US crude oil inventories are approaching record-high levels

MOSCOW (MRC) -- Recent declines in demand for petroleum products have contributed to record increases in US commercial crude oil inventories, reported Hydrocarbonprocessing.

Transportation fuel demand has decreased as a result of reduced economic activity and stay-at-home orders aimed at slowing the spread of the 2019 novel coronavirus disease (COVID-19). Refiners have been able to reduce the amount of material they run through refineries (as measured by gross inputs, which includes crude oil, unfinished oils, and natural gas plant liquids) relatively quickly in response to falling demand, but crude oil production has not responded as quickly, leading to large crude oil inventory increases.

From March 13 (when a national emergency was declared in the United States) to April 24, U.S. commercial crude oil inventories increased by 74 million barrels (16%) and are now 8 million barrels below the record-high value set in March 2017, according to data in the U.S. Energy Information Administration’s (EIA) weekly series that dates back to 1982. Commercial crude oil inventories for the week ending April 10 increased by 19.2 million barrels, the largest weekly change in EIA’s data.

The US Gulf Coast region, home to more than half of U.S. refining capacity, typically has the most crude oil inventories. From March 13 to April 24, Gulf Coast inventories increased by 36.4 million barrels (20%) to 221.6 million barrels. The increase of 10.2 million barrels in the week ending April 10 was the fourth-largest increase in the Gulf Coast region on record.

Inventories in the crude oil storage hub in Cushing, Oklahoma, increased by 24.9 million barrels (69%) from March 13 to April 24. The weekly inventory builds in Cushing for the weeks ending April 3, 10, and 17 are the three largest weekly inventory builds on record. Because market participants that hold West Texas Intermediate (WTI) futures contracts to expiration must take physical delivery of WTI crude oil in Cushing, the availability of crude oil storage there is important to facilitate the physical transfer. On April 20, 2020, the scarcity of available crude oil storage at Cushing meant several market participants sold their futures contracts at negative prices, in effect paying counterparties to close out of their contracts for them. Another important factor is that a portion of unused space at terminals is required for normal functioning of petroleum storage and transportation systems, and the unused space could be held for incoming crude oil or other operational considerations.

To help stakeholders better assess crude oil storage and capacity, EIA began providing weekly estimates of US crude oil storage capacity utilization in the Weekly Petroleum Status Report (WPSR). EIA surveys inventory levels weekly, but because capacities rarely change, crude oil storage capacities are surveyed less often. EIA’s most recent Working and Net Available Shell Storage Capacity Report was released in November 2019 with data through September 2019; the next release will be on May 29, 2020, with data through March 2020.

In EIA’s Weekly Petroleum Status Report published yesterday, U.S. crude oil storage has reached 61% of working capacity, up from 60% the previous week. In the Gulf Coast and Midwest, storage capacity utilization rose to 60% and 65%, respectively. Within the Midwest region, storage utilization at Cushing, Oklahoma, rose to 81%.

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

MOSCOW (MRC) -- Zhejiang Petrochemical Co Ltd is planning to start up its new acrylonitrile (ACN) plant within the first week of May, reported S&P Global.

Based in Zhejiang, China, this plant is able to produce 260,000 tons/year of ACN.

As MRC informed earlier, Zhejiang Petrochemical Co Ltd started up its ethylene cracker in late December 2019 and its polyolefin plants in late December 2019-January 2020.

Market sources reported then that one of its polypropylene (PP) plant with capacity of 450,000 tons/year started up by 30 December 2019, followed by another line with same capacity by 15 January 2020.

Meanwhile its 450,000 tons/year of lienar low density polyethylene (LLDPE) and 300,000 tons/year of high density polyethylene (HDPE) were launched around similar time with PP plants.

We also remind that China's greenfield Zhejiang Petrochemical will use a range of process technology from Honeywell UOP for the second phase of its integrated refining and petrochemical complex in Zhoushan, Zhejiang province, according to a document, quoting a senior Honeywell official. "This second phase of the complex by itself will process 20 million tons per year of crude oil and produce another six million tons per year of aromatics when completed," Bryan Glover, vice president and general manager, Process Technology and Equipment, at Honeywell UOP, stated in the document as of January 2019.

ACN is the main feedstock for the production of acrylonitrile-butadiene-styrene (ABS).

According to MRC's DataScope report, overall ABS imports to the Russian market increased in the first two months of 2020 by 8% year on year to 4,800 tonnes. This figure was at 4,500 tonnes in January-February 2019. February imports of material into the Russian Federation rose by 48% year on year to 2,500 tonnes from 2,700 tonnes a year earlier. Imports were 2,300 tonnes in January 2020.
MRC

MOSCOW (MRC) -- A gas leak at LG Polymers India Pvt Ltd polymer plant at Visakhapatnam, India left at least eight dead and about 800 people sick, reported Kemicalinfo.

The incident took place on 7 May at around 02:30 am IST.

The gas reportedly started leaking when the workers were preparing to reopen the plant today post lockdown. The gas was reportedly leaked out from two 5,000 metric tons tanks, which had been unattended since March due to the COVID-19 pandemic lockdown.

South Korea’s LG Chemical took over the plant from a local Indian company in the late 1990s.

"We are working together with the local authorities to assess the damage caused to the local people and to take whatever it takes to protect them and our workers,”"LG Chemical said in a statement. "The gas leak from the factory is now under control. But the gas can cause vomiting and dizziness when inhaled. We are doing all we can to ensure medical treatment as quickly as possible."

LG Polymers India plant produces polystyrene (PS) and expandable polystyrene (EPS).

According to MRC's ScanPlast report, March 2020 estimated consumption of PS and styrene plastics in Russia dropped by 2% year on year, totalling 42,130 tonnes. The estimated consumption totalled 121,880 tonnes in the first three months of 2020, down by 2% year on year. Overall, Russian plants produced 42,790 tonnes in March 2020.
MRC

MOSCOW (MRC) -- Volgograd Kaustik, Russia's fourth largest polyvinyl chloride (PVC) producer, shut down production of polyvinyl chloride (PVC) for a scheduled turnaround, according to ICIS-MRC Price report.

According to a company representative, scheduled maintenance works started at PVC production on 1 May. The shutdown will be quite long and will take three weeks. The plant's PVC production capacity is 90,000 tonnes/year.

It is also worth noting that next shutdowns for maintenance at Russian PVC plants are scheduled in June - July.
SayanskKhimPlast and RusVinyl, which annual capacities are 350,000 tonnes and 330,000 tonnes, respectively, will take next off-stream their production capacities for maintenance.

PVC production at Volgograd Kaustik was launched in December 1972 with the assistance of the Japanese firm Kureh's specialists. Nikokhim Group is one of the leaders of the Russian chemical industry, the main production assets of which are located in the southern industrial hub of Volgograd.

The holding company includes: JSC Kaustik is the principal plant of the group, manufactures basic products - caustic soda, chloroparaffins, synthetic hydrochloric acid, chlorine trademark, polyvinyl chloride, sodium hypochlorite, etc .; CJSC NikoMag - production of anti-icing materials, magnesium chloride, magnesium oxide and hydroxide; Zirax, Ltd. - production of high-purity reagents for various industries and JSC Poligran - the production of plastic compounds and rigid PVC compounds.
MRC

MOSCOW (MRC) -- Oil markets are at the beginning of a fragile recovery as coronavirus lockdowns ease, though long-term peak demand may be permanently eroded, Vitol’s chief executive told Reuters.

Russell Hardy, CEO of the world’s biggest oil trader, said global oil demand sank by 26-27 million barrels per day (bpd) in April and predicts a year-on-year drop of over 8 million bpd.

"The market is going to flirt with optimism and pessimism for the next two or three weeks," Hardy said.

As MRC wrote before, Vitol, the world’s biggest oil trader, began exporting fuel oil and diesel from Turkmenistan via the Russian port of Novorossiisk in December 2019.

We also remind that test operations at a new gas chemical complex (GCC) for processing natural gas and producing polyethylene (PE) and polypropylene (PP) in the village of Kiyanly, Turkmenistan, started in August 2018. An official launch of production took place on 17 October, 2018.

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