South Korea data: US crude imports suffer biggest ever on-year drop in May

MOSCOW (MRC) -- South Korea's crude oil imports from the US in May dropped 35.7% from a year earlier, which marks the biggest decline since the country began US crude imports, data released by Korea National Oil Corp. showed June 24, said S&P Global.

South Korean refiners imported 7.407 million barrels of US crude in May, compared with 11.516 million barrels a year earlier, according to the KNOC data. The 35.7% decline was the sharpest since South Korea began US crude imports on a regular basis in 2015.

The May shipments were down 50% from 14.827 million barrels in April that marked the biggest since South Korea began US crude imports, breaking the previous record high of 14.78 million in July 2019. South Korea's US crude imports marked the first decline in December last year when shipments fell 2.1% from a year earlier, and second time in February this year when US shipments fell 0.9% year on year.

The decline in May was largely attributable to less competitive prices of North American grades, as well as tepid domestic and regional fuel demand as economic activities slowed down due to restrictions to contain the spread of COVID-19, according to a refinery official in Seoul.

Major refiners across South Korea, China and Southeast Asia said Asia's overall US crude imports could recede from Q3 as they no longer find WTI, Bakken and Eagle Ford grades attractive, S&P Global Platts reported previously.

Despite the latest hike in Saudi OSP differentials for July-loading cargoes bound for Asia, many refiners would continue to favor Persian Gulf cargoes over US export grades, including WTI Midland and Eagle Ford, due to the prevailing high long-haul freight rates, Platts reported previously.

The KNOC data showed South Korea's crude imports from its top supplier Saudi Arabia climbed 14.7% year on year to 28.857 million barrels in May, from 25.154 million barrels a year earlier, driven by Aramco's lowering of export prices earlier this year.

Imports of Iraqi crude dropped 44.2% on year to 5.34 million barrels in May, South Korea's import of Iraqi crude has declined since November 2019 when the country received 13.54 million barrels.

South Korea received 2.057 million barrels of Forties from the UK, marking the first North Sea crude shipment since August last year when it took 2.024 million barrels. South Korea's total crude imports in May fell 6.3% from a year ago to 78.83 million barrels.

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) -- The rapidly rising price of Russia’s flagship Urals blend oil has forced European refineries to cut purchases from Moscow and look for crude supplies elsewhere, reported Reuters with reference to traders.

Urals, a blend of heavy sour oil from the Urals mountains and Volga river region and light oil from Western Siberian fields, has traded at a hefty premium of more than USD2 per barrel to dated Brent — a global benchmark — since April, up from a discount of around $4 per barrel.

Prices are being pushed up as a global deal to cut oil output reduces the amount of Urals for export, with loadings from Russia’s Baltic ports set to fall to 2.5 million tonnes in July from the 4.4 million tonnes planned for June.

Complex refineries in southern Europe have sustained loses from using Urals in the past few months, with the shortfall topping USD3 per barrel in the last two weeks

While the Russian blend remains popular in China due to a lack of sour barrels from Saudi Arabia and other destinations, Europe has a range of alternatives, including oil from the United States and Norway, although not in great enough volumes to totally replace Urals.

“The oil refineries are not buying Urals at current prices, while light blends are feeling great... There is plenty of WTI in Europe,” a trader said, referring to US West Texas Intermediate crude.

“Johan Sverdrup oil for delivery in July has sold out,” he added, noting oil from the Norwegian field was a good substitute for Russian barrels amid a scarcity of available alternatives.

Another source at a global trading firm said that the European refineries were already using more light oil from West Africa and the United States instead of Urals.

As MRC wrote before, Russia may further cut overseas supplies of its Urals oil next month due to rising demand from domestic refineries as coronavirus-related restrictions ease.

We remind that 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 also 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) -- A deal to sell the Philadelphia Energy Solutions (PES) oil refinery to a Chicago-based real estate developer is expected to close on Friday for USD26.5 million less than originally agreed to, reported Reuters with reference to lawyers for the bankrupt refiner's statement in court.

The sale to Hilco Redevelopment Partners (HRP) would end the prospect of a restart of the 335,000-barrel-per-day south Philadelphia refinery, the largest and oldest on the East Coast, which was idled a year ago after a fire badly damaged the plant.

PES agreed to reduce the purchase price to USD225.5 million, USD26.5 million less than agreed upon earlier this year. HRP requested a reduction due to economic uncertainty caused by the coronavirus pandemic and higher-than-expected costs to clean up the refinery site.

Earlier this month, the two sides asked the US Bankruptcy Court for the District of Delaware to cut the purchase agreement by USD27.5 million but settled overnight on the current price tag, lawyers for the refiner said. The court approved the new agreement.

PES filed for bankruptcy and shut its refinery after a series of explosions and fire at one of its gasoline processing units on June 21, 2019. More than 1,000 full-time employees were laid off, including 640 United Steelworkers members.

Union members were not given severance and have been waiting for the sale to be finalized in order to receive several thousand dollars in transition pay. The price cut will not affect that pay, said Steve Levine, an attorney for PES’ unsecured creditors.

Certain financial lenders to PES will receive less as a result of the lower price.

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) -- Dow says it expects a USD350-million headwind to second-quarter EBITDA, mostly due to a slower-than-expected demand recovery in the automotive and consumer durables end markets, reported Chemweek.

The demand decline will particularly impact Dow’s polyurethanes business, where second-quarter demand is expected to decline by about 25–30% year on year (YOY). Dow had previously expected a 15–20% YOY demand decline for polyurethanes in the second quarter.

About two-thirds of the EBITDA impact “can be attributed to the delayed and slower recovery in the automotive, construction, appliance, and furniture sectors,” Dow president and CFO Howard Ungerleider said in a virtual conference presentation this morning. The rest “is being driven by margin pressure due to lower demand, which is negatively impacting pricing power, along with MEG softness,” he added.

On the positive side, volumes in plastics have been “resilient,” and will be roughly flat YOY for the quarter, according to Ungerleider. The do-it-yourself (DIY) coatings end market has also held up well, he says. “Solid demand trends continue in the packaging, home care, industrial and institutional cleaning, and health and hygiene industries,” Ungerleider adds.

Due to the lower-than-expected demand and profits, Dow “will be taking further cost actions,” according to Ungerleider. Details of additional cost reductions have not been disclosed, and will be announced when the company releases second-quarter earnings. Dow has previously announced plans to cut over USD1 billion in cost, including reductions in capital expenditure and operating expenses.

Despite the slow recovery in some end markets, Dow says that sales are on the rise. “It is encouraging to see the pace of recovery accelerate in June in almost every value chain in our portfolio,” according to Ungerleider.

As MRC informed earlier, Dow Chemical will restart three idled polyethylene (PE) plants in Texas and Argentina and two elastomers plants in Louisiana as demand begins to rebound. And the company expects economic recovery to take hold in the second half of 2020 as gradual emergence from coronavirus pandemic-related shutdowns continues.

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.

The Dow Chemical Company is an American multinational chemical corporation headquartered in Midland, Michigan, United States. Dow is a large producer of plastics, including polystyrene (PS), polyurethane, polyethylene, polypropylene, and synthetic rubber.
MRC

MOSCOW (MRC) -- The chief legal officers of seven states — Louisiana, Texas, Oklahoma, Utah, Arkansas, Oklahoma and Wyoming - added their names and states to the list of those urging EPA to issue a waiver of 2020 Renewable Fuel Standard (RFS) compliance burdens, said Hydrocarbonprocessing.

As the Attorneys General (AGs) note, EPA is empowered with authority under the Clean Air Act to waive all or part of RFS annual compliance burdens when the fulfillment of such obligations would cause severe economic harm to a state, region or the country as a whole. The AGs write, “Congress intended the renewable fuels program to be transformative, not destructive. If the program threatens the very economies it intends to modify, the Administrator is empowered to take necessary steps to protect the regulated markets by waiving the program’s requirements."

This year, the AGs note EPA and other agencies have exercised authority to provide industries relief from regulatory policies in order to “maximize and sustain capacity” and help keep the U.S. economy afloat. It is only fitting that EPA use the tools provided by Congress to prevent states and regions from facing any more severe economic harm because of surging compliance costs in the RFS regulatory market.

The refining industry is critical to the economy and energy security of the United States. The sector’s health and capacity — which is an economic anchor for entire states and regions — is threatened by growing RFS mandates and compliance costs that have hit two-year highs in the midst of an historic economic downturn.

The time for EPA to invoke its general waiver authority and reduce RFS regulatory costs is now.

As MRC informed earlier, Russia's output of chemical products rose by 4.4% year on year in May 2020 . Thus, production of basic chemicals increased year on year by 5.4% in the first five months of 2020. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-May. Production of benzene was 110,000 tonnes in May 2020, which equalled the figure a month earlier. Overall output of this product reached 615,000 tonnes over the stated period, up by 1.7% year on year.
MRC