Oil moves mixed on easing lockdowns, looming storage shortage

MOSCOW (MRC) -- Oil prices were mixed as optimism about the easing of coronavirus-related restrictions reassured markets, although traders remained cautious with storage capacities filling up fast and supply cuts not deep enough to counter falling demand, reported Reuters.

Brent crude rose 78 cents, or 4%, to USD20.77 a barrel at 1338 GMT, following a 6.8% slide on Monday.

US West Texas Intermediate (WTI) crude was down 46 cents, or 4%, at USD12.32 a barrel. The contract plunged 25% on Monday.

"While wild price swings are set to last in the very near term, we see more upside than downside from prices around USD20 per barrel. The oil price should recover in the longer term," said Norbert Rucker, analyst at Swiss bank Julius Baer.

From Italy to New Zealand, governments announced the easing of restrictions, although Britain said its too dangerous to relax a lockdown for fear of a deadly second outbreak. More parts of the United States looked set to restart business.

German retailers sought on Tuesday to persuade the government to let all stores operate normally from May 4, saying the decision to only allow smaller stores to open was confusing for customers.

"While we expect oil demand to modestly recover from the April lows as countries ease some lockdown measures, demand will remain under severe pressure in the near term because of the COVID-19 pandemic," said UBS commodities analyst Giovanni Staunovo.

BP Chief Executive Bernard Looney told Reuters his company expected global oil demand to drop by about 15 million barrels per day (bpd) in the second quarter due to coronavirus-related movement restrictions.

That is more than the 10 million bpd of cuts agreed by the Organization of the Petroleum Exporting Countries, Russia and other allied producers. The reductions are due to be implemented from May 1.

Russian Energy Minister Alexander Novak said on Tuesday oil markets would start balancing out once an output deal took effect, but no significant rise in prices was likely in the near future due to high levels of global storage.

Analysts said part of the WTI decline was due to retail investment vehicles like exchange-traded funds selling out of the front-month June contract and buying into months later to avert massive losses like last week, when WTI fell below zero.

The United States Oil Fund LP (USO), the largest oil-focused U.S. exchange-traded product, said it would further shift its holdings into later-dated contracts.

"The exodus in our view remains motivated by concerns over the saturation of storage capacity at Cushing and the associated risk of negative pricing," Harry Tchilinguirian, global oil strategist at BNP Paribas, told the Reuters Global Oil Forum.

Global storage onshore was estimated to be about 85% full as of last week, according to data from consultancy Kpler.

In a sign of the energy industry’s desperation for places to store petroleum, oil traders are resorting to hiring expensive US vessels to store gasoline or ship fuel overseas, shipping sources said.

As MRC informed earlier, global oil consumption cut by up to a third. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

We remind that earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

We also remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

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.
MRC

Australian Viva Energy to close unit of Geelong Refinery

MOSCOW (MRC) -- Australian fuel supplier Viva Energy Group on Monday said it will shut down a unit of its Geelong Refinery in Victoria as it seeks to reduce surplus production to cope with a collapse in fuel demand, reported Reuters.

The company said closure of the refinery’s Residual Catalytic Cracking Unit will not have a material financial impact or lead to a disruption in fuel supply.

We remind that, as MRC informed before, Italian energy group Eni said most of its oil refineries in Italy were working at around 60% of their capacity in April as the coronavirus emergency continues. The pandemic has shut down large parts of economies across the globe and prompted many governments to slap tough restrictions on travel, triggering a steep fall in the demand for refined oil products. In emailed comments, Eni said its biggest refinery Sannazzaro, in northern Italy, was running at around 50% of its capacity since it was also impacted by planned maintenance work.

We also remind that operations at Italian petrochemical producer Versalis (part of Eni) werenot affected by emergency quarantine measures in the country imposed in March 2020. Italian Prime Minister Giuseppe Conte extended its emergency coronavirus measures on 8 March and announced the closure of "non-essential" commercial businesses. This follows the announcement of a nationwide lockdown on 6 March, limiting movement for around 60 million people. Under these measures people are only allowed to leave their homes for work or health reasons. Versalis has three steam crackers in Italy, capable of producing 1.675 million mt of ethylene, 750,000 of propylene and 285,000 mt of butadiene a year.

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.
MRC

Brenntag to hold virtual shareholders meeting

MOSCOW (MRC) -- Brenntag, the global market leader in chemical distribution, says that its annual shareholders' meeting will take place as planned on 10 June. But, due to the spread of the coronavirus disease 2019 (COVID-19) pandemic, the meeting will be held as a purely virtual event, without the physical presence of shareholders, according to Chemweek.

Due to the COVID-19 pandemic and to protect the health of shareholders, employees, and the service providers involved, this year's shareholders’ meeting cannot take place as planned in Essen, Germany, says Brenntag.

"It is nevertheless important to us to hold the general shareholders’ meeting on the initially planned date and thus enable the shareholders to vote on the items on the agenda at that time," says Christian Kohlpaintner, CEO of Brenntag. "We have therefore decided to make use of the possibility created by the legislator to hold a virtual general shareholders’ meeting."

As MRC reported earlier, since 1 February 2014, Brenntag has startied distributing the cellulosic additive and latex powder portfolio of Dow Construction Chemicals in Germany and Austria.

We also remind that Dow Chemical began major maintenance on the LHC 1 cracker at Terneuzen, Netherlands from 9 September, 2019. More than 1,500 extra employees from various external companies carried out maintenance work in the subsequent period. LHC stands for Light Hydro Carbons, or hydrocarbons. The cracker splits naphtha - a derivative of crude oil - into hydrocarbons such as ethylene and propylene. These are the raw materials for the other Dow factories that make chemicals and plastics from them. Together with two other naphtha crackers, LHC 1 forms the heart of the Terneuzen Dow site.

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.

Brenntag is the global market leader in full-line chemical distribution. Linking chemical manufacturers and chemical users, Brenntag provides business-to-business distribution solutions for industrial and specialty chemicals globally. The value-added services include just-in-time delivery, product mixing, formulation, repackaging, inventory management, drum return handling as well as extensive technical support. Headquartered in Mulheim an der Ruhr, Germany, the company operates a global network with more than 400 locations in 70 countries.

Indian chemical exports rise 7% between Apr 2019-Jan 2020

MOSCOW (MRC) -- India’s chemical exports rose by 7% to Rs 2.68 lakh crore (USD35.2 billion) during April-January period of the last fiscal, and became the top exporting sector in the country for the first time, reported Kemicalinfo with reference to the government's statement on Saturday.

"Union Minister of Chemicals and Fertilisers DV Sadananda Gowda congratulated the chemicals and petrochemicals industry on becoming the top exporting sector of the country for the first time," an official statement said.

Gowda informed that during April 2019-January 2020, the export of chemicals grew by 7.43% over the corresponding period of the previous fiscal.

"Total export of chemicals during this period reached Rs 2.68 lakh crore (USD35.2 billion). This constitutes 14.35% of the total exports," it added.

The minister assured full support to the industry towards making India a leading global hub for manufacturing of chemicals and petrochemicals.

"Continuous efforts made by my Department of Chemicals and Petrochemicals have enabled the industry to become the top most exporting segment for the first time," the Union Minister of Chemicals and Fertilisers said in a tweet.

As MRC informed earlier, India to consider imposing a 15% "Covid-19" import tax on chemicals to help protect its domestic industry from major exporting nations in East and SE Asia. The domestic industry has been badly affected by a major demand slump as a result of nationwide coronavirus lockdown. The proposed tax will be added in addition to current import duties. The committee is also proposing that all duties and taxes on exports be refunded for domestic manufacturers.

With possible exemptions for ethylene, paraxylene (PX), ethylene dichloride (EDC) and vinyl chloride monomer (VCM), the recommendation covers all other chemicals and petrochemicals imported by India.

India is a major chemicals importer, including polymers, monomers and solvents. If introduced, the new tax would impact domestic importers and distributors.

EDC and VCM are the main feedstocks for the production of polyvinyl chloride (PVC).

According to MRC's DataScope report, exports of suspension polyvinyl chloride (SPVC) from Russia totalled 45,600 tonnes in the first three months of 2020, down by 4% year on year. Imports increased, but still remained at a low level.
MRC

Covestro first-quarter profit sinks on low demand in China, strong competition

MOSCOW (MRC) -- German chemicals maker Covestro reported an 89% plunge in quarterly profit on Wednesday, hurt by weak demand in China due to coronavirus pandemic-driven production disruptions and as strong competition led to a decline in products prices, said Reuters.

The former Bayer unit, whose main customers include the automotive industry and electronics manufacturers, said its first-quarter net income attributable to shareholders dropped to 20 million euros (USD21.69 million).

Covestro, however, confirmed the preliminary figure for first-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA).

As MRC informed earlier, Covestro has successfully closed the sale of its European polycarbonates (PC) sheets business to the Munich-based Serafin Group effective January 2, 2020. This includes key management and sales functions throughout Europe as well as production sites in Belgium and Italy.

According to MRC's ScanPlast report, overall estimated consumption of PC granules totalled 12,600 tonnes in the Russian market in January-February 2020 (excluding imports and exports to/from Belarus), compared to 9,600 tonnes a year earlier. Demand increased by 31%.

Covestro (formerly Bayer MaterialScience) is an independent subgroup within Bayer. It was created as part of the restructuring of Bayer AG from the former business group Bayer Polymers, with certain of its activities being spun off to Lanxess AG. Covestro manufactures and develops materials such as coatings, adhesives and sealants, polycarbonates (CDs, DVDs), polyurethanes (automotive seating, insulation for refrigerating appliances) etc. With 2018 sales of EUR 14.6 billion, Covestro has 30 production sites worldwide and employs approximately 16,800 people (calculated as full-time equivalents) at the end of 2018.
MRC