US. petroleum stocks surge as coronavirus stops consumption

MOSCOW (MRC) -- U.S. gasoline consumption fell to its slowest rate for more than a quarter of a century last week as epidemic controls brought much of the economy and transportation system to a sudden stop, reported Reuters.

Estimates for the volume of gasoline and other petroleum products supplied to the domestic market, published on Wednesday, provide the first clue to the epidemic’s impact on the oil market.

Gasoline supplied fell to 6.66 million barrels per day (bpd), down from 9.70 million bpd two weeks earlier, and the slowest rate since 1994, data from the U.S. Energy Information Administration (EIA) showed.

Gasoline supplied, a proxy for the amount consumed by motorists, is very volatile from one week to the next, which is why the EIA recommends focusing on the four-week running average.

But the decline in gasoline supplied over the last two weeks is unequalled in the three decades since the EIA started estimating this series, and is almost certainly unequalled in the history of the oil industry.

The two-week decline in the volume of gasoline supplied between March 13 and March 27 was equivalent to more than eight times the typical change over a similar period.

Gasoline was the hardest hit of the main petroleum products in the United States, but there was also a substantial decline in the volume of jet fuel supplied and smaller declines in some other products including diesel.

The total volume of petroleum products supplied decreased by 3.6 million bpd over the two-week period, the largest drop for more than 30 years, and equivalent to more than 4 standard deviations.

The collapse in fuel consumption is causing petroleum stocks to build all along the supply chain, with large increases in both crude and products being stored at refineries and tank farms around the country.

Total U.S. stocks of crude and petroleum products, excluding the government’s strategic petroleum reserve, jumped by 21 million barrels last week.

It was the third-largest increase in the last 30 years, a rise that has been exceeded on average only once in every 800 weeks.

With much of the economy at a standstill because of restrictions introduced to control the spread of the new coronavirus, while production has yet to fall significantly, stocks are likely to continue rising rapidly.

U.S. gasoline consumption accounts for almost one in every ten barrels of oil consumed each day around the world.

But the U.S. experience is almost certainly replicated across the major refining and consumption centres of Europe and Asia, though data for those areas will not become available for another couple of months.

Rising global stocks of crude and products are likely to exhaust available storage capacity within the next few months, unless oil production and refining is curbed, or travel restrictions are eased.

“The global oil industry is experiencing a shock like no other in its history,” the International Energy Agency wrote in a note published on Wednesday.

“The scale of the collapse in oil demand ... is well in excess of the oil industry’s capacity to adjust.”

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).
MRC

MOSCOW (MRC) -- INEOS FPS has today responded to requests from customers and delayed its planned summer shut down of the Forties Pipeline System, as per the company's press release.

The decision has been taken in the face of the growing Corona Virus pandemic and the need to avoid bringing together large numbers of people

INEOS will continue to work with our Government and customers to provide more information as soon as is practical.

INEOS FPS has today written to all its customers saying that there will be a delay to the FPS Summer Shutdown that was planned for June 16th 2020. The Shutdown will not now start before August 2020 at the earliest.

INEOS is also mindful of the benefits of completing this project work to the future operation of FPS and the risks of not going ahead. However, it recognises the importance of maintain a flow of oil and gas through FPS during the current situation. The company found that there was an overwhelming desire to delay the shutdown by its customers which it is responding to.

In the coming days INEOS will continue to have discussions with its customers and other stakeholders to define the best dates to plan these projects.

As MRC informed before, in January 2019, INEOS announced Antwerp as the location for its new petrochemical investment. The EUR3 billion investment will be the biggest ever made by INEOS and is first cracker to be built in Europe in 20 years. The investment is a game changer for the chemical sectors and will bring huge benefits to the Belgium and wider European economies.

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.

INEOS is a global manufacturer of petrochemicals, specialty chemicals and oil products employing 22,000 people. It has 34 businesses, with a production network spanning 183 manufacturing facilities in 26 countries.
MRC

MOSCOW (MRC) -- The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), fell 2.6 percent in March on a three-month moving average (3MMA) basis following a downwardly revised 0.1 percent gain in February. On a year-over-year (Y/Y) basis, the barometer fell 1.3 percent in March, said Americanchemistry.

The unadjusted data shows an 8.0 percent decline in March following a 1.1 percent decline in February and a 1.2 percent gain in January. The unadjusted decline in March is the largest in the post-World War II period. The diffusion index slumped to 27 percent in March. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for February was revised downward by 1.13 points and that for January was revised downward by 0.38 points.

"The CAB signals recessionary conditions in U.S. commerce,” said Kevin Swift, chief economist at ACC. “ACC believes a recession to be occurring when the barometer declines for three consecutive months and falls 3.0 percent or more from the peak. As of March, the CAB has declined for two straight months and fallen 8.9 percent from the peak."

The CAB has four main components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators. Production-related indicators generally declined in March. Trends in construction-related resins, pigments and related performance chemistry were generally negative. Plastic resins used in packaging and for consumer and institutional applications were generally negative. Performance chemistry was negative and U.S. exports were weak. Equity prices collapsed, but are improving this week. Product and input prices declined. Inventory and other supply chain indicators were negative.

The CAB is a leading economic indicator derived from a composite index of chemical industry activity. Due to its early position in the supply chain, chemical industry activity has been found to consistently lead the U.S. economy’s business cycle, and this barometer can be used to determine turning points and likely trends in the broader economy. Month-to-month movements can be volatile, so a three-month moving average of the CAB reading is provided. This provides a more consistent and illustrative picture of national economic trends.

Applying the CAB back to 1912, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.

As MRC informed earlier, in February of this year, the index of production of chemicals in the Russian Federation grew by 9% compared with the same period a year earlier. Thus, the cumulative release for the first two months of 2020, the release of basic chemicals showed an increase of 6%, follows from Rosstat materials. According to the Federal State Statistics Service of the Russian Federation, the largest increase in production volumes in January - February came from polymers in primary form.
MRC

MOSCOW (MRC) -- Royal Dutch Shell slowed refining output and will write down up to USD800 million in the first quarter of 2020 after a dramatic drop in oil demand due to the coronavirus, according to Hydrocarbonprocessing.

In an update ahead of first-quarter results, Shell said it expects “significant uncertainty” over oil and gas prices and demand as a result of falling consumption.

With the global lockdown of 3 billion people - roughly 40% of the world’s population - demand for fuel has been in free fall, forcing Shell to lower its refining output by around 13%.

The sharp drop in demand, which could reduce consumption by 25% compared to 2019, poses a significant threat to Shell, which is the world’s largest petrol retailer with more than 40,000 service stations.

The Anglo-Dutch company lowered its oil and gas price outlook for 2020, resulting in a post-tax impairment charge in the range of USD400 million-USD800 million, it said.

Benchmark Brent crude prices fell by around 65% in the first quarter and were trading at below $23 a barrel on Tuesday as a result of a sharp drop in global demand due to the coronavirus and pledges by Saudi Arabia and Russia to raise output.

Shell shares were up 5% in early trading in London.

Shell said this month it would lower spending by USD5 billion to USD20 billion or less and suspend its vast USD25 billion share buyback plan in an effort to weather the downturn.

Shell’s first quarter oil production was expected to fall by 4.5% versus the fourth quarter of 2019, while liquefied natural gas (LNG) volumes were set to decline by 2.3%.

Shell, which sells products produced by its refineries and other suppliers, gave a wide range for oil products sales volumes of 6 million to 7 million barrels per day (bpd) for the first quarter of 2020.

At the middle point, the figure is slightly higher than in the fourth quarter of 2019.

Shell slowed down its refining output in the first three months of the year due to weaker demand for fuels.

Refinery utilisation is expected to be between 80% to 84%, while 93% to 96% of its refining capacity is available. Refining profit margins were also expected to be lower, Shell said.

The company said its cash liquidity remained strong after getting a new USD12 billion revolving credit facility commitment, lifting its available liquidity from USD30 billion to USD40 billion.

As MRC informed earlier, 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) -- Trinseo (Berwyn, Pennsylvania) has joined the growing ranks of chemical companies providing financial and operational updates in response to the coronavirus disease 2019 (COVID-19) pandemic, reported Chemweek.

Like many of its peers, the company announced that it is drawing USD100 million on a revolving credit facility “out of an abundance of caution.” Trinseo says all of its manufacturing facilities remain online except the API Plastics site in Mussolente, Italy, which has been closed by the government as a nonessential business.

Trinseo says it ended 2019 with USD1,195 million of debt and USD456 million of cash, and it expects to end the first quarter with approximately USD425 million of cash, which excludes the USD100-million revolver drawdown. No amounts were previously outstanding on the revolving credit facility, says the company. Declining feedstock prices and inventory management are also expected to free over USD100 million in working capital during the second quarter.

"In this environment, we are taking aggressive actions to improve cash flow by reducing working capital, capital expenditures, and discretionary spending," says Frank Bozich, president and CEO. "We’re reducing our anticipated capital expenditures for 2020 from USD100 million to between USD80 and USD85 million."

The company also provided an update on the status of its styrene monomer assets in Boehlen, Germany, and its polybutadiene rubber (nickel and neodymium-PBR) assets in Schkopau, Germany. Consultations with the Economic Council and Works Councils of Trinseo Deutschland regarding their disposition began in March. The combined adjusted EBITDA of the two operations last year was approximately negative USD18 million, according to Trinseo, which says it “continues to be committed to its other operations at the Schkopau site,” including polystyrene and styrene-butadiene rubber.

As MRC reported earlier, Trinseo and its affiliate companies in Europe have announced a price reduction for all polystyrene (PS) grades in Europe. Effective March 1, 2020, or as existing contract terms allow, the contract and spot prices for the products listed below went down as follows:

-- STYRON general purpose polystyrene grades (GPPS) -- by EUR65 per metric ton;
-- STYRON and STYRON A-Tech and STYRON X- Tech high impact polystyrene grades (HIPS) - by EUR65 per metric ton.

According to ICIS-MRC Price report, prices of Russian PS remained unchanged until the end of the first quarter. Nizhnekamskneftekhim rolled over February prices of its material for shipments in March. Penoplex and Gazprom neftekhim Salavat also maintained their GPPS prices the same.

Trinseo is a global materials company and manufacturer of plastics, latex and rubber. Trinseo's technology is used by customers in industries such as home appliances, automotive, building & construction, carpet, consumer electronics, consumer goods, electrical & lighting, medical, packaging, paper & paperboard, rubber goods and tires. Formerly known as Styron, Trinseo completed its renaming process in 1Q 2015. Trinseo had approximately USD4.6 billion in net sales in 2018, with 16 manufacturing sites around the world, and approximately 2,500 employees.
MRC