U.S. crude stocks bloated by aftermath of volume war

MOSCOW (MRC) -- U.S. petroleum inventories climbed again last week to a record 2.1 billion barrels, mostly as a result of rapid crude imports, with an unusually large volume again arriving from Saudi Arabia, said Hydrocarbonprocessing.

Once the extra tankers loaded at the height of the Saudi-Russian volume war have finished discharging, which should be within the next week or two, U.S. crude stocks should stabilize.

Total stocks of crude and refined products increased by almost 12 million barrels in the week to June 5, and are up by a total of 197 million barrels over the last 12 weeks.

Crude accounted for two-thirds of last week’s rise, with 6 million barrels put into commercial storage and another 2 million added temporarily to the strategic petroleum reserve.

But the flow of crude into inventory each week has decelerated by roughly half compared with the peak, when the lockdown was most intense in April.

Crude imports remained unusually elevated at 7 million barrels per day (bpd), which was in the 75th percentile for all weeks over the past year.

Much of the brisk importing is being sustained by an unusually heavy flow of crude loaded in Saudi Arabia.

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 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.
MRC

MOSCOW (MRC) -- Iraq, OPEC's second-largest oil producer, expects to export 2.8 million b/d of crude oil in June as it seeks to firmly commit to the OPEC+ cuts after it failed to comply with its quota in May, the country's oil minister Ihsan Ismaael told al-Sharqiya TV on June 14, said S&P Global.

The country also plans to reduce domestic crude consumption by switching to gas as feedstock to produce electricity, Ihsan Ismaael told the private TV network.

Ismaael reiterated Iraq's commitment to the OPEC+ production cuts, although the country had flouted its quota in the past.

"It is in our interest to commit as OPEC's second largest producer," Ismaael said. "Non-commitment is a slippery slope." Iraq pumped 4.213 million b/d of crude oil in May, above its OPEC+ quota of 3.592 million b/d and exported 3.63 million b/d, oil marketer SOMO said on June 7.

OPEC and its allies, including Russia, agreed on June 6 to roll over their 9.6 million b/d in collective production cuts through July, to help bolster the market as it emerges from the depths of the COVID-19 pandemic.

Under the deal, Angola, Iraq, Kazakhstan and Nigeria committed to compensate for their lack of compliance in May with extra cuts below their quotas in July, August and September.

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 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.

MRC

MOSCOW (MRC) -- PPG Industries announced a plan to cut about USD160-170 million/year in costs in an effort to reduce the company’s cost structure due to the impact of the COVID-19 pandemic. The plan includes staffing reductions, under a “voluntary separation program,” in the US and Canada, PPG says.

“These measures will enable the company to come out of the crisis with lower structural costs,” says PPG chairman and CEO Michael McGarry. “Despite efforts to reduce our total costs, we remain committed to continuing our investments in growth-related initiatives, including fully funding our research and development for products, services and digital capabilities that will drive long-term growth."

PPG will record a pre-tax restructuring charge of USD160-180 million, or 52-58 cents/share, in connection with the cost-cutting program. An additional USD10 million in restructuring costs is likely over future quarters. The second-quarter costs are mostly related to employee severance, although the precise number of job cuts the program entails was not disclosed.

PPG also noted that “the aggregate impact [of COVID-19] and pace of recovery is consistent with the company’s expectations. This includes strong demand for architectural do-it-for-yourself coatings, aerospace applications for military programs, and packaging coatings, but which has been more than offset by soft demand for commercial aerospace, automotive OEM, automotive refinish, architectural do-it-for-me and certain general industrial coatings end uses."

Volumes were down by about 35% year-on-year (YOY) in April, and down by about 30% YOY in May, according to PPG. There was YOY volume improvement in China through the spring, and volumes grew in the US and Europe sequentially from April to May, with further sequential increases expected in June.

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

MOSCOW (MRC) -- BASF said that construction of its previously announced battery materials plants in Europe is advancing as planned, said Chemweek.

After the casting of the foundation for its precursor cathode active material (PCAM) plant at Harjavalta, Finland, BASF has officially started construction. In addition, BASF has secured the construction permits to begin building the new cathode active material (CAM) plant at Schwarzheide, Germany. Despite the ongoing COVID-19 pandemic, the multi-step investment project is progressing as scheduled for a 2022 startup. With these facilities, BASF will provide a local supply to cell producers and OEM customers in Europe.

The new battery materials plants are part of BASF’s goal to be the leading global supplier of high-energy density CAM for the automotive industry. The initial capacities will enable the supply of around 400,000 full electric vehicles per year with BASF battery materials.

“We are determined to provide innovative high-performance products with a minimized CO2 footprint along the battery value chain. Through regional production in combination with renewable energy sources as well as use of energy efficient and proprietary process technologies in our new plants in Europe, we are able to reduce CO2 footprint significantly – by around 30% compared with conventional industry standard on the market,” says Peter Schuhmacher, president, catalysts division at BASF.

We remind that 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

MOSCOW (MRC) -- State-owned Saudi Aramco bought 2.1 billion shares of Saudi Basic Industries (SABIC) on the stock market on Sunday as it completed its deal agreed last year to buy 70% of the petrochemical giant, reported Reuters with reference to sources and market data.

Four transactions were executed on the Saudi exchange, known as Tadawul, involving SABIC shares worth 259,125 billion riyals ($69.1) billion, Tadawal data showed, without naming the buyer.

Four sources confirmed the transactions were part of the Aramco acquisition agreed in 2019 and which will be one of the biggest in the global chemical industry once completed.

The shares are being sold by the Saudi sovereign fund, the Public Investment Fund (PIF), giving it more cash to invest in the government programme to diversify the economy away from oil.

Sources told Reuters in May that Aramco had been looking to restructure the deal after SABIC’s market value fell more than 40% due to an oil price slump. Sunday’s transactions suggested the deal price had not changed but it was unclear whether the structure for making payments to PIF had been revised.

Sunday’s share trades involved cross transactions, also known as special deals on Tadawul, which are executed at an agreed price between a buyer and seller, without those involved.

“The deal completion is on-track with expectations to be finalised before the end of the second quarter,” Aramco told Reuters in a statement when asked about the transactions. “We will make a completion announcement in due course.”

Aramco has been boosting investments in refining and other downstream industries.

Three of Sunday’s deals were completed at 123.40 riyals per share and the fourth at 123.20 riyals, prices that were similar to last year’s agreed price of 123.39 riyals per share.

SABIC shares ended at 88.50 riyals on Sunday.

Aramco raised USD10 billion in a loan this year to help with the SABIC acquisition, sources previously said.

As MRC wrote before, SABIC has recently announced its financial results for the first quarter, reporting a net loss of 950 million Saudi riyals (USD250 million).

We remind that Sinopec SABIC Tianjin Petrochemical Co. (SSTPC), a 50-50 joint venture of Sinopec and Sabic, shut its naphtha cracker in Tianjin on 1 May 2020 for routine maintenance work. The cracker is expected to remain off-line until early July 2020. The naphtha cracker is designed to produce 1 million tons/year of ethylene, which supplies several local buyers in the Tianjin area. Besides, the company is also planning to expand its cracker capacity to 1.3 million tons/year in 2021.

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.

Saudi Basic Industries Corporation (Sabic) ranks among the world"s top petrochemical companies. The company is among the world"s market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.

Saudi Aramco, officially the Saudi Arabian Oil Company, is a Saudi Arabian national oil and natural gas company based in Dhahran, Saudi Arabia. Saudi Aramco"s value has been estimated at up to USD10 trillion in the Financial Times, making it the world"s most valuable company. Saudi Aramco has both the largest proven crude oil reserves, at more than 260 billion barrels, and largest daily oil production.
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