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Covid-19 compounds European refiners challenges

April 07/2020

MOSCOW (MRC) -- The demand impact from widespread lockdowns causes an immediate demand headache. But longer-term structural obstacles remain, said Hydrocarbonprocessing.

The prospects for European gasoline look particularly grim at the moment. So says Chris Judge, vice-president, crude and oil products at price reporting agency Argus Media and an analyst of European refined products markets for well over 20 years.

Or, rather said. As, to put into context the scale of both the short and longer-term challenges facing the European refining sector, Judge uttered these words in late February, before the extent of the impact of the Covid-19 pandemic on European and global products demand was clear.

These short-term challenges are daunting enough in themselves. The grounding of the majority of the worlds plane and strict lockdowns on peoples mobility bite hard into transport fuel demand.

Requirements for jet fuel have fallen dramatically. Consultancy Energy Aspects warns that refineries in Spain and the Netherlands are at particular risk of being forced to cut jet fuel output. The financial pressures from [the pandemic] event will perhaps accelerate the rationalisation of capacity in Europe, says Robert Campbell, the firms head of oil products research.

Not every refinery throughput is hit as hard as jet and middle distillates. There will be a more muted impact for refiners that produce a lot of marine fuel, according to Eugene Lindell, a senior consultant at research firm JBC Energy.

"From the [marine fuel] refiners side, we do not see any production issues as the low sulphur fuel oil crack is expected to be higher than the gasoline crack meaning that refiners will have an incentive to supply this fuel first, says Lindell. One complicating issue is that the low outright crude price automatically creates a narrower price spread between clean and dirty fuel. This is bad news for ship owners that invested in scrubbers, as it lengthens the payback period."

We also remind that the COVID-19 outbreak has led Shell Chemical to temporarily suspend construction on the massive plastics and petrochemicals site it's building in Monaca, Pa, USA.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, petrochemistry.
Category:General News
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