U.S. crude dips below USD20 as lockdowns wipe out demand

MOSCOW (MRC) -- Oil prices fell sharply on Monday, with U.S. crude briefly dropping below USD20 and Brent hitting its lowest in 18 years, on heightened fears that the global coronavirus shutdown could last months and demand for fuel could decline further, Reuters.

Brent crude, the international benchmark for oil prices, was down USD1.98, or 7.9%, at USD22.95 by 1337 GMT, after earlier dropping to USD22.58, the lowest since November 2002.

U.S. West Texas Intermediate (WTI) crude was USD1.31, or 6.1%, lower at USD20.20. Earlier in the session, WTI fell as low as USD19.92. The price of oil is now so weak that it is becoming unprofitable for many oil firms to remain active, analysts said, and higher-cost producers will have no choice but to shut production, especially since storage capacities are almost full.

“Global oil demand is evaporating on the back of COVID 19-related travel restrictions and social distancing measures,” said UBS oil analyst Giovanni Staunovo. “In the near term, oil prices may need to trade lower into the cash cost curve to trigger production shut-ins to start to prevent tank tops being reached,” he added.

Rystad Energy’s head of oil markets, Bjornar Tonhaugen, said: “The oil market supply chains are broken due to the unbelievably large losses in oil demand, forcing all available alternatives of supply chain adjustments to take place during April and May”.

These included cutting refinery runs and increasing onshore or offshore storage, he said. Supertanker freight rates are rising for a second time this month as traders rush to secure ships for storage. Goldman Sachs analysts said demand from commuters and airlines, which account for about 16 million barrels per day of global consumption, may never return to previous levels.

Besides the demand shock, the oil market is also under pressure from a price war between Saudi Arabia and Russia, after the collapse earlier this month of a three-year deal to limit supply between the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Moscow.

U.S. President Donald Trump said he planned to speak with Russian President Vladimir Putin on Monday. He said that Saudi Arabia and Russia “both went crazy” following the collapse of the deal to cut output, as oil prices were pushed down by an economic slowdown caused by the need to slow the spread of the coronavirus.

Saudi Arabia said on Monday it plans to boost its oil exports to 10.6 million barrels per day from May. “This game of attrition is likely to drag prices even lower and even a price of $10 per barrel is no longer unimaginable,” said Hussein Sayed, analyst at FXTM.

Collapsing oil prices have left some African producers facing lost revenue when they most need it to tackle coronavirus. Sovereign wealth funds from oil-producing countries mainly in the Middle East and Africa are also on course to dump up to USD225 billion in equities.

The contango spread between May and November Brent crude futures reached its widest ever at USD13.45 a barrel, while the six-month spread for U.S. crude broadened to minus USD12.85 a barrel, the widest discount since February 2009.

In a contango market prompt prices are lower than those in future months, encouraging traders to store oil for future sales.

As MRC informed earlier, the Trump administration has decided not to appeal a court ruling that would sharply reduce its use of waivers exempting refineries from the nation’s biofuels regulation, cheering the corn lobby but drawing anger from oil refiners. The administration had until the end of March 24 to file a challenge, but by early March 25, no such filing had been entered, according to a case docket on the US government’s electronic access service for court records.

MRC

MOSCOW (MRC) -- Tronox Holdings on Thursday provided an investor update in light of the current global pandemic, to emphasize the strength of the company's cash flow, balance sheet, and sources of liquidity, reported Chemweek.

The first quarter is expected to close better than anticipated, due to positive market trends and developments thus far in 2020. The company anticipates adjusted EBITDA in the first quarter to reach USD160–170 million, adjusted earnings per share of USD0.10–0.18, and revenue of USD700–730 million.

Commenting on the company's current financial position, CEO Jeffry Quinn said, "Our balance sheet is solid, with no upcoming maturities on our term loan or bonds until 2024. We also have no financial covenants on our term loan or bonds and only a minor springing financial covenant on our [asset based loan]. We have the ability to reduce our capital expenditures and manage our working capital that, combined, could unlock over USD200 million of cash should the need present itself. Out of abundance of caution, we provided notice to draw down USD200 million of revolving credit loans under our credit facilities as a precautionary measure to increase liquidity and preserve financial flexibility. We plan to repay the amounts drawn when the macro uncertainty subsides. We also remain committed to maintaining the recently increased dividend."
MRC

MOSCOW (MRC) -- Royal Dutch Shell is restarting units at its Pernis oil refinery in the Netherlands following a power outage on Saturday, reported Reuters with reference to a spokesman for the oil major.

“The Pernis site is currently in the process of restarting the impacted units and restoring its electrical facilities,” he said.

A power outage on Saturday evening caused multiple unit shutdowns at the 404,000 barrel per day refinery, Europe’s largest.

As MRC informed before, a contractor working at Shell's Pulau Bukom manufacturing site in Singapore has contracted the new coronavirus. The Bukom manufacturing site in Singapore houses Shell's biggest wholly-owned refinery. The company said earlier it had sent some staff home from its main office at Metropolis in western Singapore after discovering another employee had been in contact with a carrier.

We also remind that Shell Singapore restarted its naphtha cracker in Bukom Island in early December, 2019, following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 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 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.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
MRC

MOSCOW (MRC) -- SK Global Chemical, a subsidiary of SK Innovation, plans to shut down its production processes for ethylene and ethylene propylene diene monomer (EPDM) within its naphtha cracking center in Ulsan, South Korea, according to Apic-online.

The 200,000-t/y naphtha cracker, which started commercial operation in 1972, and the EPDM unit, which began commercial operation in 1992, will be mothballed from December 2020 to shift the company's focus to high-value added chemicals.

Separately, SK Global Chemical's planned purchase of Arkema's functional polyolefins business is on schedule to be completed in the first half of this year.

Last October, Arkema announced the proposed divestment of the business to SK for an enterprise value of 335-million.

Part of the PMMA (polymethyl methacrylate) business unit, functional polyolefins comprises ethylene, copolymers and terpolymers.

As MRC wrote before, South Koreaпї's SK Global Chemical had restarted its naphtha cracker in late January 2018, after a brief but unplanned one-day shutdown. The 660,000 tonnes-per-year (tpy) naphtha cracker was expected to be operating normally the following day after the restart. Located in Ulsan, South Korea, the No. 2 cracker has a production capacity of 690,000 mt/year. SK Global Chemical also operates a smaller 200,000 tpy cracker.

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).
MRC

MOSCOW (MRC) -- Taiwan’s 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, reported Reuters with reference to two sources familiar with the matter.

CPC, which primarily supplies fuel to the Taiwan market, operates two refineries in Talin and Taoyuan which have a combined capacity of 650,000 barrels per day (bpd).

CPC typically issues monthly tenders to buy Middle East sour crude and sweet crude from West Africa and the United States by the third week of each month.

However, the company has decided not to issue crude tenders in March to seek cargoes for June arrival due to the output reduction, sluggish demand and a sufficient amount of crude in storage, according to the sources.

"Facing the situation of the COVID-19, we are trying to minimize the impact, therefore we decided not issue our crude purchase tender temporarily," CPC spokesman J. Z. Fang said in an emailed response.

"We are still checking how serious the impact is and might reduce our run rate as result," he added.

In February, CPC bought 500,000 barrels of April-loading Upper Zakum crude, 3 million barrels of US West Texas Intermediate Midland crude and 3 million barrels of Angola crude via spot tenders, trade sources said.

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. The shutdown resulted in a production loss of 67,671 tons of ethylene and 34,370 tons 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).

CPC Corporation, Taiwan, is engaged in the exploration, production, refining, procurement, transportation, storage, and marketing of oil and gas. The company provides fuel oil, including automotive unleaded gasoline and diesel fuel, low-sulfur fuel oil, marine distillate fuels, marine residual fuels, and aviation fuel; petrochemicals, such as ethylene, propylene, butadiene, benzene, para-xylene, and ortho-xylene; liquefied petroleum gas products comprising liquefied petroleum gas, propane, butane, and a propane/butane mixture; lubricants, motor oil, industrial oil, grease, and marilube oil; SNC products, including petroleum ether, naphtha, toluene, xylene, crude octene, methyl alcohol, normal paraffin, viscosity-graded asphalt cement, and sulfur; and natural gas.
MRC