China doubled crude oil storage inflows during coronavirus demand hit

MOSCOW (MRC) -- Rather than cutting back on imports, China pushed crude oil into storage tanks at almost double the rate in the first quarter of this year than it did in the same period in 2019 as the new coronavirus hit domestic consumption, reported Reuters.

China doesn’t release official data on flows into strategic and commercial stockpiles, but an estimate can be made by subtracting the amount of crude processed by refineries from the total volume of oil available from both imports and domestic output.

China’s crude oil imports were 10.2 million barrels per day (bpd) in the first three months of the year, according to customs data.

Domestic output was 3.74 million bpd, giving a total of available crude for the quarter of 13.94 million bpd.

Refinery throughput for the first quarter was the equivalent of 11.96 million bpd, meaning of the total available crude 1.98 million bpd wasn’t processed by refineries.

Doing the same calculations for the first quarter of last year shows imports of 9.83 million bpd, domestic production of 3.84 million bpd, and refinery processing of 12.6 million bpd, leaving a gap of 1.07 million bpd.

The numbers suggest that China almost doubled the rate at which it put oil into storage in the first quarter of 2020, in order to deal with the loss of consumption as the coronavirus caused much of the country to be placed in some form of lockdown.

It’s also worth noting that China’s exports of refined fuels also rose in the first quarter of this year, reaching 18.02 million tonnes, up 9.7% from the same period last year.

A breakdown by type of refined product isn’t yet available, but it’s likely the bulk of the increase was in gasoline and in middle distillates such as jet kerosene and diesel.

Overall, the picture that emerges from the first quarter is that China decided to increase crude storage flows rather than cut back on imports.

The other factor in dealing with the loss of demand from the coronavirus was that refinery throughput did drop and exports of refined fuels increased, but not by huge margins.

However, rather than being a template for the rest of the world as it battles to contain the coronavirus, China is likely to be something of an outlier.

Other major crude importing countries lack the ability to simply divert oil into storage on the scale that China can, meaning they will have to lower the amount of crude being imported.

Even countries with large commercial and strategic storages, such as the United States, will find that the volume of crude available is so much that it will overwhelm available tank space within weeks, rather that months.

China’s ability to double storage flows to almost 2 million bpd over an entire quarter makes it unique, not a model.

To put China’s storage flows in perspective, at about 2 million bpd they are 25% higher than the total crude consumption of the United Kingdom, the world’s sixth-largest economy.

It’s also likely that China will continue to suck up crude oil for its stockpiles, especially given the collapse in prices since the coronavirus caused much of the developed world to put their economies into some form of lockdown.

China is on track to import at least 9.35 million bpd of seaborne crude in April, up from 8.8 million bpd in March, according to Refinitiv vessel-tracking data, filtered to show only cargoes already discharged, awaiting discharge or underway and due to offload prior to the end of the month.

Seaborne imports exclude pipeline volumes from Russia and central Asia, which were around 843,000 bpd in March.

China’s appetite for imported crude for storage is probably one of the few bright spots for the embattled oil industry currently, although by itself it’s nowhere near enough to compensate for the loss of an estimated 30 million bpd of global consumption.

We remind that, as MRC informed earlier, Asia’s top refiner China Petroleum Chemical Corp, or Sinopec, expects its full-year 2020 refining runs will be lower than in 2019 because of a contraction in Chinese fuel demand caused by the coronavirus outbreak.

We also remind that Sinopec Qilu Petrochemical, a subsidiary of Sinopec Corporation, plans to shut the cracker unit in Tianjin in northeast China for scheduled repairs on 15 June, 2020. This cracking unit with a capacity of 900,000 tonnes of ethylene per year and 480,000 tonnes of propylene tons per year will be closed for scheduled repairs until 24 June, 2020.

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

1. ConocoPhillips cuts production, buybacks, spending again

MOSCOW (MRC) -- ConocoPhillips said it would cut gross production by 225,000 barrels of oil per day while also suspending its share repurchase program and cutting back further on capital spending to weather the collapse in oil prices, said Hydrocarbonprocessing. Oil and gas producers have sunk deep into crisis mode over the past month as the slump in demand caused by coronavirus lockdowns left the world’s big producers producing far more than current needs and crude prices falling below USD30.


MRC

MOSCOW (MRC) -- Asia’s top refiner China Petroleum Chemical Corp, or Sinopec, expects its full-year 2020 refining runs will be lower than in 2019 because of a contraction in Chinese fuel demand caused by the coronavirus outbreak, according to Hydrocarbonprocessing.

The fall in demand will last for the first half of this year and lead to lower full-year demand but refined oil consumption is expected to return to normal in the third and fourth quarters, said Ling Yiqing, vice president of Sinopec, during an earnings call in late March.

"Due to the impact of the first and second quarters, our expectation of full year consumption of oil products will be negative growth," said Ling.

"In terms of refining utilization rates in the full year 2020, due to the impact of coronavirus outbreak and exports, our whole year number will be affected," he said.

State-backed Sinopec lowered the utilization rates at its crude oil refineries to 66% in February amid the outbreak, which was first detected in the central Chinese city of Wuhan and prompted the government to impose stringent travel bans.

The average utilization rate at Sinopec’s oil refineries was 91.3% in 2019.

Ling also said the spread of coronavirus overseas will impact oil product exports, negatively affecting Sinopec’s oil refining in the second quarter.

Inventory of refined oil products was seen at a high level in February at Sinopec, Ling said, but it is expected to fall back to a normal level by end-March.

The company, which will trim 2020 capital expenditure by 2.5%, was making a detailed plan to reduce capex and would report this in April during first-quarter earnings, said Zhang Yuqing, chairman of Sinopec.

Zhang expects that oil prices will fluctuate around USD42 per barrel, and the low price scenario might remain for a longer-than-expected period.

He added that coal-to-liquids (CTL) and coal chemical projects will not have any competitiveness when oil prices fall below USD35 per barrel.

Sinopec, which has three coal-chemical projects, will strive to lower costs this year and work on future planning, Zhang said.

Asia’s largest oil refiner also warned about lower petrochemical output in the coming months as it expects a notable decline in global consumption in the next one to two months.

Sinopec, which had lowered operation rates by 10% at its petrochemical plants in February, has resumed operations to nearly 100%, but it still sees a high level of inventory of petrochemical products, Yu Baocai, also said a vice president at Sinopec.

We remind that, as MRC wrote before, Sinopec Qilu Petrochemical, a subsidiary of Sinopec Corporation, plans to shut the cracker unit in Tianjin in northeast China for scheduled repairs on 15 June, 2020. This cracking unit with a capacity of 900,000 tonnes of ethylene per year and 480,000 tonnes of propylene tons per year will be closed for scheduled repairs until 24 June, 2020.

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.

Sinopec corp. is one of the world's largest integrated energy and chemical companies. Business Sinopec Corp. includes oil and gas exploration, production and transportation of oil and gas, oil refining, petrochemical production, production of mineral fertilizers and other chemical products. In terms of refining capacity, Sinopec Corp. ranks second in the world, in terms of ethylene capacity - fourth.
MRC

MOSCOW (MRC) -- Lanxess has announced that it expects its core income to decline in 2020 as the global coronavirus epidemic is expected to damage its supply chains, according to Kemicalinfo.

The company forecasts that profit before exceptional items will slash EUR 50-100 million (USD56.4-112.8 million) as a result of coronavirus, with EUR20 million (USD22.6 million) impact projected for the first quarter. However, the company anticipates its operating business will remain stable for the year.

The fourth-quarter core profit before exceptional items stood at EUR197 million (USD223.5 million), slightly above the EUR185.8 million (USD209.5 million) forecast by analysts on average in a consensus provided by the company.

The specialty chemicals producer managed to increase earnings before interest, taxes, depreciation and amortization (EBTDA) before exceptional items in 2019 to EUR1.02 billion (USD1.15 billion), up from EUR986 million (USD1.11 billion) in 2018, despite the weak environment through 2019.

For the full-year 2020, Lanxess said it forecasts its EBTDA to come in at EUR0.90 billion to EUR1.0 billion (USD1-1.13 billion), including an impact of the coronavirus epidemic outbreak of EUR50-100 million (USD56.4-112.8 million).

As MRC informed earlier, Vinmar Polymers America will distribute Lanxess Corp.'s high-performance plastics to customers in North America.

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.

LANXESS is a leading specialty chemicals company with sales of EUR 7.2 billion in 2018. The company currently has about 15,500 employees in 33 countries and is represented at 60 production sites worldwide. The core business of LANXESS is the development, manufacturing and marketing of chemical intermediates, additives, specialty chemicals and plastics.
MRC

MOSCOW (MRC) -- Saudi Aramco, the world’s largest oil producer, is in early talks with banks for a loan of about USD10 billion to help finance its acquisition of a 70% stake in Saudi Basic Industries Corp (SABIC), reported Reuters with reference to three banking sources.

Aramco agreed last year to buy the controlling stake in SABIC from the kingdom’s wealth fund for $69.1 billion, sealing one of the biggest-ever deals in the global chemical industry.

"The financing would be for the SABIC deal, but the borrower is Aramco," said one of the sources, adding that the discussions were at an initial stage, with the company sounding out banks.

"Ten billion dollars is where they want to get to, (it’s) not clear if, in this market, they’ll manage to reach that."

A second source said banks involved in the talks included HSBC and JPMorgan, as well as lenders in the Gulf.

In response to a Reuters request for comment about whether it was seeking such a loan, Saudi Aramco said: "The company continues to review its financial options as part of its normal course of business, while prudently preserving its pristine balance sheet and its resilience."

JPMorgan declined to comment, while HSBC did not immediately respond to a request for comment.

A third banker said Aramco was looking to borrow in US dollars because it was cheaper than in Saudi riyals, in terms of interest, and to avoid pressuring Saudi banks’ liquidity.

The SABIC stake acquisition from Saudi Arabia’s Public Investment Fund (PIF) will help Aramco’s downstream expansion plans. The deal came after months of talks between the company and PIF and was one of the reasons for the delay of Aramco’s blockbuster initial public offering late last year.

The loan discussions come at a time when oil-producing nations have been hit by a plunge in demand for crude as a result of the coronavirus outbreak and a slide in oil prices.

OPEC and its allies led by Russia, a group known as OPEC+, have agreed to the largest oil output cut in history that could curb supply by up to 20%. But the agreement has done little to boost oil prices as many economies remain under lockdown due to the novel coronavirus pandemic, curbing demand.

Saudi Arabia, which owns more than 98% of the oil giant, is likely to sell new international bonds soon, according to sources, as the output cut deal further squeezes revenues hit by the plunge in oil prices.

We remind that as MRC informed before, 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.

Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.

Saudi Basic Industries Corporation (SABIC) ranks among the world's top petrochemical companies. The company is among the worldпїЅs market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.
MRC