Oil demand recovery under spotlight as lockdowns ease

MOSCOW (MRC) -- Optimism over a swift and steady economic rebound from crushing pandemic lockdowns have helped global oil prices stage a dizzying rebound from near two-decade lows in April, reported S&P Global.

Nearly all the oil demand metrics have been encouraging so far. After bottoming out in early to mid-April, global economic indicators are improving with the exception of aviation activity which remains well below seasonal norms.
Implied driving activity is already well above pre-crisis levels in both the US and Germany, Europe's biggest economy and user of fuels.

In the week to June 5 alone, the US saw a surge in refined product demand to 17.57 million b/d, the strongest since the week ended March 27 when the first statewide lockdowns went into effect.

Market consensus has formed around an expected global oil demand slump of around 8-9 million b/d this year after a fifth, or some 20 million b/d, of demand, was wiped out by lockdowns in April.

But the so-called V-shaped recovery path - where global oil demand will continue to rise steadily to snap back to its previous trajectory by year-end - is being called into question.

One major uncertainty over oil's recovery is how much of the world's upended work and social behavior partners during the crisis stick even after lockdowns are lifted.

On June 9, the US' Energy Information Administration cut its forecast for 2021 US oil demand for a second time, forecasting demand will be 1.26 million b/d lower than its pre-lockdown baseline.

Standard Chartered is even more bearish, predicting slow recoveries in jet fuel demand and diesel demand will hobble the US rebound next year.

"We think that much of the market is ignoring the downside risks to demand arising from both economic weakness and permanent changes in patterns of energy use brought on by COVID-19," the bank's energy analyst Emily Ashford said in a note.

Fears that the pandemic could inflict lasting damage on oil demand due to less commuting, fewer business trips and hardwired adoption of social distancing, are hard to gauge. For now, at least, most market watchers feel it is still too early to predict how behavior patterns will impact demand.

Research suggests that overall energy savings from mass home-working are likely to be limited, and in many cases could be non-existent, according to The World Economic Forum.

The other key variable in current demand recovery forecasts is the potential for second-wave of infections --and resulting return to lockdowns-- if the current curbs are lifted too quickly.

Goldman Sachs last week raised its forecast for Brent crude by USD6/b for the second half of 2020 to USD45/b on stronger recovery data but noted risks from a bounce in global infection rates.

"The positive start to reopening does not resolve the uncertainties about a potential second wave of infections or of a more difficult recovery beyond the easier gains of the first few months," the bank said.

While there are no signs yet that ongoing efforts to loosen curbs on mobility and business activity are fueling new cases in Europe and the US, elsewhere moves to contain the coronavirus are more mixed.

In some emerging economies of Latin America and South Asia, single-day coronavirus infection rates continue to spike.

India saw the highest single-day spike of 10,000 new cases on June 7 while Indonesia logged almost 1,000 new cases on June 6, a new single-day high for the country.

In Brazil, the situation has continued to worsen with the country's most populous state Sao Paulo reporting a record number of COVID-19 deaths for the second day running on June 10. Chile, meanwhile, still has the highest infection rate in South America.

Even under the default, V-shaped demand scenario, a uniform return to pre-crisis demand levels is far from assured with large potential disparities between geographic and specific fuel markets.

According to forecasts by S&P Global Platts Analytics, Western Europe is set to feel the most pain in terms of oil demand impact with 13% of its oil consumption set to disappear in 2020.

The US, however, is set for the biggest loss in terms of volumes with 2.4 million b/d impacted, or 29% of the global total, according to the outlook.

In China, where the lockdown response was initially viewed as extreme, oil demand may fall just 340,000 b/d this year, according to Platts Analytics, helped by government incentives to limit fuel price falls which created an import binge during May.

In terms of oil products, US gasoline demand is by far the biggest casualty accounting for almost half of the 2.6 million b/d global impact for the key driving fuel.

It is the grounding of thousands of flights, however, that will see jet fuel take the largest hit by market share with almost a quarter of jet demand disappearing this year.

Indeed, the tail end of the demand recovery story could well be dominated by the impact from long-lasting, tighter controls on international passenger movements in addition to a reduced appetite for air travel, many believe.

Despite a relatively rapid recovery in non-commercial flights since May, S&P Platts Analytics still predicts global jet and kerosene demand will average almost 800,000 b/d lower in 2021 than 2019.

With analysts in uncharted waters to predict the new, post-COVID normal, it may be some time before market watchers can confidently call the world's return to full health from the pandemic and with it their appetite for oil.

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.
MRC

Thai energy group PTT cuts 2020 investment

MOSCOW (MRC) -- State-owned Thai oil and gas company PTT Pcl said it would cut its investment budget across the group by 10-15% this year and some projects will be delayed as partners face challenges from the coronavirus, according to Hydrocarbonprocessing.

Chief Executive Auttapol Rerkpiboon, who took up the post last month, said the PTT group faced "double effects" from the oil price slump and the coronavirus outbreak.

"All the projects that have been approved will go forward, but we will review and prioritize those in the pipeline," he told reporters.

PTT has six flagship companies including PTT Exploration and Production Pcl, oil refiner IRPC Pcl and electricity firm Global Power Synergy Corporation Pcl and had planned to invest 250 billion baht ($8.08 billion) across the group this year.

"Of the 250 billion, we expect a reduction of around 10% to 15%," Auttapol said. That would be a reduction of between 25 billion baht and 37.5 billion baht (USD808 million-USD1.2 billion).

For PTT alone, the company will reduce investment this year by 15 billion baht to 54 billion baht, he said.

Sales at its upstream arm, PTTEP are expected to drop by 7% and gas volumes are likely to decline by up to 10% this year, the CEO said, adding that he expects PTT’s refineries to have a utilization rate of around 90% to 100%.

The company has 66 billion baht from corporate bonds ready if needed, he said, but does not expect to use the entire sum and the company will maintain a debt-to-equity ratio below one.

Its debt-to-equity ratio in the first quarter was 0.55.

Auttapol said PTT would also focus on expanding its gas business overseas and position itself as a liquefied natural gas trading hub for the region as the Thai government liberalizes the gas market.

PTT’s gas business faced new competition in Thailand after local rivals Gulf Energy Development Pcl and B. Grimm Power Pcl received government licenses to import LNG.

Prior to 2017, PTT was the country’s sole LNG importer.

As MRC reported before, PTTGC America and Daelim Chemical USA, equal partners in their long-planned PTTDLM petrochemical project in Mead Township, Belmont County, Ohio, have recently delayed making a final investment decision (FID) on their multi-billion-dollar petrochemical project, originally expected in the middle of 2020.

We remind that PTT Global Chemical (PTTGC) fully restarted its No. 2 cracker in Map Ta Phut in early March,2020, after a planned turnaround. The company started resuming operations at the cracker by end-February, 2020. The cracker was shut for maintenance on January 20, 2020. Located at Map Ta Phut, Thailand, the No. 2 cracker has an ethylene production capacity of 400,000 mt/year. The company also operates No. 1 cracker at the same site with a capacity of 515,000 tonnes of ethylene and 310,000 tonnes of propylene per year, which was also shut on 23 January, 2020, for a 40-day turnaround.

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.

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

Xinjiang Tianye to resume production at MEG plant in China

MOSCOW (MRC) -- Xinjiang Tianye is in plans to bring on-stream its mono ethylene glycol (MEG) plant following a turnaround, according to Apic-online.

A Polymerupdate source in China informed that, the company is likely to resume operations at the plant in mid-June, 2020. The plant was shut for maintenance in mid-May, 2020.

Located In Xinjiang, China, the plant has a production capacity of 350,000 mt/year.

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

According to ICIS-MRC Price report, in Russia, spot PET prices continued to go down. June formular prices for contract customers were in the range of Rb67,500-69,500/tonne CPT Moscow, including VAT. Formular prices are expected to decrease further next month.
MRC

COVID-19 - News digest as of 15.06.2020

1. US spot benzene market has been under tremendous pressure over the last two months

MOSCOW (MRC) -- The US spot benzene market has been under tremendous pressure over the last two months as energy prices sank and derivative demand disappeared for many segments as COVID-19 forced lockdowns in North America, said Chemweek. After being dragged down by a confluence of factors, prices may have begun to stage a rebound that could be sustained for the next few months. In April and May, refineries in North America opted to run their reformers harder than other units within the refinery, while lowering operations at their crude distillation units and fluid catalytic crackers to roughly 70%, according to data from the US Energy Information Administration (EIA). As a result, aromatics extraction units maintained operating rates of 80% and above despite downstream styrene, cyclohexane, and methylene di-para-phenylene isocyanate (MDI) plants curtailing their rates due to poor demand.

MRC

Shenhua Coal completes turnaround at MTO plant in China

MOSCOW (MRC) -- Shenhua Coal to Liquid and Chemical, part of Shenhua Group, has brought on-stream its methanol-to-olefins (MTO) plant in Shaanxi, according to Apic-online.

A Polymerupdate source in China informed that, the company has completed turnaround at the plant in end-May, 2020. The plant was shut for maintenance on April 6, 2020 for maintenance.

Located in Yulin, Shaanxi, China, the MTO plant has an ethylene capacity of 300,000 mt/year and propylene capacity of 300,000 mt/year.

As MRC reported earlier, Shenhua Baotou, another subsidiary of Shenhua Group, took off-stream its coal-to-olefin plant in Inner Mongolia for a turnaround on September 16, 2019. The plant remained shut till end-October, 2019. Located at Baotou City, China, the plant has a ethylene and propylene production capacity of 300,000 mt/year each.

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