US commercial crude stocks swell to all-time high as refinery demand sputters

MOSCOW (MRC) -- US commercial crude stocks notched a fresh all-time high last week amid still-weak refinery demand and flagging exports, US Energy Information Administration data showed June 17, reported S&P Global.

Commercial crude stocks climbed 1.22 million barrels to 539.28 million barrels in the week ended June 12, US Energy Information Administration data showed. Inventories are now 14.5% above the five-year average for this time of year.

An additional 1.73 million barrels entered storage at the Strategic Petroleum Reserve, pushing stockpiles there to 65.17 million barrels.

In a pattern echoing recent weekly reports, the commercial crude build was again concentrated on the US Gulf Coast. Stockpiles there pushed 3.81 million barrels higher on the week to a fresh all-time high of 307.49 million barrels.

In contrast, inventories at the NYMEX delivery hub of Cushing, Oklahoma, fell for a sixth consecutive week, drawing 2.61 million barrels down to 46.84 million barrels. Cushing stocks are now down 18.61 million barrels from their late-April peak, a slide of more than 28%.

Refinery net crude inputs were up 120,000 b/d on the week at 13.6 million b/d, but despite climbing for five consecutive weeks inputs remain nearly 20% behind the five year average. Crude inputs were as much as 25% behind the five-year average in early May, but rising refinery demand has only slightly outpaced the typical late-spring uptick, leaving runs well behind normal.

USGC refinery crude inputs were 14.4% behind the five-year average last week, in from more than 22% in early May, but runs on the US Atlantic Coast and West Coast were still, respectively, 51% and 31% below normal.

US crude exports averaged at 2.46 million b/d, up slightly from 2.44 million b/d the week prior but down over 28% from year-ago levels.

While tight arbitrage economics due to a particularly narrow Brent/WTI spread has impacted US export volumes, low freight rates—particularly for Trans-Atlantic Aframaxes - have been more supportive.

However, a global glut of crude in floating storage continues to present headwinds to stepped-up US exports. Global floating storage stood at a record-high 199.49 million barrels on June 17, according to data from Kpler, going back to January 2016.

Commercial crude inventories climbed despite production dropping 600,000 b/d to 10.5 million b/d. Production realized its biggest one-week decline since late-March and was at the weakest since March 2018.

Notably, the bulk of this production decline is likely temporary and the result of Gulf of Mexico production shut-ins ahead of Tropical Storm Cristobal, which made landfall at Louisiana on June 6.

At its peak June 7, Gulf of Mexico operators reduced output by 636,000 b/d. By June 12, just 120,079 b/d of crude output remained down, according to the US Bureau of Safety and Environmental Enforcement.

Nationwide distillate inventories saw their first weekly decline since late March, falling 1.36 million barrels to 174.47 million barrels last week, as demand climbed nearly 8% on the week to 3.56 million b/d.

Jet demand rose 11% last week to reach 788,000 b/d, and is now more than double its all-time record-low 352,000 b/d reported the week ended May 8.

Rising demand has contributed to an improvement in cracks for both jet and ultra-low sulfur diesel. Consequently, refiners have for the most part stopped using jet fuel to blend into with ULSD as seen earlier in the year. This blending activity had been a major contributor to the massive build in distillate stocks seen in recent weeks.

Total US gasoline stocks dipped 1.67 million barrels last week to around 257 million barrels, but stocks are still ample at around 9.8% above the five year average.

Total gasoline demand edged 30,000 b/d lower to 7.87 million b/d. The outlook for gasoline demand remains uncertain. On the one hand, major USAC cities, which were among the hardest hit by the COVID-19 pandemic this spring, have just started their reopening in recent days, however, nine states that eased restrictions on non-essential travel and trade in recent weeks are now reporting record numbers of cases.

USAC gasoline stocks saw the first weekly draw since the week ended May 1, dropping 970,000 barrels to 74.14 million barrels.

As MRC informed before, 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

MOSCOW (MRC) -- Sasol (Johannesburg) has accelerated an ongoing asset disposal program that could eliminate more than half of the South African company’s debt, with the proposed sale of a stake in its Lake Charles Chemicals Project (LCCP) in Louisiana of the “highest priority”, reported Chemweek.

The company is trying to raise cash amid cost overruns and lower oil prices, with the overall process to be completed possibly within one year and generating up to USD5 billion, which would help prevent a last-resort rights offering, according to a report by Bloomberg.

“The best possible value and the highest possible chance of a divestment, they go first,” says Paul Victor, Sasol’s chief financial officer in an interview. While each asset has its own timeline for disposal, the company intends to complete all sales by June 2021. A decision on the rights offer is due in the next few months.

Sasol’s “highest priority” in the sales process is a stake in its Lake Charles petrochemical complex, which has increased in cost to almost USD13 billion, Victor says. The company has received multiple bids and aims to have that sale “at a well-developed stage by the end of December,” he says. Specialties chemical production is considered part of Sasol’s core business, while base chemicals take a lot of volume to stay competitive and the preference is to sell a portion of that, he adds.

Sasol is still evaluating whether to sell its share in the Natref crude oil refinery in South Africa, a joint venture in which it owns 64%, with Total holding the remainder. Keeping the plant, where production has been suspended since April, could require investing in upgrades to produce cleaner fuel. The company’s West African oil assets will be sold, while natural gas operations in Mozambique will be retained. “Mozambique is part of our future - it helps us to decarbonize our footprint,” Victor says. Sasol’s shale gas assets in Canada were on the block earlier than anything else and a buyer could take them “at value,” he says.

Sasol has reportedly received offers for a large stake in its LCCP from companies including CPChem, LyondellBasell, and Ineos, with these and other companies now moving into a second round of bidding. The stake sale could raise more than 29 billion South African rand ($1.69 billion) for Sasol. The cost of the Lake Charles project has soared from original estimates of $8.9 billion to USD12.9 billion.

Earlier this week Sasol announced a 30,000-metric tons/year Guerbet alcohol unit at the LCCP had achieved beneficial operations, following on from beneficial operations starting at its Ziegler alcohol unit on the same site a few days before. The only remaining unit to be brought online at the complex is a 420,000-metric tons/year low-density polyethylene (LDPE) plant, which was damaged by an explosion earlier this year while in the final stages of commissioning. The plant is expected to be online by the end of September.

As MRC reported earlier, Sasol's world-scale US ethane cracker with the capacity of 1.5 mln tonnes per year reached beneficial operation on 27 August 2019. Sasol’s new cracker, the heart of LCCP, is the third and most significant of the seven LCCP facilities to come online and will provide feedstock to our six new derivative units at the company's Lake Charles multi-asset site.

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.

Sasol is an international integrated chemicals and energy company that leverages technologies and the expertise of our 31 270 people working in 32 countries. The company develops and commercialises technologies, and builds and operates world-scale facilities to produce a range of high-value product stream, including liquid fuels, petrochemicals and low-carbon electricity.
MRC

1. Future of Shell Oman GTL project in question

MOSCOW (MRC) -- Plans to build a new gas-to-liquids (GTL) project in Oman between the government and Shell have been thrown into doubt by the global economic downturn, the sultanate's oil minister Mohammed AL-Rumhy has told S&P Global. "We've decided to revisit the GTL with our partners Shell," said Rumhy in a June 11 interview. "We will see what is best for the project, and this work could take up to three months. So, by the third or fourth quarter we will make a final investment decision of some kind on the project. We'll see how it goes."

The commissioning process is currently ongoing. During this phase, the company is concluding functional tests and process tests to verify performance of controls and integrated safety systems. Initial production test runs are anticipated to begin in the next month with the first full scale commercial production activity currently expected in the third quarter of 2020. "The COVID impact on the North American polypropylene industry during April and May affected durable segments such as automotive...

MRC

MOSCOW (MRC) -- Angarsk Polymers Plant has shut down its low density polyethylene (LDPE) production for a scheduled turnaround, according to ICIS-MRC Price Report.

The plant's customers said Angarsk Polymers Plant took off-stream its LDPE production for the scheduled maintenance on 22 June. The outage is scheduled to last for one month. The plant's annual production capacity is about 75,000 tonnes.

It is also worth noting that next shutdowns for maintenance at Russian plants are scheduled for July. Gazprom neftekhim Salavat will shut its LDPE production capacities for a one-month maintenance on 1 July, and Tomskneftekhim is expected to conduct maintenance works at its production in the second half of the month.

Angarsk Polymer Plant (controlled by Rosneft through OOO Neft-Aktiv) is the only petrochemical full-cycle plant in Eastern Siberia. The bulk of the produced ethylene is used by the plant for the production of LDPE, styrene monomer (SM) and polystyrene (PS). Straight-run gasoline and hydrocarbon gases, mainly produced by OAO Angarskaya NHK, are the feedstocks for the plant.
MRC

MOSCOW (MRC) -- Russia's output of products from polymers decreased in May 2020 by 7.2% year on year due to quarantine restrictions and weaker demand. However, this figure increased by 1.2% year on year in the first five months of 2020, reported MRC analysts.

According to the Russian Federal State Statistics Service, May production of unreinforced and non-combined films dropped to 101,000 tonnes from 107,000 tonnes a month earlier. Output of films products grew in the first five months of 2020 by 10.1% year on year to 503,900 tonnes.

Last month's production of non-porous polymer boards, sheets and films rose to 33,000 tonnes from 32,800 tonnes in April. Thus, overall output of these products reached 160,500 tonnes in January-May 2020, up by 4.9% year on year.

May production of porous poly,er boards, sheets and films was 22,800 tonnes, up by 12.6% month on month. Overall production of these products reached 107,300 tonnes in the first five months of 2020, compared to 101,200 tonnes a year earlier.

May production of plastic bottles and flasks fell to 1,958,000,000 items from 2,060,000,000 items a month earlier. Overall output of these plastic products totalled 8,920,000,000 units over the stated period, compared to 8,541,000,000 units a year earlier.

Last month's production of polymer pipes, hoses and fittings was 56,500 tonnes versus 52,800 tonnes in April. Overall output of these products was 250,100 tonnes in January-May 2020, up by 18.5% year on year.

May production of sacks and bags from ethylene polymers reached 2,547,000,000 units, compared to 2,419,000,000 units a month earlier. Overall output of these plastic products totalled 11,676,000,000 units in the first five months of 2020, compared to 9,857,000,000 units a year earlier.

Last month's production of linoleum and floor coverings was 8,600,000 square metres, compared to 6,700,000 square metres in April. Overall output of these products totalled 48,600,000 square metres over the stated period versus 54,300,000 square metres a year earlier.

May production of plastic windows and door blocks reached 1,816,000 square metres and 69,200 square metres, respectively, versus 1,521,000 square metres and 64,300 square metres a month earlier. Overall output of these plastic products totalled 8,862,000 square metres and 330,000 square metres, respectively, compared to 7,718,000 square metres and 344,500 square metres a year earlier.
MRC