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Fuel prices pummeled from Asia to the US by coronavirus fallout

March 24/2020

MOSCOW (MRC) -- Prices and profit margins for motor and aviation fuels globally are under pressure from a severe loss of demand as more countries enforce lockdowns and planes are grounded, forcing more refineries to reduce output, reported Reuters.

US ultra-low sulfur diesel was the latest product refined from crude oil to take a hit in its cash market last week, after refiners boosted production in a bid to flee poorer margins for other products more affected by coronavirus fallout.

Refining margins for gasoline and jet fuel have tanked because of decreased demand for transportation fuels, as the disease outbreak has forced businesses to close and governments to push residents to avoid travel and public places.

In Asia, profit margins for jet fuel turned negative for the first time in over a decade as global airlines canceled flights.

Emirates and Singapore Airlines were the latest carriers to announce huge cuts in their passenger flights.

European jet fuel prices last week plummeted to a near 17-year low, and for the past eight trading sessions European refiners have been producing gasoline at a loss.

For most of last week, U.S. diesel margins held up relatively well, as both trucking and farming, two sectors that rely on diesel, continued operating.

But refiners moves to divert production capacity previously devoted to other fuels to diesel is starting to cause oversupply in some regions, leading to a drop in cash prices, market participants said.

Cash prices for diesel in Chicago ULSD-DIFF-MC slid last week to 34 cents per gallon below the heating oil futures contract HOc1, the lowest seasonally since at least 2011, early Refinitiv Eikon data showed.

Elsewhere in the Midwest ULSD-DIFF-G3 and on the Gulf Coast ULSD-DIFF-USG, prices were the lowest seasonally since 2016.

That could augur declines in diesel refining margins HOc1-CLc1, which are still seasonally strong at USD18.53 a barrel.

Meanwhile, gasoline refining margins RBc1-CLc1 are at US3.55 a barrel, the lowest for this time of year since at least 2005, Refinitiv Eikon showed.

Underscoring falling demand, Colonial Pipeline Co said on Thursday it would cut volumes on its primary lines delivering gasoline and diesel fuel to the US East Coast from the Gulf Coast.

Refiners around the world have already started cutting output or are considering such measures as the coronavirus curbs travel and driving.

Exxon Mobil Corp cut production on Saturday at its 502,500 barrel-per-day-capacity Baton Rouge, Louisiana, said sources familiar with plant operations.

Taiwans state-owned oil refiner CPC Corp will cut crude throughput rates in April by less than 10% from around 70%-80% currently, as the coronavirus pandemic has lowered fuel demand, two sources familiar with the matter said on Monday.

As MRC informed earlier, ExxonMobil said last 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.

We also remind that 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.
Author:Margaret Volkova
Tags:Asia, PP, PE, LLDPE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, CPC, Exxon Mobil, UK, Russia, USA.
Category:General News
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