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OPEC+ reaches tentative deal on one-month extension to 9.7 mil b/d oil cuts: sources

June 05/2020

MOSCOW (MRC) --  OPEC and its allies have coalesced around a one-month extension to their 9.7 million b/d collective production cuts beyond June, with key members Saudi Arabia and Russia aligned, though the date of a meeting to finalize a decision remains in flux, reported S&P Global with reference to people involved in the talks.

OPEC kingpin Saudi Arabia is insisting on firm commitments from other members to stick to their production quotas, and those who have violated their caps are being pressured to overcomply in the coming months to make up for their excess barrels, OPEC+ sources told S&P Global Platts.

The OPEC+ alliance had floated moving forward the meeting to June 4 from its previously scheduled June 9-10, but no announcement has been made as the compliance discussions continue.

"Hopefully the [earlier] meeting will happen, but it's not yet decided," a source said.

Without an extension, the 9.7 million b/d in cuts are scheduled to roll back to 7.7 million b/d starting July 1 through the end of 2020.

Oil prices have rebounded -- with front-month ICE Brent futures rising above USD40/b in early trading June 3 -- but are still far below desirable levels for many OPEC+ members, and with the global economy only just starting to recover, many members have pushed to maintain the deeper cuts.

Under the proposed one-month extension, OPEC+ ministers would meet monthly to review compliance and market conditions, the sources said.

Several of the six secondary sources used by OPEC to monitor output, including S&P Global Platts, have yet to report their May production figures.

But preliminary production and export data released by some countries have indicated uneven compliance so far, with Russia exceeding its cap by 100,000 b/d and Iraq reporting exports that nearly match its production quota.

Saudi Arabia itself, along with Gulf allies the UAE and Kuwait, have pledged additional cuts below their quotas for June, though it was unclear whether the countries would continue their overcompliance in an extension.

As MRC informed previously, global oil consumption cut by up to a third in Q1 2020. 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 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim.  At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.
Author:Margaret Volkova
Tags:Europe, PP, PE, LLDPE, crude and gaz condensate, PP random copolymer, propylene, LDPE, ethylene, petrochemistry, BASF, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals, Kuwait, United Arab Emirates (UAE), Rossiya, Saudi Arabia, USA.
Category:General News
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