Marathon Petroleum cuts spending by USD1.4 bln as virus saps fuel demand

MOSCOW (MRC) -- US oil refiner Marathon Petroleum Corp cut spending by 30% and detailed other measures to reduce costs, as widespread lockdowns to curb the spread of the COVID-19 pandemic pummel demand for oil and gas, reported Reuters.

Stay-at-home orders to contain the pandemic have decimated travel, cutting worldwide demand for oil at a time when the market is already over supplied.

With US oil prices now down 70% for the year, companies have rushed to cut their budgets and are finding ways to save cash in order to survive through the downturn.

Marathon, which last month said it will defer or delay some expenses, expects total capital spending to decline by USD1.4 billion, reducing its budget for the year to USD3 billion. It estimated operating expenses to be USD950 million lower in 2020.

Investors are likely to take a positive view of the spending cuts, analysts at Credit Suisse wrote in a note, adding that the measures were better than the brokerage’s estimates.

Marathon’s shares rose around 5% in premarket trading, as the company also posted a quarterly adjusted loss of 16 cents per share that was much smaller than analysts’ average estimate of 31 cents, according to Refinitiv IBES data.

Marathon forecast sharply lower refining throughput for the second quarter as it temporarily idled some facilities to save costs amid little demand for refined products.

The company expects second-quarter throughput, defined as the amount of crude oil processed by a refinery, to be around 2.13 million barrels of oil per day (bopd), down from 3.1 million bopd a year earlier.

Net loss attributable to the largest US oil refiner was USD9.2 billion, or USD14.25 per share, in the first quarter, as it booked USD12.4 billion in charges related to inventory writedowns and goodwill impairment.

Marathon’s rivals Valero Energy Corp and Phillips 66 reported losses for the first three months of the year as they also wrote down the value of their inventories and took one-time charges because of the oil crash.

As MRC wrote before, Marathon Petroleum Corp will idle its 166,000 barrel-per-day (bpd)refinery in Martinez, California beginning April 27 in response to the coronavirus pandemic’s hit to demand for refined products.

Meanwhile, Marathon Petroleum Corp plans to operate the gasoline-producing fluidic catalytic cracker (FCC) at its 585,000 barrel-per-day (bpd) Galveston Bay Refinery in Texas City, Texas. The 140,000 bpd FCC restarted on Sunday, 12 April, after repairs following a March 23 brief power outage that shut the unit.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

MOSCOW (MRC) -- U.S. crude oil stockpiles rose less than forecast and distillate inventories jumped but gasoline posted a drawdown for the second straight week, the Energy Information Administration said, said Hydrocarbonprocessing.

The rate of increases in crude inventories has slowed since a record build of 19 million barrels in early April as refining output has rebounded modestly due to a slight recovery in gasoline demand. However, builds are expected to continue as consumption remains under pressure due to coronavirus-induced lockdowns.

Crude inventories rose for the 15th straight week, rising by 4.6 million barrels in the week to May 1 to 532.2 million barrels. That exceeded analysts’ expectations in a Reuters poll for a 7.8 million-barrel rise. In the U.S. Gulf Coast refining and export hub, crude inventories rose 2.3 million barrels to a record high of 282.7 million barrels.

Distillate stockpiles, however, which include diesel and heating oil, surged, rising by 9.5 million barrels in the week to 151.5 million barrels, more than triple expectations for a 2.9 million-barrel rise, the EIA data showed. “That smallish crude oil build was certainly supportive but there are still problems facing the market,” said John Kilduff, a partner at Again Capital in New York. “That huge build in distillates shows that the impact from a lack of airline traffic and over-the-road truck traffic."

Diesel demand has not dropped as much as gasoline consumption because of farming and trucking use, but it is still 20% lower than the same time a year ago, the EIA said. Refiners have been producing more diesel, even mixing jet fuel back into processing.

The market for physical grades of crude had slumped in recent weeks as storage filled, but that growth has also slowed. Still, inventories at the Cushing, Oklahoma, delivery hub, rose for a ninth straight week, rising 2.1 million barrels last week to 65 million barrels, their highest in three years, the EIA said.

Oil prices fell after the report, with U.S. crude down 4.4% to $23.49 a barrel as of 10:48 a.m. ET (1448 GMT), while Brent was down 3.8% to USD29.78 a barrel. U.S. gasoline stocks fell by 3.2 million barrels in the week, the EIA said, compared with analysts’ expectations in a Reuters poll for a 43,000-barrel rise.

“Gasoline demand rose quite nicely last week and there’s some bright spots through this report,” said Tony Headrick, energy markets analyst at CHS Hedging. Refinery crude runs rose by 215,000 barrels per day in the last week, EIA said. Refinery utilization rates rose by 0.9 percentage points on the week to 70.5% of capacity.

Weekly U.S. crude production dropped by 200,000 bpd to 11.9 million bpd, its lowest rate since July 2019, the EIA said.

Ethylene and propylene are feedstocks for producing PE and 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) -- DSM's Materials division posted a drop in its first-quarter earnings after demand declined sharply due to the coronavirus pandemic, said the company.

Lockdowns enforced across China/Asia, Europe and North America have impacted the operations of several DSM customers and closures of retail operations significantly reduced demand.
- DSM estimates a 7% negative sales impact due to coronavirus effects on Materials in Q1.
- Volumes fell by 6% in the first quarter while prices were down 4%, fully reflecting lower input costs.

"Towards the end of the quarter, as China gradually lifted its lockdowns, local demand started to show initial signs of a slow recovery, especially in non-automotive applications," the company said.

"With lockdowns in place in the rest of the world, and especially in Europe and North America since mid-March, significant uncertainty persists over sales development going forward," it added.

"DSM expects Nutrition to deliver at least a mid-single digit increase in Adjusted EBITDA for 2020 compared to prior year, but given current limited visibility in Materials it feels prudent not to express an overall earnings outlook at this time," the company said.

DSM Engineering Plastics is launching bio-based grades of its Arnitel® and Stanyl® product portfolio manufactured via a mass-balancing approach of bio-based feedstock. The Stanyl bio-based grades are already available with the globally recognized sustainability certification ISCC Plus. Joost d’Hooghe, Vice President Polyamides at DSM Engineering Plastics said: “Our Arnitel and Stanyl bio-based alternatives will deliver the same functional performance as our conventional portfolio. This will enable our customers to easily shift to a more sustainable solution without having to requalify materials."

As MRC informed earlier, Royal DSM, a global science-based company in Nutrition, Health and Sustainable Living, announced the strengthening of its leadership in high-performance specialty polymers with the operational launch of a new production line for Arnitel in Emmen, the Netherlands.

Royal DSM is a global science-based company active in health, nutrition and materials. DSM delivers innovative solutions that nourish, protect and improve performance in global markets such as food and dietary supplements, personal care, feed, pharmaceuticals, medical devices, automotive, paints, electrical and electronics, life protection, alternative energy and bio-based materials.

MRC

MOSCOW (MRC) -- TechnipFMC provided the proprietary technology and process design for part of ZheJiang Petroleum & Chemical Co., Ltd.’s(1) (ZPC’s) successful startup of its mega 1,400 KTA(2) ethylene plant in Zhoushan City, Zhejiang Province, China, said Hydrocarbonprocessing.

The startup took only about three days to complete. The liquids ethylene cracker is part of ZPC’s grassroots integrated refining and petrochemical complex which broke ground in 2016.

In addition to the ethylene cracker technology, TechnipFMC provided key proprietary technology components including a Heat Integrated Rectifier System, Ripple Trays and Wet Air Oxidation process. TechnipFMC’s Ultra Selective Conversion (USC®) U-coil ethylene technology is preferred for its high energy efficiency and high yields.

Stan Knez, President of TechnipFMC Process Technology, commented: “We are very pleased with the successful startup of the ZPC cracker. This is a great milestone for the complex and another example of our proven ethylene technology”.

Ethylene and propylene are feedstocks for producing PE and 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.

ZPC: Zhejiang Petroleum & Chemical Co., Ltd, established in Zhoushan, Zhejiang on June 18, 2015, is a mixed-ownership enterprise jointly formed by the private enterprise Rongsheng Petrochemical Co., Ltd. ( holding 51% of shares ), provincial state-owned enterprise Zhejiang Juhua Investment Co., Ltd. ( holding 20% of shares ) , the private enterprises Zhejiang Tongkun Investment Co., Ltd. ( holding 20% of shares ) and Zhoushan Marine Comprehensive Development and Investment Co., Ltd.(holding 9% of shares), which will be the first kind of mixing economy enterprise in China in the Refinery and Petrochemical Industry. ZPC’s first phase project includes 20 million tons per year refinery and 1400 KTA Ethylene Complex.
MRC

MOSCOW (MRC) -- Shandong Yangmei Hengtong Chemical, has restarted its methanol-to-olefins (MTO) plant following a maintenance turnaround, according to Apic-online.

A Polymerupdate source in China informed that, the company resumed operations at the plant on May 5, 2020. The plant remained under maintenance for about one month.

Located in Shandong province, China, the MTO plant has an ethylene production capacity of 120,000 mt/year and propylene capacity of 180,000 mt/year.

We remind that, as MRC reported earlier, on April 20, 2020, the first phase of Connell Chemical Industry Ltd.'s 600 KTA MTO complex, a 300 KTA MTO plant, successfully started up and produced on-spec ethylene and propylene. This project is the first large-size chemical project brought online during period when Chinais in the process of restarting the economy while fighting COVID-19 pandemic. The MTO plant started feed-in at 8:18 AM on April 15, produced on-spec propylene at 7:00 AM on April 18, and produced on-spec ethylene at 4:00 AM on April 20.

Ethylene and propylene are feedstocks for producing 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