Oil at highest since March on lower US inventories

MOSCOW (MRC) -- Oil prices rose to their highest since March, supported by lower U.S. crude inventories, OPEC-led supply cuts and recovering demand as governments ease restrictions on people’s movements imposed due to the coronavirus crisis, reported Reuters.

Crude prices have slumped in 2020, with global benchmark Brent hitting a 21-year low below USD16 a barrel in April as demand collapsed. With fuel use rising and more signs that the supply glut is being tackled, Brent has since more than doubled.

Brent crude for July rose USD1.17, or 3.3%, to USD36.92 per barrel by 1340 GMT. U.S. West Texas Intermediate crude climbed 96 cents, or 2.9%, to USD34.45. Both benchmarks are at their highest since March 11.

“Global supply has been curtailed to a great degree,” said Rystad Energy analyst Paola Rodriguez Masiu. “We are on a clear path to a gradual recovery now.”

In the latest sign the supply glut is easing, U.S. crude inventories fell by 5 million barrels last week. Analysts had expected an increase.

At the same time, there is evidence of recovering fuel use. British airline easyJet plans to restart some flights on June 15, pointing to higher jet fuel demand.

Physical crude markets, at historic lows just weeks ago, are also rising.

“It is now abundantly clear that the market is tightening and crude prices are rebounding as demand returns,” said analysts at JBC Energy.

The Organization of the Petroleum Exporting Countries, Russia and other allies, known as OPEC+, agreed to cut supply by a record 9.7 million barrels per day (bpd) from May 1 to support the market.

So far in May, OPEC+ has cut oil exports by about 6 million bpd, according to companies that track the flows, suggesting a strong start in complying with the deal. OPEC says the market has responded well.

As MRC informed previously, 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

Idemitsu sees Japanese oil products demand down 20% April-June

MOSCOW (MRC) -- Japanese oil refiner Idemitsu Kosan expects Japan’s demand for oil products to fall by about 20% in the April-June quarter from a year earlier as measures to curb the coronavirus pandemic reduce jet fuel and gasoline use, reported Hydrocarbonprocessing with reference to its chairman's statement.

“Overall demand for oil products in Japan is now seen dropping about 20% in April-June, bigger than our earlier estimate of about a 14% decline, with jet fuel demand plunging more than 50%,” Takashi Tsukioka, chairman of Idemitsu, told a news conference.

Global fuel demand is set to drop by as much as 15% to 20% in the April-June quarter after the coronavirus pandemic, which has killed more than 143,700 people, halted most air travel and prompted national lockdowns across the globe to keep people at home.

Idemitsu estimates gasoline demand will fall by about 20% in Japan and diesel demand will dip 10% for the quarter, Tsukioka said.

To reflect slumping demand, Japanese refiners are cutting run rates, said Tsukioka, who is also the president of the Petroleum Association of Japan (PAJ).

“For Japanese refiners, 70% is the minimum run rate to keep stable operation. So if a refiner needs to cut a utilisation rate to below 75%, it may need to shut the facility,” he said.

But given large amounts of maintenance planned this quarter, Japanese refiners could cope with weaker demand by just lowering run rates, he said.

Asked whether Japanese refiners would reduce crude purchases going forward, Tsukioka said they were likely to take full contractual volumes for April and May, while cutting spot purchases.

“But it’s possible that Japanese refiners would not take full contractual volume from June loading as they are running out of storage capacity,” he said.

“Each refiner will send a nomination to oil producers next month for June loading to reflect its sales and storage capacity,” he said.

Tsukioka also said global oil producers would probably be forced to decrease output on top of the reduction agreed to on Sunday by the Organization of the Petroleum Exporting Countries and its allies, as the fall in global oil demand is greater than their output cut.

As MRC wrote previously, Idemitsu Kosan shut its naphtha cracker for a maintenance turnaround in Chiba from 9 April 2019 to end-May 2019.

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.

Idemitsu Kosan is a Japanese petroleum company. It owns and operates oil platforms, refineries and produces and sells petroleum, oils and petrochemical products. The company runs two petrochemical plants in Chiba and Tokuyama. The two naphtha crackers can produce up to 997,000 tonnes of ethylene per year.
MRC

Refiners pin hopes on gasoline for post-lockdown demand recovery

MOSCOW (MRC) -- Global oil refiners, battling weak profit margins, are pinning their hopes on a recovery in gasoline demand as coronavirus lockdowns start to ease in many countries around the world, reported Reuters.

Gasoline was one of fuels the hardest hit by the lockdowns as restrictions on mobility cut demand for the motor fuel by more than 50% in several regions.

“Even a slight uptick in gasoline demand will provide support to overall margins,” a source at a trading firm said.

In Asia, gasoline profit margins GL92-SIN-CRK turned positive on Tuesday for the first time in nearly two months as demand started to pick up.

European margins remain negative, but traders said they expect a recovery as more refineries shut down units to deal with a glut of diesel.

“In terms of demand recovery, gasoline demand will improve first, followed by diesel and jet fuel,” said Lee Dal-seok, senior research fellow at the Korea Energy Economics Institute.

In Britain, fuel demand rose in the past couple of weeks, the Petroleum Retailers Association said after the government eased some restrictions. The Association also said the recovery in gasoline was outpacing diesel as motorists hit the road while avoiding public transport.

The recovery in gasoline contrasts with a weaker outlook for diesel where slow demand and oversupply are still hurting refining margins.

“The upside on distillates after an exit from lockdown is much smaller than for gasoline,” a distillates trader said. Although he said demand for distillates from agriculture and manufacturing had remained buoyant during the lockdown.

U.S. margins to refine crude into distillates have fallen to USD10.45 a barrel, the lowest since at least 2009.

Meanwhile, U.S. gasoline stocks have fallen for three consecutive weeks to 252.9 million barrels, according to data from the Energy Information Administration. Analysts expect U.S. gasoline stocks to fall for a fourth week.

As MRC informed before, Valero's 180K bbl/day Memphis, Tenn., refinery along the Mississippi River is operating at 60%-65% of capacity after gradual rate increases in recent weeks. Rates at the Memphis refinery were reduced as low as 50% last month as demand slumped in the wake of the spread of the coronavirus.

We also remind that Valero Energy Corp restarted the small CDU at its Port Arthur refinery after repairing a valve on 25 September 2019. And in late October 2019, Valero Energy Corp shut the small crude distillation unit (CDU) at its Port Arthur refinery. The 75,000-bpd AVU 147 CDU was shut to repair a heat exchanger.

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

BASF to deliver more propylene for refiners using new FCC additive

MOSCOW (MRC) -- BASF announced the commercial launch of ZEAL which is a new Fluid Catalytic Cracking (FCC) additive product designed to enhance the production of light olefins in FCC units that process resid or gasoil feedstocks, said Hydrocarbomprocessing.

ZEAL is the latest product development that will enable refiners to quickly respond to the increasing shift to petrochemical feedstocks. ZEAL has been optimized to deliver superior propylene yields while maintaining the base catalyst performance.

ZEAL commercial trials have confirmed its ability to deliver high propylene selectivity and yields. This innovative technology from BASF enhances performance through the higher content of zeolitic active sites in a new propylene FCC additive. Successful applications have demonstrated ZEAL’s ability to provide operating flexibility as refiners increasingly shift toward a crude-to-chemicals configuration in the future.

Detlef Ruff, Senior Vice President Process Catalysts at BASF, says: “The introduction of ZEAL shows that we continuously innovate and introduce new products that address refineries’ needs. We are confident that the benefits of this new product will bring our customers improvements in propylene yields, potentially contributing to the refineries’ profitability.”

“The refining market, and our customers, increasingly focus on the need to support conversion of crude to chemicals,” says Jim Chirumbole, Vice President Refining Catalysts at BASF. “ZEAL delivers high propylene yields to help our customers make more for the market.”

As MRC reported earlier, BASF has restarted its No. 1 steam cracker following a maintenance turnaorund. Thus, the company resumed operations at the plant on September 30, 2019. The plant was shut for maintenance in mid-August, 2019. Located at Ludwigshafen in Germany, the No. 1 cracker has an ethylene production capacity of 235,000 mt/year and a propylene production capacity of 125,000 mt/year.

Ethylene and propylene are feedstocks for producing 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.

BASF is the leading chemical company. It produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases, basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries. BASF generated sales of EUR59 billion in 2019.
MRC

Hypower to use Honeywell UOP hydrogen technology for clean fuel cells

MOSCOW (MRC) -- Honeywell announced that Beijing HyPower Energy Technology Ltd., a leading hydrogen energy technology provider in China, will adopt Honeywell UOP technologies to supply high-purity hydrogen for fuel cells, said Hydrocarbonprocessing.

HyPower agreed to adopt a range of Honeywell UOP solutions including Polybed™ pressure swing adsorption (PSA), thermal swing adsorption (TSA) and other adsorption-based technologies to purify hydrogen fed into fuel cells. Honeywell UOP will provide services, equipment, and adsorbents needed for fuel cell projects.

“As a leader in supporting the hydrogen energy economy across China, we are proud to work with Honeywell UOP, a leading provider of hydrogen technologies all over the world to meet the growing demand for hydrogen fuels,” said Zhiwei Zha, chairman of HyPower. “China is promoting hydrogen energy use in public transportation, as well as logistics vehicles.”

“UOP’s hydrogen purification technologies can further enhance operational reliability by providing a stable source of high-purity hydrogen,” said Bryan Glover, vice president and general manager, Honeywell UOP Process Technologies. “We are happy to work with our customers to achieve the vision of a cleaner and more efficient world.”

Unlike fossil fuels, such as petrol and diesel, hydrogen is a clean fuel that, when consumed in a fuel cell, produces only water, electricity, and heat. With hydrogen energy growing in importance, and concerns about global warming, automobile manufacturers worldwide have invested in developing hydrogen fuel cells to power vehicles and generate electricity.

Chinese government first included the development of hydrogen stations for new energy vehicles in the Government Work Report in 2019. Other energy-intensive economies such as Germany, Japan and South Korea also share a common vision about hydrogen as an energy source.

Honeywell UOP hydrogen purification solutions provide targeted hydrogen recovery and high product purity levels. Hydrogen can be produced on purpose or can be a valuable by-product.

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 ScanPlast report, Russia's ABS output was 920 tonnes in March. Russian producers manufactured 2,600 tonnes of ABS plastics in January-March 2020, down by 59% a year earlier.
MRC