Oil ends March with biggest monthly and quarterly losses ever

MOSCOW (MRC) -- Crude oil benchmarks ended a volatile quarter with their biggest losses in history, as both U.S. and Brent futures were hammered throughout March on the global economic freeze due to the coronavirus pandemic and the eruption of a price war between Russia and Saudi Arabia, reported Reuters.

Both benchmarks lost roughly two-thirds of their value in the quarter, with March’s declines of about 55% accounting for the lion’s share of the losses.

U.S. West Texas Intermediate crude salvaged the end of the month with a modest 2% gain on Tuesday, while Brent ended slightly lower.

Global fuel demand has been destroyed by travel restrictions due to the coronavirus pandemic. Forecasters at major merchants and banks see demand slumping by 20% to 30% in April, and for weak consumption to linger as economic activity is severely curtailed for the next several months.

WTI CLc1 settled 39 cents higher at $20.48 per barrel. The U.S. benchmark plunged 54% during March and 66% for the first quarter, the worst declines since the contract’s inception in 1983.

May Brent crude futures LCOc1 ended the session 2 cents lower at USD22.74 a barrel ahead of expiration. The international benchmark fell 66% in the first quarter and 55% in March, the worst quarterly and monthly percentage declines on record.

The more-active June contract LCOM0 settled 7 cents lower at USD26.35 a barrel.

Oil drew in some buyers after U.S. President Donald Trump and Russian counterpart Vladimir Putin agreed to talks on stabilizing energy markets. Markets have been in turmoil for more than three weeks after Saudi Arabia and Russia were unable to come to an agreement to curb supply to combat the growing COVID-19 coronavirus pandemic.

That took prices down sharply earlier in the month, but markets dropped even more as the pandemic worsened. More than 800,000 people have been infected and more than 39,000 have died.

So far it is unclear if Trump and Putin’s efforts will come to fruition. Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries were unable to come to an agreement on Tuesday to meet in April.

Saudi Arabia, the de facto leader of OPEC, and Russia, which had allied with OPEC to curb output for more than three years beginning in late 2016, remain at loggerheads. The Saudis plan to boost oil exports to 10.6 million barrels per day (bpd) from May on lower domestic consumption.

The weakness in futures markets has been surpassed by the physical markets, where cargoes are selling at single digits in key markets like Canada, Mexico and Europe, reflecting expectations for the coming collapse in demand that will strand barrels of oil.

“COVID has taken the oil market hostage,” said Michael Tran, managing director of energy strategy at RBC Capital Markets in New York.

“The unprecedented pace of demand destruction has forced the hand of refineries, on a global level, to issue run cuts, leaving barrels from the U.S. to the North Sea, to Asia searching, often unsuccessfully, for homes.”

Fuel demand is expected to fall sharply in coming months, with Trafigura’s chief economist predicting a 30% falloff in demand. Worldwide aviation is basically shut down, and motorists are staying off the roads.

“It’s just a matter of time before we see the producers be forced by the crude gatherers to cut as one cannot ‘gather’ crude when there are no buyers or tanks to store it in,” said Scott Shelton, energy specialist at United ICAP.

U.S. crude output fell to 12.7 million bpd in January from 12.8 million bpd in December, the U.S. Energy Information Administration (EIA) said in a monthly report on Tuesday.

That was the first time since July 2019 that U.S. crude output has declined two months in a row. Goldman Sachs anticipates that U.S. supply will fall by roughly 1.4 million bpd by the third quarter of 2021 to deal with falling demand.

A Reuters survey of 40 analysts forecast Brent crude prices LCOc1 would average USD38.76 a barrel in 2020, 36% lower than the $60.63 forecast in a February survey.
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U.S. crude stocks rise less than expected last week

MOSCOW (MRC) -- U.S. crude stocks rose less than expected last week as refineries hiked output, while gasoline and distillate inventories fell, the Energy Information Administration said, as per Hydrocarbonprocessing.

Crude inventories rose by 414,000 barrels in the last week, compared with analysts’ expectations for an increase of 2.5 million barrels. Refinery crude runs rose by 190,000 barrels per day, EIA data showed. Refinery utilization rates rose by 1.4 percentage points. Net U.S. crude imports fell last week by 1.03 million barrels per day.

“A solid tick higher in refining activity and a firm drop in net imports has resulted in minor build to crude stocks,” said Matt Smith, director of commodity research at ClipperData. “This lesser build than expected, combined with draws to the products, is providing further encouragement for today’s rally."

Oil prices extended gains after the data, with Brent crude up about 1% and U.S. crude futures gaining about 1.6% by 11:29 a.m. ET (1629 GMT). Still, in the East Coast, refinery utilization rates dropped to the lowest level since November 2012, the data showed.

The gasoline-producing unit at Phillips 66’s Bayway Refinery in Linden, New Jersey, the largest on the East Coast, has been shut since early this month. Gasoline stocks fell by about 2 million barrels, compared with analysts’ expectations in a Reuters poll for a 435,000-barrel gain.

Distillate stockpiles, which include diesel and heating oil, fell by 636,000 barrels, versus expectations for a 1.5 million-barrel drop, the EIA data showed. “The refinery utilization rate is probably the most important number here. It looks like turnaround season is basically over, said Bob Yawger, director of energy futures at Mizuho in New York. “That’s the number that managed to lower the crude oil build.” Crude stocks at the Cushing, Oklahoma, delivery hub fell by 133,000 barrels, EIA said.

As MRC informed earlier, brent oil futures may be trading at USD27 per barrel but oil producers are selling their crude in the physical market at lower prices not seen since the aftermath of the Asian financial crisis of the late 1990s. Most are offloading their oil for below USD20 a barrel as the coronavirus pandemic savages demand and global supply rises amid a battle between Saudi Arabia and Russia for market share, according to traders, state oil firms, major refiners and prices quoted in physical markets.

As MRC informed earlier, US-based Phillips 66 is delaying three sizeable scheduled shutdowns at its refineries this year, the company said last week, because of concerns that coronavirus could spread among the refineries' workers if the maintenance goes ahead.

We also reminad that Phillips 66 remains open to developing another ethane cracker for its Chevron Phillips Chemical (CP Chem) joint venture, the refiner's CEO said in March 2018.

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).
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Equinor to quit U.S. lobby group over climate policy

MOSCOW (MRC) - Equinor will leave industry lobby group the Independent Petroleum Association of America (IPAA) over a disagreement about climate policy, the energy producer said Reuters.

The Norwegian company is undertaking a review of its memberships of industry associations under an agreement with a group of institutional investors, the Climate Action 100+, signed last April. The Washington-headquartered IPAA represents thousands of independent oil and natural gas producers and service companies across the United States.

"We believe that IPAA's lack of position on climate leaves the association materially misaligned with Equinor's climate policy and advocacy position," the company said in its review of industry associations. Specifically, Equinor cited the IPAA's support for the U.S. Environmental Protection Agency's (EPA) roll-back of U.S. federal methane regulations, which the company opposes.

U.S. President Donald Trump's administration proposed in 2019 rescinding Obama-era limits on oil and gas industry emissions of methane, one of the main pollutants scientists link to climate change. The IPAA was not immediately available for comment.

Equinor also said it would remain a member of the American Petroleum Institute (API) and the Australian Petroleum Production & Exploration Asociation (APPEA) despite some "some misalignments" with the company's climate policies.

The group said it expected API to make further progress in strengthening its support for the Paris climate agreement, tightening methane emissions regulations and marking out a clearer stance on carbon pricing. "We will also encourage APPEA to take a clear stand on supporting carbon pricing in Australia and not supporting carryover of credits from the Kyoto protocol to the Paris Agreement," it added.

Under its agreement with the Climate Action 100+, Equinor has committed to make sure that all memberships in more than 100 industry associations, including oil, gas and renewable energy, align with its support for the goals of the Paris Agreement.

BP said in February it would leave the main U.S. refining lobby group, the American Fuel & Petrochemical Manufacturers (AFPM), a leading U.S. refining lobby, and two other trade groups due to disagreements over climate policies.

As MRC informed earlier, BP Zhuhai, part of BP PLC, has taken off-stream its No. 3 purified terephthalic acid (PTA) plant for a maintenance turnaround. The company halted operations at the plant on March 14, 2020. The plant is slated to remain off-line for around two weeks. Located at Zhuhai in China, the No.3 PTA plant has a production capacity of 1.25 million mt/year.

PTA is used to produce polyethylene terephthalate (PET), which is used in the manufacturing of plastic bottles, films, packaging containers, in the textile and food industries.

As per MRC's ScanPlast report, the estimated consumption of polyethylene terephthalate (PET) in Russia increased in January 2020 by 9% year on year. Totally, Russia recycled 55,390 tonnes of PET chips in January (excluding shipments of Russian material to the countries of the Customs Union). PET chips production in Russian in January 2020 totalled 43,200 tonnes.
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Eastman begins producing materials needed to help make 10,000 face shields

MOSCOW (MRC) -- Eastman announced on Tuesday that the company has partnered with the Tennessee Higher Education Commission and Austin Peay State University to support the production of 10,000 face shields for medical personnel in Nashville, according to WJHL.

According to a release from Eastman, materials like rolls of PETG film and a copolyester used for medical packaging to help produce the face shields.

“The Eastman team that made this happen has my thanks, and I find this work and numerous other efforts like it happening around the world to be inspiring,” said Steve Crawford, Eastman’s chief technology and sustainability officer. “The need here is very real and life-changing. Health care workers are in dire need of help as they are on the front lines of battling COVID-19, and I’m proud to be part of an Eastman team that always steps up when help is needed.”

Eastman and THEC hope to produce the 10,000 face shields using 3D printers at different colleges and universities across Tennessee.

As MRC reported earlier, in 2016, Eastman Chemical's chief executive Mark Costa announced that the company wanted to reduce its surplus ethylene and commodity intermediates, but did not intend to sell its cracker in Longview, Texas.

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.

Eastman is a global specialty chemical company that produces a broad range of products found in items people use every day. With a portfolio of specialty businesses, Eastman works with customers to deliver innovative products and solutions while maintaining a commitment to safety and sustainability. Its market-driven approaches take advantage of world-class technology platforms and leading positions in attractive end-markets such as transportation, building and construction and consumables. Eastman focuses on creating consistent, superior value for all stakeholders. As a globally diverse company, Eastman serves customers in more than 100 countries. The company is headquartered in Kingsport, Tennessee, USA and employs approximately 14,500 people around the world.
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China to grant fuel export quotas to non-state refineries in Zhejiang free trade zone

MOSCOW (MRC) -- China will grant export quotas for refined oil products to non-state refineries in the Zhejiang pilot free trade zone, the country’s state council said in a statement, as per Reuters.

Fuel export quotas have only been granted to state-backed oil firms in the past. However, the statement did not specify any volume or timeframe in the new policy.

The state council statement also said it will study raising export rebates for low-sulphur bunker fuel and allow companies to carry out bonded oil blending within the free trade zone for the supply of clean marine fuel.

It also said it would bring in foreign exchanges, including New York, London, Singapore and Dubai, as strategic investors into the free trade zone, but did not give details.

As MRC informed earlier, Zhejiang Petrochemical Co Ltd (ZPC) has successfully started up its high density polyethylene (HDPE) plant since last week. Based in Zhejiang, China, the petrochemical complex consists of 450,000 tosn/year of HDPE, 400,000 tons/year of linear low density polyethylene (LLDPE) and two polypropylene (PP) plants with combined production capacity of 900,000 tons/year.

As MRC informed before, on 30 December 2019, Zhejiang Petrochemical Co Ltd started up its ethylene cracker. Based in Zhejiang, China, the cracker is able to produce 1.4 million tons/year of ethylene.
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