Oil mixed as Chinese data offsets Trump plans to ease lockdown

MOSCOW (MRC) -- Oil prices were mixed on Friday as China’s worst quarterly economic contraction on record offset President Donald Trump’s plans to revive the U.S. economy, said Reuters.

Brent rose by 41 cents, or 1.5%, to USD28.23 a barrel by 1347 GMT, while U.S. crude CLc2 for June was down 24 cents, or 0.9%, at USD25.29. The less active U.S. crude contract CLc1 for May tumbled by USD1.77, or 8.9%, to USD18.10, attributable to the imminent expiry of the contract on April 21 and fast-filling crude storage.

“As the oversupply is more a topic for right now, the May contract trades at a deep discount to June,” said UBS analyst Giovanni Staunovo.

The hobbling of China’s economy was highlighted by data showing that GDP shrank 6.8% year on year in the three months to March 31, the first such decline since quarterly records began in 1992.

China’s daily crude oil throughput in March sank to a 15-month low as state refiners maintained deep output cuts, though there are some signs of recovery as the country begins to ease coronavirus containment measures.

Investors pinned their hopes on U.S. plans to ease lockdown measures after Trump laid out new guidelines for states to emerge from a coronavirus shutdown in a three-stage approach, but the early boost to Brent prices was short-lived.

Excitement over Trump’s intention to end the country’s lockdown seems to be dying down as traders realise that a return to full economic activity will not come overnight, said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

FXTM analyst Han Tan, meanwhile, pointed to the potential for oil prices to strengthen next month as moves to lift lockdowns gather momentum. “If more of the global economy enacts plans to reopen and restores some sense of normality, that could help oil prices find a firmer floor in May, aided by the OPEC+ supply cuts kicking in."

The Organization of the Petroleum Exporting Countries (OPEC) and producers including Russia, a grouping known as OPEC+, agreed on production cuts of nearly 10 million bpd last weekend after an earlier oil supply pact collapsed.

Earlier in the session oil prices found some support from a report of encouraging partial data from trials of U.S. company Gilead Sciences’ (GILD.O) experimental drug remdesivir in severe COVID-19 patients, but the company cautioned that full data would need to be analysed to draw any conclusions.

Analysts said that investors remain cautious, with readings of economic indicators worsening while global supply chains remain shut and large-scale production stoppages put millions out of work.

Both oil benchmarks are heading for a second consecutive week of losses, with U.S. oil prices at 19-year lows.

As MRC informed earlier, Russia’s oil export duty CL-EXPDTY-RU, a key source of tax revenue for the government, is likely to plummet in May to its lowest level in nearly two decades if oil prices stay low. The expected sharp decline in duty paid by Russian oil exporters will encourage oil producers to sell crude oil and make refining it less attractive, hitting the profit margins of Russian refineries.

As MRC informed earlier, based on the results of operations in the 1st quarter 2020, Gazprom neftekhim Salavat ramped up its stable gas condensate throughput and production output. The throughput performance of stable gas condensate during the 1st quarter 2020 (1 502 thousand tons) has grown by 15.7% at the Company’s Oil Refinery, as compared to the same period last year (1 298.5 thousand tons) due to increases in supplies.

It was previously reported that Gazprom Neftekhim Salavat (STS), one of the largest Russian petrochemical producers, plans to start scheduled repairs of acrylate production on April 20. This production will be closed until May 30.
MRC

Chemical Industry outlook: uncertainty and downside risks linked to COVID-19

MOSCOW (MRC) -- The American Chemistry Council (ACC) released an abbreviated, interim update to its Chemical Industry Situation and Outlook. The update offers two scenarios intended to capture a range of potential trajectories for the global and U.S. economies and the chemical industry, said Americanchemistry.

“ACC typically updates our economic forecast twice a year, but we wanted to provide an interim update that would reflect some of the potential impacts of COVID-19,” said Kevin Swift, ACC chief economist. “While there is significant uncertainty in the projections, short-term risks are to the downside before a possible rebound in 2021."

According to the update, U.S. chemical volumes are expected to fall 3.3 percent in 2020 before rising 5.2 percent in 2021. Basic chemical volumes will drop 2.9 percent in 2020 before rising 6.7 percent next year. Chemical shipments are expected to fall 10.0 percent in 2020 before rebounding by 7.8 percent in 2021. Anticipated declines reflect struggling end-use markets and export customers for U.S. chemistry products.

Partially offsetting weakness in U.S. chemical production is strengthening demand for chemistry used in the response to COVID-19. Among the many chemistry solutions used in the fight against the virus are synthetic materials for personal protective equipment (PPE), ingredients for cleaners and disinfectants, and plastics used in medical equipment such as ventilator machines and IV bags.

Automotive and building and construction are key end-use markets for chemistry. According to ACC projections, vehicle sales will fall sharply to 13.1 million in 2020 before improving to 15.5 million in 2021 – down from 16.9 million in 2019. Housing starts will tumble to 1.08 million before edging to a higher 1.19 million pace in 2021. Specialty chemical volumes will decline 4.4 percent in 2020 before rebounding 3.3 percent in 2021.

“Industrial activity started the year on a weak note even before news of COVID-19 emerged in late January,” said Martha Moore, senior director of policy analysis and economics at ACC. “Then supply disruptions from China began to percolate through the U.S. industrial sector. With further shocks to aggregate demand, U.S. industrial production is set to fall 8.4 percent this year before growing by 2.6 percent in 2021."

Global GDP is expected to contract by 2.5 percent in 2020 before rebounding 6.0 percent in 2021, according to ACC’s update. As the industrial sector has been dealt a series of blows from closures related to COVID-19, demand destruction and logistical challenges, global industrial production will fall 3.9 percent in 2020 before improving 5.6 percent in 2021. Trade and commercial activity have experienced an unprecedented collapse, and world trade is seen shrinking 10.5 percent in 2020 before improving by 9.9 percent in 2021.

U.S. GDP is projected to fall by 4.0 percent in 2020 before rising 4.0 percent in 2021. Consumer spending will decline by 4.6 percent in 2020 before rebounding 4.4 percent next year. Economy-wide business investment was already lower prior to COVID-19 and is expected to decline 9.7 percent in 2020 before showing 3.0 percent growth in 2021.

With more than 20 million people filing unemployment claims in the past four weeks, the unemployment rate is expected to reach over 13 percent by the end of Q2 2020 before steadily easing through 2021. After three years of gains, chemical industry employment is expected to decline by 28,000 (5.1 percent) in 2020. Chemical industry capital spending declines 2.0 percent in 2020, but grows 1.8 percent in 2021.

ACC’s analysis presents an assessment of current conditions and expectations using economic data and publicly available information through April 14, 2020. For the U.S. chemical industry, we use our own model (supplemented by other forecasters), projecting likely paths for the industry in 2020-2022. In addition, we take into account forecasts made by manufacturing economists, economic forecasting consultants and other institutions.

The projections in this release rely on a baseline scenario under which U.S. COVID-19-related restrictions are lifted before the end of Q2 2020. ACC also developed a “pessimistic” scenario under which U.S. restrictions are extended through Q4 2020.

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.
MRC

Toyo Styrene building facility to recycle used PS into SM using Agilyx process

MOSCOW (MRC) -- Agilyx Corp. has licensed its technology to Toyo Styrene Co. for use in a new facility to be built in Japan that will recycle post-use polystyrene (PS) back to styrene monomer (SM), as per Apic-online.

The plant, which will be located near Toyo Styrene's existing facility in China Prefecture, will have a processing capacity of up to 10 t/d of post-use PS. Agilyx and Toyo have begun engineering and development of the project. Operations are expected to begin in early 2022.

"This announcement marks our formal entrance into the Asian markets to deliver circular pathways for plas-tics," said Agilyx Chief Executive Joe Vaillancourt.

"We are excited to be working with a group that shares our mission of reducing the impact on the global environment by increasing recycled content in new products while reducing the dependency on virgin material. Toyo Styrene has been a leader in developing eco-friendly products for the efficient use of plastics."

According to ICIS-MRC Price report, in Russia, Nizhnekamskneftekhim reduced its April selling PS prices by Rb10,000/tonne. GPPS for injection moulding and extrusion was offered at Rb86,000-90,000/tonne CPT Moscow, including VAT, whereas HIPS - at Rb90,000-94,000/tonne CPT Moscow, including VAT. Penoplex reduced its GPPS prices by Rb10,000/tonne. Demand for the Kirishi plant's material remained quite good. And Gazprom neftekhim Salavat reduced its indicative prices by Rb8,000/tonne, and its GPPS prices for small- and medium-sized buyers have not been settled yet.
MRC

Twelve oil majors to slash capex by USD43.6B amid price collapse, coronavirus

MOSCOW (MRC) -- The massive plunge in oil prices amid the price war between OPEC and Russia and a drastic decline in oil demand due to the global coronavirus pandemic has forced the world's top integrated oil and gas majors to take swift and dramatic measures to preserve cash and protect their balance sheets, reported S&P Global.

As of April 7, 12 of the world's largest public oil and gas companies by market value have announced specific cuts to their 2020 capital spending programs, totaling approximately USD43.6 billion, as global crude prices have tumbled below USD30 per barrel.

In total the announced cuts by the 12 integrated majors represent an approximate 23% decline in capital spending compared to their initial plans and far eclipse announced 2020 capex reductions by independent oil and gas producers.

Thus, Exxon Mobil Corp. announced April 7 that it will cut its capital budget for 2020 by 30%, or USD10 billion, in response to low energy prices caused by collapsing demand. Exxon said it would also cut its cash operating expenses by 15%.

Exxon's new capital investment budget for the year is now about USD23 billion, a decrease from the USD33 billion previously announced, with most of the spending cuts to take place in the US Permian Basin.

BP PLC announced April 1 that it will cut its 2020 capital spending budget by $4 billion, or about 25% of previous guidance, to USD12 billion to navigate the depressed economic and oil price environment amid the coronavirus pandemic. BP, which spent USD15.2 billion in 2019, also said it will write down about USD1 billion in noncash, nonoperating charges in the first quarter.

Brazilian state-run oil company Petroleo Brasileiro SA, also known as Petrobras, said March 26 it will cut 2020 investments by USD3.5 billion to a total of USD8.5 billion, from USD12 billion previously, to soften the blow of the new coronavirus pandemic and the recent oil price downturn on the business. The major has also proposed cutting its operating expenses by the year by USD2 billion and postponing paying out dividends to shareholders.

Italy's Eni SpA said March 25 it plans to cut capital expenditures for 2020 by about EUR2 billion, or 25%, from its previously planned spend of approximately EUR8 billion, to adjust for market conditions caused by the coronavirus outbreak and plunging oil prices.

Eni on March 18 announced it would withdraw its €400 million share buyback proposal. Eni will reconsider relaunching the buyback when the Brent price is equal to at least USD60/bbl, it said.

Spain's Repsol SA said March 25 it will reduce 2020 capital expenditures by more than EUR1 billion, or 26%, due to the oil price crash and the coronavirus pandemic. The company is also looking to decrease operating expenditures by more than EUR350 million.

Embattled oil producer Occidental Petroleum Corp. on March 25 slashed its spending plans for the second time in a month as it tries to navigate a low oil price environment and heat from activist investor Carl Icahn.

The new spending guidance, between USD2.7 billion and USD2.9 billion, is down from the USD3.5 billion to USD3.7 billion range given March 10 and represents a 47% decrease from the midpoint of the company's initial 2020 spending plan of USD5.2 billion to USD5.4 billion.

In addition to trimming its capital spending plan, Occidental said it will cut 2020 operating and corporate costs by at least USD600 million, which includes "significant" salary cuts for the corporation's executive team.

The company also announced March 10 it will cut its dividend - a major selling point for investors from 79 cents per share to 11 cents per share.

Norway's Equinor ASA said March 25 it will slash capital expenditures as well as exploration and operating costs by a total of USD3 billion amid the one-two punch of the coronavirus pandemic and plummeting oil prices.

The major will cut organic capex by USD2 billion to USD8.5 billion, down about 19% from a prior range of USD10 billion to USD11 billion. In addition, it will reduce exploration expenses from USD1.4 billion to USD1 billion and will trim operating costs by about USD700 million from original estimates.

On March 22, Equinor announced it would suspend its USD5 billion share buyback program due to the current oil price crisis.

California-based Chevron Corp. said March 24 it would cut capital expenditures for 2020 by USD4 billion, or about 20%, to USD16 billion and aims to reduce cash capital and exploratory expenditures by USD3.3 billion, to USD10.5 billion. The US supermajor also said it will halt its USD5 billion share buyback program and will slice run-rate operating costs by more than USD1 billion by the end of the year.

Key to Chevron's new capex plan is trimming costs for its expansion in the US Permian Basin. The company has reduced its Permian production guidance by 125,000 barrels of oil equivalent per day, or 20%, since it plans to reduce spending in the region by 50% this year from USD4 billion to USD2 billion.

Canada's Suncor Energy Inc. announced March 23 it would lower its 2020 capital program to between CD3.9 billion and CD4.5 billion, a decrease of CD1.5 billion, or 26%, from the midpoint of the original guidance range of CD5.4 billion to CD6.0 billion.

Suncor also slashed its total operating expenditures by more than CD1 billion, from CD11.2 billion of expenditures in 2019. Suncor decided to extend for up to two years the timelines for the cogeneration facility at the company's oil sands base plant, Forty Mile wind power project and some offshore developments.

In light of the oil price crash, Royal Dutch Shell PLC said March 23 it will slash this year's capex to USD20 billion if not lower, from an initial level of around USD25 billion. The Anglo-Dutch major will also cut underlying operating costs by USD3 billion to USD4 billion per year over the next 12 months, and will suspend the next USD1 billion tranche of its massive USD25 billion share buyback program.

France's Total SA said March 23 it will trim organic capital expenditures this year by more than USD3 billion and will suspend its USD2 billion buyback program. The revised capex will reduce net investments for this year to less than USD15 billion, with savings mostly in the form of short-cycle flexible capex.

Saudi Arabian Oil Co. said March 15 that its capital expenditures for the current year will run anywhere from USD25 billion to USD30 billion, down from USD32.8 billion in 2019. The midpoint of the company's new range is down by an average of

We remind that as MRC wrote previously, in October 2019, McDermott International announced that it had been awarded a contract by Saudi Aramco and Total Raffinage Chimie (Total) for their joint venture (JV) Amiral steam cracker project at Jubail, Saudi Arabia. Amiral is a JV in which Aramco holds 62.5% and Total the rest. The plant, designed to produce 1.5 million metric tons/year (MMt/y) of ethylene, will be one of the world's largest mixed-feed crackers.

Aramco and Total launched their USD5-billion Amiral JV project in October 2018. The steam cracker will be fed with a mixture of 50% ethane and refinery off-gases. It will supply ethylene to a downstream 1 MMt/y polyethylene manufacturing complex and other petrochemical products. The project aims to fully exploit operational synergies with the adjacent refinery, owned by Satorp, another JV between Aramco and Total. Third-party investors, including Daelim and Ineos, will locate plants at the value park adjacent to Amiral with a combined investment of USD4 billion. A final investment decision is expected in 2021.

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

According to MRC's ScanPlast report, 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.
MRC

Husky Energy makes further cuts to 2020 capital spending

MOSCOW (MRC) -- Canadian oil and gas producer Husky Energy cut its 2020 capital expenditure by an additional CSD700 million (USD496.31 million), citing a hit to oil prices from the coronavirus outbreak, said Reuters.

The Calgary, Alberta-based company said it now expects to spend between CSd1.6 billion and CSD1.8 billion, about half its earlier estimate of CSD3.2 billion to CSD3.4 billion.

Husky Energy also said it would also reduce production by more than 80,000 barrels per day, most of which is heavy oil.

Oil and gas producers have been slashing spending, trimming output and rolling back share buybacks and dividends as oil demand slumped due to the coronavirus outbreak that has hampered travel.

Husky had previously cut its 2020 capital spending budget by C$900 million in March, citing challenging global market conditions.

Smaller-rival Crescent Point Energy Corp also slashed its capital expenditure forecast for 2020 by another C$75 million, or 10%, to a range of CSD650 million to CSD700 million. Earlier in March, Crescent had lowered its estimates by 35%.

As MRC informed earlier, Cambridge, AVEVA, a global leader in engineering and industrial software, has signed an agreement with Calgary-based integrated oil and gas company Husky Energy to deliver an end-to-end supply chain management solution for Husky’s downstream business.
MRC