from 208,000 metric tonnes, by reinforcing the plant’s polystyrene production facility and optimizing processes. Investment was not disclosed. The company has set a target for increasing annual sales of polystyrene by 10% from the fiscal year 2017 level by fiscal year 2023.

According to MRC's ScanPlast report, January 2020 estimated consumption of PS and styrene plastics in Russia dropped by 10% year on year, totalling 41,420 tonnes. Russian plants' overall output also decreased (by 3%) year on year in January 2020 to 43,260 tonnes.
MRC

MOSCOW (MRC) -- The oil products markets globally are caught between a rock and a hard place as the impact of ultra cheap oil, which should be a boon for refiners, is mitigated by record low prices for gasoline and jet fuel, reported Hydrocarbonprocessing.

While major oil producers like Saudi Arabia vow to pump at record levels and offer hefty discounts on their barrels, refiners, in theory, should be producing at maximum capacity.

“The extent to which (refinery) runs increase will quickly become constrained as product cracks reach a ceiling due to high inventory levels and weak global demand,” consultancy Woodmac said.

Jet fuel is one of the markets hardest hit by the virus outbreak as more and more countries shut borders and travellers shun flying.

Before the outbreak, jet was seen as a key market for oil demand growth globally, with mega airports springing up across the world from Istanbul to China.

On March 16, British Airways owner International Consolidated Airlines Group said it would cut its flying capacity by at least 75% in April and May.

Low-cost carrier Ryanair plans to ground most of its fleet in Europe over the next seven to 10 days and expects to cut seat capacity by 80% for the next two months.

Consultancy Rystad Energy is expecting jet fuel demand to fall by 12% globally or at least 800,000 barrels per day compared with last year.

"The annual estimates assume no additional lockdowns and fewer flight cancellations after the summer," Rystad said.

Refiners will likely curtail jet fuel output in part by switching more processing capacity to diesel production, after the fuel’s value versus diesel plunged following news of the ban.

In Europe, jet fuel cargo differentials to front-month diesel futures JET-CD-NWE are at a record low.

As more and more cities and countries go into lockdown and people work from home, a negative impact on motor fuel demand is inevitable.

In Europe and Asia profit margins for making gasoline at an oil refinery are negative, meaning that a refinery is losing money producing the fuel.

In the United States, the world’s biggest consumer of the motor fuel, NYMEX RBOB Gasoline futures RBc1 have tumbled to a record low of USD0.6778/gallon.

With projections of leisure driving falling by 50%, US fuel demand could drop roughly 2 million to 2.5 million barrels per day. For 2020, that would cut gasoline demand by roughly 300,000 to 400,000 bpd, Rystad said.

Road fuel demand in China alone, for diesel and gasoline, was down 1.5 million bpd year-on-year in February, Rystad said. Demand there is not trickling up as more people return to work.

With the outlook for global economic growth looking gloomy, diesel, which is heavily used in industry, remains under pressure.

While margins in Europe are far outperforming gasoline and jet fuel, lockdowns in Italy and Spain have sapped demand there.

"The return of over 1 million bpd of the Middle East’s refining capacity from maintenance over the coming months will add further downside pressure to middle distillate cracks," Woodmac said.

The Mideast Gulf, which has some of the world’s most sophisticated refineries, is a major diesel and jet fuel export region.

Woodmac estimates that 6 million bpd in crude distillation capacity is offline globally, which is providing some support to refining margins.

Jet and diesel/gasoil imports into Italy between March 1 and March 16 stood at 140,000 bpd, according to preliminary data from oil analytics firm Vortexa, less than half the average for February.
MRC

MOSCOW (MRC) -- President Donald Trump said the United States would take advantage of low oil prices and fill the nation’s emergency crude oil reserve, in a move aimed to help energy producers struggling from the price plunge, said Hydrocarbonprocessing.

"Based on the prices of oil, I’ve ... instructed the secretary of energy to purchase, at a very good price, large quantities of crude oil for storage in the U.S. strategic reserve,” Trump, a Republican, told reporters at the White House. “We’re going to fill it right up to the top,” he added without offering details.

The Strategic Petroleum Reserve has the capacity to store up to an additional 77 million barrels of oil, a Department of Energy official said, after Trump spoke. The official did not immediately comment on how fast the oil would be purchased for the reserve which currently holds 635 million barrels.

It was the first move by a president to fill the SPR since President George W. Bush, a Republican, ordered a fill to capacity in the wake of the Sept 11, 2001 attacks.

Oil prices posted the worst week in more than a decade, collapsing to about USD31 a barrel on a rare combination of severe shocks to both supply and demand. The spread of coronavirus has hit demand by shutting travel around the world. Meanwhile, the launch of a price war between Saudi Arabia and Russia over the weekend has flooded global markets with crude.

Analysts were divided about the move, with one calling it an “unambiguously smart step.” “Better to do it before an emergency,” said Bob McNally, the president of the Rapidan Group consultancy. “We still need a large SPR because our economy remains vulnerable to price shocks from disruptions anywhere,” said McNally, who was a White House energy adviser at the national security council under Bush.

Daniel Yergin, an energy historian who advises U.S. officials on energy matters, told reporters at the Energy Department late Thursday he was skeptical that buying oil for the reserve could quickly help energy producers. “I don’t see how you can use the SPR,” he said. “With the amount of oil coming into market this is really going to lead to swollen inventories, it’s going to take a long time to bring down."

McNally agreed it could take a while, even years, to fill the reserve, and added he did not know how the Trump administration would pay for it. Former Secretary of State Henry Kissinger pushed for the creation of the SPR in 1975, after the Arab oil embargo spiked gasoline prices and damaged the U.S. economy. It is held in a series of caverns along the Texas and Louisiana coasts.

An oil and gas industry group welcomed Trump’s directive. Anne Bradbury, chief executive of the American Exploration and Production Council, said it could “help alleviate the oversupply disruptions in the marketplace."

An environmentalist said Trump was putting energy companies first. It is “wildly inappropriate” for Trump to use the SPR “as a tool to prop up the oil and gas industry at a time when the White House should be focusing on how to help everyday people,” said Alex Doukas, of Oil Change International.

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