Crude oil futures dip as doubt lingers around OPEC+ talks

MOSCOW (MRC) -- Crude oil futures were trading lower in mid-morning trade in Asia on June 4 as uncertainty crept up on the market amid reports that OPEC+ talks were bogged down over quota compliance, said S&P Global.

At 10:24 am Singapore time, ICE Brent August crude futures was 47 cents/b (1.18%) lower from the settle on June 3 at USD39.32/b, while the NYMEX July light sweet crude contract was 69 cents/b (2.1%) lower at USD36.60/b.

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

Saudi Arabia is insisting on firm commitments from other members to stick to their production quotas, according to multiple sources involved in the discussions, Platts reported previously.

Those who have violated their quota caps are being pressured to slash output by the volume exceeded in the coming months to compensate for this, the sources told Platts.

"Saudi Arabia and Russia are demanding that fellow members stop cheating on quotas before any agreement is reached," ANZ analysts said in a note June 4. "This has taken an early OPEC+ alliance meeting off the table, with the originally scheduled one for June 9-10 also at risk," the analysts added.

The recent price rally has also raised concerns over whether shale production will rebound. "The main problem for OPEC+ is not so much compliance from small producers, rather its the potential for shale production to rebound," AxiCorp's chief global markets strategist Stephen Innes said in a note June 4.

"The sharper price recovery has raised some concerns among OPEC+ producers that highly price-agile US producers will turn on the taps quickly and eat into OPEC+ share of the pie," Innes added.

Meanwhile, US commercial crude stocks fell 2.08 million barrels to 532.35 million barrels during the week ended May 29, US EIA data released June 3 showed.

Nonetheless, this was offset by indications of still tepid demand, analysts said. Total product supplied -- a proxy for refined product demand -- fell 890,000 b/d to 15.07 million b/d during the period, the EIA data showed.

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.

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Braskem new Texas PP plant nearly complete

MOSCOW (MRC) -- Brazilian petrochemical producer Braskem's 450,000 mt/year polypropylene (PP) plant under construction along the Houston Ship Channel is nearly complete, reported S&P Global with reference to Chief Financial Officer Pedro van Langendonck Teixeira de Freitas.

The company said construction was 98.4% complete by the end of the first quarter of 2020, with $634 million spent. Braskem's US arm, Braskem America, imported 8,000 mt of PP from the parent company's Brazilian operations in Q1 to continue the new facility's pre-marketing activities.

"It's pretty much done," Freitas said during Braskem's Q1 2020 earnings call on June 3. Braskem had expected the plant to start up in July, but has since widened that target to encompass the entire third quarter. He said it could take longer than planned to get people to the new plant to certify systems and oversee commissioning amid coronavirus pandemic-related restrictions on air travel and other movement.

"There is still some uncertainty out there because of COVID and people traveling to the plant to do some of the tasks," Freitas said.

On June 1, Braskem announced it would establish a PP export hub in Charleston, South Carolina, with packaging and warehouse provider Frontier Logistics, that is set to open in Q3 of this year as well.

Braskem operates five other US PP plants in Texas, Pennsylvania and West Virginia with a cumulative capacity of 1.57 million mt/year that the company acquired. The new plant in La Porte, Texas, is Braskem America's first PP newbuild.

As MRC wrote before, Brazilian petrochemical firm Braskem SA reported on Wednesday a net loss of USD777 million in the first quarter compared with a profit of USD243 million a year ago, as foreign exchange oscillations led to higher financial expenses. The company said financial expenses grew to USD1.332 billion in the quarter ended March 31 from USD243 million a year ago, given the depreciation of the Brazilian real and the Mexican peso against the US dollar.

According to MRC's ScanPlast report, 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.

Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm. Petrobras' activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks as well as refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.
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PTTGC shut HDPE plant in Thailnd for maintenance

MOSCOW (MRC) -- State-owned PTT Global Chemical Public Co Ltd (PTTGC) has shut its one of HDPE units for a planned maintenance since 25 May 2020, reported CommoPlast with reference to market sources.

Based in Map Ta Phut, Thailand, the HDPE plant is having a production capacity of 300,000 tons/year.

The HDPE plant is expected to remain offstream until 9 June 2020.

Meanwhile the other 200,000 tons/year HDPE plant is still operating.

In addition, the company is planning to shut one of its linear low density polyethylene (LLDPE) unit with production capacity of 400,000 tons/year in July for 20 days and 300,000 tons/year low density polyethylene (LDPE) plant in September for 24 days.

As MRC informed before, PTT Global Chemical Public Co Ltd resumed operation at its LDPE units by 17 March 2020 following an emergency shutdown during mid of February 2020. The unit is designed to produce 400,000 tons/year and had been shut longer than expected, which players attributed to the draught issue in Thailand.

According to MRC's ScanPlast report, April estimated HDPE consumption in Russia fell to 69,130 tonnes from 78,220 tonnes a month earlier. ZapSibNeftekhim significantly increased its export sales to China. Overall HDPE imports to the Russian market totalled 377,450 tonnes in the first four months of 2020, which corresponds to the last year's figure. Production increased significantly, and exports also grew by 5 times.

PTT Global Chemical is a leading player in the petrochemical industry and owns several petrochemical facilities with a combined capacity of 8.45 million tonnes a year.
MRC

N. America weekly chemical rail traffic holds steady

MOSCOW (MRC) -- Chemical railcar traffic in North America showed some firming last week. Volume remained significantly down year-over-year (YOY), but the deficit did not deepen, said Chemweek.

On a four-week basis, volume declined 12% from 2019 and 11.3% from 2018 (chart), improving slightly from the 12.8% and 11.8% declines of the previous week.

Railcar loadings totaled 39,854 carloads during the week ended 30 May, down 1.9% from the previous week and down 10.5% YOY, according to data released on 3 June by the Association of American Railroads (AAR).

For the year to date, chemical railcar traffic in North America is down 3.4% from 2019 and down 4.3% from 2018.

Chemical railcar traffic in the US contributed 26,714 carloads to the weekly total, down 15.2% YOY and down 6.4% from the previous week. For the year to date, US chemical railcar traffic is down 3.5%.

Canadian chemical rail traffic totaled 12,299 carloads, up 2.0% YOY and up 10.4% from the previous week. For the year to date, Canadian chemical railcar traffic is down 3.1%.

Chemical railcar traffic in Mexico totaled 841 carloads, a YOY decrease of 12.2% and a sequential decrease of 11.2%. For the year to date, Mexican chemical railcar traffic is down 4.3%.

As MRC informed earlier, Russia's output of products from polymers grew in April 2020 by 11.2% year on year due to quarantine restrictions. However, this figure increased by 3.4% year on year in the first four months of 2020. According to the Russian Federal State Statistics Service, April production of unreinforced and non-combined films decreased to 107,000 tonnes from 110,400 tonnes a month earlier. Output of films products grew in the first four months of 2020 by 12.5% year on year to 402,800 tonnes.
MRC

Sinopec to build new LNG terminal in Zhoushan

MOSCOW (MRC) -- China Petroleum & Chemical Corporation (Sinopec) has inked a deal to build a new LNG terminal in Zhoushan, reported OffshoreENERGY.

The company has signed a deal with the Zhejiang provincial government worth USD2.8 billion to develop a 15 mtpa import terminal.

According to a Reuters report citing a government notice, the facility will include four LNG storage tanks with 220,000 cubic meter capacity. It will be the third import facility in Zhoushan.

It will include two wharfs, ancillary facilities and have a 7 mtpa capacity once the first development phase is complete.

Construction is planned to start during the first half of the next year. Operations are planned to start in 2024.

As MRC informed earlier, Sinopec Corp is expected to start commercial operations at its oil refining and petrochemical complex in Zhanjiang at the end of July. The refinery is capable of processing 200,000 barrels per day (bpd) of crude oil and the petrochemical plant will produce 800,000 tonnes per year of ethylene. The project, with first phase investment of 40 billion yuan ($5.59 billion), is located in southern China’s Guangdong province. The refinery received its first crude oil cargo of 128,900 tonnes from a very large crude carrier (VLCC) that arrived at the plant’s 300,000-tonne capacity berth in early May, Sinopec said on May 9.

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.

China Petrochemical Corporation (Sinopec Group) is a super-large petroleum and petrochemical enterprise group established in July 1998 on the basis of the former China Petrochemical Corporation. Sinopec Group"s key business activities include the exploration and production of oil and natural gas, petrochemicals and other chemical products, oil refining.
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