Low-sulfur gasoil deliveries for May rise at expiry

MOSCOW (MRC) -- Deliveries of low-sulfur gasoil for May rose to 3,645 lots, or 364,500 tonnes, according to Hydrocarbonprocessing with reference to InterContinental Exchange data showed on Tuesday.

The contract expired at USD244.25 a tonne, down from USD295 at the April expiry, when deliveries reached 1,857 lots.

As MRC informed before, Asian gasoil markets will continue to face headwinds over the next few months even as refineries cut processing rates further and economies gradually start picking up as the coronavirus pandemic becomes contained.

We remaind that India’s state oil refiners have reduced crude processing as local fuel demand has tumbled due to lockdowns in much of the country that are aimed at halting the spread of coronavirus.

We also remind that state-owned Bharat Petroleum Corporation Ltd (BPCL) will invest about Rs25,000 crore to set up an ethylene cracker plant at Rasayani, 50 kilometres from its Mumbai refinery, as the firm pushes further into the petrochemicals business to fuel growth.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, 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

Oil holds near USD30, caught between demand loss and supply cuts

MOSCOW (MRC) -- Oil prices edged higher on Wednesday, reversing earlier losses, and Brent held near $30 a barrel as potential OPEC+ plans to deepen supply cuts were tempered by demand concerns exacerbated by a possible second wave of coronavirus infections as countries ease lockdowns, reported Reuters.

Brent crude was flat at USD29.98 a barrel by 1332 GMT, after hitting a low of USD28.92 a barrel earlier.

West Texas Intermediate crude futures rose 5 cents, or 0.19%, to USD25.83 after falling to USD25.07 a barrel.

“Fears are running rife that easing lockdown measures will trigger a second wave of coronavirus infections,” said Stephen Brennoc at oil brokerage PVM.

U.S. infectious disease expert Anthony Fauci on Tuesday told Congress that easing coronavirus lockdowns could set off new outbreaks of the COVID-19 disease that has killed 80,000 Americans and badly damaged the world’s biggest economy and oil consumer.

New outbreaks have been reported in South Korea and China, where the health crisis started before spreading across the globe, prompting governments to lock down billions of people, devastating economies and demand for oil.

The U.S. Energy Information Administration (EIA) now expects world oil demand to fall by 8.1 million barrels per day (bpd) this year to 92.6 million bpd, compared with a previous forecast for a drop of 5.2 million bpd.

The agency also expects U.S. output to fall by 540,000 bpd, against a previous forecast of 470,000 bpd. It expects global output of 11.7 million bpd this year and 10.9 million bpd in 2021.

The Organization of the Petroleum Exporting Countries also slashed its world oil demand forecast and now expects it to contract by 9.07 million bpd this year, it said in a monthly report. Last month, OPEC expected a contraction of 6.85 million bpd.

On the supply side, OPEC+ is looking to maintain existing cuts beyond June, when it meets next in Vienna, sources told Reuters.

OPEC and other producers including Russia - a group known as OPEC+ - agreed to cut output by 9.7 million bpd in May and June and to scale back cuts to 7.7 million bpd for the rest of the year.

Saudi Arabia’s cabinet has urged OPEC+ countries to reduce output further to restore balance in global crude markets, the country’s state news agency reported early on Wednesday.

Riyadh said it would add to planned cuts by reducing production by a further 1 million bpd next month, bringing output down to 7.5 million bpd.

“Suffice to say, the tug-of-war between OPEC-led cuts and virus anxieties will limit upside price potential,” PVM’s Brennoc said.

In the United States, crude oil inventories rose by 7.6 million barrels last week to 526.2 million barrels, against analyst expectations for an increase of 4.1 million barrels, the American Petroleum Institute (API) said on Tuesday.

Still, stocks of crude at the Cushing delivery hub in Oklahoma fell by 2.3 million barrels, API said. If confirmed by official data, that would be the first drawdown since February, ING Economics said.

“Concerns over hitting storage capacity have eased, as we see demand gradually recovering, along with supply cuts hitting the market,” ING said in a note, pointing to the decline in Cushing stocks.

As MRC wrote before, 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.

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 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 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, 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

Antidumping probe will hurt chemical imports to India, GPCA warns

MOSCOW (MRC) -- Gulf Cooperation Council (GCC) mono ethylene glycol (MEG) imports into India may be severely hurt as a result of an ongoing anti-dumping investigation targeting imports from Oman, Saudi Arabia, Kuwait & UAE, reproted Kemicalinfo with reference to the Gulf Petrochemicals and Chemicals Association (GPCA).

According to GPCA analysis, the inconsistent investigative practices by Indian authorities on anti-dumping regulations raise serious concerns under World Trade Organization (WTO) rules and threaten to severely hurt GCC economies, jeopardising USD543 million worth of mono ethylene glycol (MEG) imports, which is equivalent to 20% of total chemical imports from the region into India.

India is the second largest importer of GCC chemicals and accounts for over a third of total GCC export volume together with China.

On April 6, 2020, Indian authorities terminated the investigation for the sole imports from Saudi Arabia, and continued the investigation into imports from Kuwait, Oman and the United Arab Emirates. This partial termination of the investigation is inconsistent with Indian anti-dumping rules, said the group.

“GPCA is therefore urging the fair treatment of GCC MEG producers and calling upon Indian authorities to terminate the partial investigation into MEG imports from the remaining GCC states, in order to restore a level playing field for all producers and allow for the continuation of exports of MEG from the GCC to India in the future,” it said in a press statement.

MEG is an essential raw material for the production of various end user products ranging from clothing and other textiles, through packaging to kitchenware, engine coolants and antifreeze. Polyester and fleece fabrics, upholstery, carpets and pillows, as well as light and sturdy PET drink and food containers originate from ethylene glycol.

Dr Abdulwahab al Sadoun, Secretary General, GPCA, commented, “As the regional body for the Arabian Gulf chemical industry, GPCA calls for the immediate termination of the partial anti-dumping investigation into regional MEG imports into India. This detrimental and ill-advised measure is having a harmful impact not just on GCC economies but also on bilateral trade, threatening to disrupt India’s domestic market and damage long-standing friendly relations between the nations.”

Last December, India’s Reliance Industries in its application to the government said the MEG export prices of the five countries were lower than their domestic prices. Oil- and gas-rich ethylene producers Kuwait, Oman, Saudi Arabia and UAE get feedstock at discounted prices. It later sought termination of investigation against Saudi Arabia.

MEG is one of the main feedstocks for the production of polyethylene terephthalate (PET).

As per MRC's ScanPlast report, Russia's estimated PET consumption decreased to about 53,890 tonnes in February 2020, down by 3% year on year. 100,830 tonnes of PET chips were processed in Russia in the first two months of 2020. February PET production in Russia dropped to 45,800 tonnes, down by 5% year on year. Russia's overall PET production fell in January-February 2020 by 13% year on year.
MRC

Sibur earnings, revenue down on currency effects, lower margins

MOSCOW (MRC) -- Sibur (Moscow), Russia’s largest petrochemicals producer, today announced its financial and operational results covering the first quarter, said the company.

The company reported a loss of 52.281 billion Russian ruble (USD704.1 million) compared with a profit of RR46.02 billion in the year-earlier quarter. It attributes the loss to currency effects. Adjusted EBITDA was down 16.5% to RR39.823 billion due to lower margins for most product groups. EBITDA margin slipped from 33.7% in the first quarter of 2019 to 31.0% in the latest quarter but remains consistently high against the industry average.

Revenue declined 7.8% to RR120.67 billion due to negative pricing dynamics in ruble terms in the midstream and the plastics, elastomers, and intermediates segments. This was partially offset by revenue growth of 30.4% year on year (YOY) in the olefins and polyolefins segment, driven by higher sales of polypropylene (PP) and polyethylene (PE).

The company has completed the start-up and commissioning work at key production facilities at ZapSibNeftekhim (ZapSib), its flagship petrochemical complex at Tobolsk. ZapSib in the first quarter of 2020 produced 115,000 metric tons of PP and 259,000 metric tons of PE, part of which is en route to clients and was not reflected in the sales volumes for the reporting period. Sales of PP grew by 87.3% to 243,000 metric tons and of PE by more than 100% to 132,000 metric tons. In January 2020, Sibur completed construction of its new thermoplastic elastomers production facility at Voronezh and launched trial production.

In its update on the next large investment project, the Amur gas chemical project at Blagoveshchensk on the Chinese border, Sibur says that Sinopec received all the necessary corporate approvals to enter into a joint venture for the project with Sibur. The company also has more clarity about the regulatory regime for the recoverable excise duty on ethane and liquefied petroleum gas (LPG) for all petrochemical projects in Russia. The Ministry of Finance has finalized and just submitted draft amendments to the Russian Tax Code for the parliament's approval. The two developments could pave the way for the project to proceed. All the technologies have now been selected and engineering companies appointed.

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

Global refining activity slump extends into May as glut builds

MOSCOW (MRC) -- The sharp decline in global refining activity has continued in May, the International Energy Agency said in its monthly oil market report, as refiners face the double whammy of rising crude prices and falling diesel profits, said Hydrocarbonprocessing.

The agency now sees global crude refining throughput at 66.2 million barrels-per-day, unchanged from April, and more than 14 million bpd lower from a year ago. Gradual recovery could start appearing in June, it added.

“If crude supply adjusts more quickly to the oversupply than forecast, this will support crude prices and depress refinery margins, resulting in lower refining throughput than anticipated,” the IEA said in its monthly oil market report.

“On the other hand, a quicker demand recovery could boost margins and accelerate a recovery in refining activity,” it added. Oil demand in April slumped by around 25%, or more than 25 million bpd, IEA figures showed, in reaction to global lockdowns to stem the spread of the new coronavirus.

While the easing of some lockdown restrictions in places like the United States, China and Europe this month is expected to boost demand for oil products, refiners are still facing big headwinds and more are shutting down until margins improve.

Refiners across the globe have been curbing output in recent months in the face of falling demand and filling storage tanks, but until recently they had some incentive to continue running. As the price war between key producers like Saudi Arabia and Russia hit its peak in April, physical crude grades were trading at historic lows, a boon for refiners, which coupled with healthy diesel margins, allowed many to keep running.

But in recent weeks the physical crude market has bounced back, adding pressure on refiners. “Crude market strength is exerting more and more pressure on refining economics, with our assessed global weighted average margin having fallen solidly into negative territory for the first time since Q2-2014,” JBC Energy said.

While diesel margins in Europe LGOc1-LCOc1 traded in double digits throughout April, in the past week they have slumped to their lowest since mid-2009 below USD5 a barrel. Refiners in Europe are already feeling the pain.

Spain’s Petronor is the latest to announce economic run cuts, saying it had shut one of its crude units from May 9 at its 220,000 bpd Bilbao oil refinery due to slow demand and storage saturation.

A middle distillate trader said they already see tightening high-sulphur gasoil in the Mediterranean region, and offers of jet fuel were falling. “These are signs of run cuts,” he 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