Crude futures extend rise into Asia trade on positive US economic data

MOSCOW (MRC) -- Crude oil futures were trading higher in mid-morning trade in Asia June 26 after positive US economic data buoyed market sentiment about an improved demand outlook, despite fresh outbreaks of COVID-19, reported S&P Global.

At 10:15 am Singapore time (0215 GMT), 26 June, ICE Brent August crude futures were up 51 cents/b (1.24%) from the June 25 settle at USD41.56/b, while the NYMEX August light sweet crude contract was 45 cents/b (1.16%) higher at USD39.17/b.

A US Census Bureau report published June 25 showed that US durable goods orders jumped 15.8% in May, exceeding market expectations. Durable goods orders had contracted by more than 18% in April.

Meanwhile first time US unemployment filings fell to 1.48 million in the week ended June 20, the US Labor Department said, down from 1.51 million the week before. While US initial claims were higher than expected, it was the 12th consecutive week of decline in new claims.

However, a surging number of new coronavirus cases in the US continues to weigh on market sentiment. Data from the COVID Tracking Project showed there were 38,672 positive COVID-19 tests in the US on June 24, a new record high. White House economic adviser Larry Kudlow was quoted in media reports as saying: "There will be shutdowns in individual places or certain stores."

"With fresh outbreaks of COVID-19 in Texas, Florida and California, there is a real threat of this demand recovery stalling. Some states are quarantining travelers from these states and some have halted the reopening of businesses," ANZ analysts said in a note June 26.

On the supply front, resurgent demand and higher price levels could prompt US producers to bring capacity back online, increasing headwinds for crude futures in the near term.

An energy survey by the Dallas Fed published June 24 showed that while 71% of exploration and production firms had some oil production shut in or curtailed over June 10-18, more than a third expected to restart the majority of their production in June and another 20% in July.

"One oil-specific negative that could play out in the near term: despite the mini-correction this week, WTI remains comfortably in the price zone that may ease US production curtailments, which could mean more upward pressure on US inventories and oil sentiment in coming weeks," Stephen Innes, chief global markets analyst at AxiCorp, said in a note June 26.

US commercial crude stocks hit a record 540.82 million barrels in the week ended June 19, latest US Energy Information Administration data showed June 24.

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 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

COVID-19 - News digest as of 06.07.2020

1. CVR Refining, HollyFrontier cut jobs at US refineries

MOSCOW (MRC) -- CVR Refining and HollyFrontier Corp have cut their workforce in recent weeks, reported Reuters with reference to three sources, as demand falls due to the ongoing coronavirus pandemic. In recent weeks CVR Refining has laid off approximately 50 salaried employees and HollyFrontier has cut at least 12 jobs, the sources said. HollyFrontier previously said it would lay off about 130 workers at its Cheyenne, Wyoming, refinery as it converts to a renewable diesel facility. CVR and HollyFrontier both declined to comment.


MRC

US crude oil refining capacity nears 19 MMbpd

MOSCOW (MRC) -- US crude oil refining capacity grew by nearly 1 percent in 2019, or 173,650 barrels per day (bpd) to nearly 19 million bpd (MMbpd), a new record, reported Reuters with reference to a report released by the US Energy Information Administration (EIA).

The report on national refining capacity was assembled from reports filed by owners of the nation’s 135 refineries. The reports were filed by Jan. 1, 2020. They do not take into account reduced production levels because of the COVID-19 pandemic.

The number of total refineries was unchanged, but the number of idle plants grew by one to four, the EIA said.

Independent US refiner Marathon Petroleum Corp continues to be the nation’s largest. The combined throughput capacity of the company’s 16 refineries is 3.07 MMbpd, equal to 16% of the national total.

The increase in national capacity came from incremental growth in production capabilities at multiple plants across the country.

Marathon’s capacity grew by 42,285 bpd with increases at the company’s refineries in Garyville, Louisiana, and Catlettsburg, Kentucky, as well as other plants.

Fellow independent Valero Energy Corp, remains the nation’s second-largest refiner at 2.18 MMbpd.

Exxon Mobil Corp, one of the world’s largest corporations, is the third-largest refiner at 1.75 MMbpd. Exxon’s capacity grew by 15,200 bpd, all at the company’s Baton Rouge, Louisiana, refinery.

Phillips 66, also an independent refiner, is the nation’s fourth largest at 1.7 MMbpd.

Chevron Corp, PBF Energy, Royal Dutch Shell Plc, Citgo Petroleum Corp, BP Plc and Koch Industries’ Flint Hills Resources LP are the others among top 10 refiners.

Motiva Enterprises is the 11th largest refiner. Its only refinery is the nation’s largest in Port Arthur, Texas, with a capacity of 607,000 bpd.

The top 10 refiners are evenly divided between independents and integrated oil companies.

As MRC wrote before, Marathon Petroleum Corp will idle its 166,000 barrel-per-day (bpd)refinery in Martinez, California beginning April 27 in response to the coronavirus pandemic’s hit to demand for refined products.

Meanwhile, Marathon Petroleum Corp planned to operate the gasoline-producing fluidic catalytic cracker (FCC) at its 585,000 barrel-per-day (bpd) Galveston Bay Refinery in Texas City, Texas. The 140,000 bpd FCC restarted on 12 April, after repairs following a March 23 brief power outage that shut the unit.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

Imperial Oil delays Sarnia, Syncrude coker turnaround to Q3

MOSCOW (MRC) -- Imperial Oil said it will delay turnarounds at its 120,000 b/d Sarnia, Ontario, refinery and one of three cokers at the Syncrude facility in Western Canada from the second quarter to the third quarter as it continues to assess the impact of the coronavirus on its operations, reporteed S&P Global.

"These deferrals have resulted in an updated capital outlook of CD1.1 billion to CD1.2 billion for 2020, a CD500 million (30%) reduction compared to original guidance of CD1.6 billion to CD1.7 billion," the company said in a statement released in late June.

Imperial has a 25% stake in Syncrude and receives about 60,000 b/d to 70,000 b/d of oil net of royalties. The work on Syncrude 8-2 coker was planned to start in April and last through May, according to the Syncrude website.

At Sarnia, planned work on the 120,000 b/d crude unit and 24,300 b/d coker was planned to begin in early April and to end early June, according to market sources.

As MRC wrote before, Alberta's 80,000 b/d Sturgeon refinery ramped up to full operations in April as it began processing local bitumen to produce ultra low sulfur diesel and other refined products. Overall, Canadian refinery runs increased to 1.31 million b/d of 67% of capacity for the week ended May 12, up from the 1.27 million b/d the week earlier, according to National Energy Board data.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

Asian refiners trim July LSFO output, exports on flagging regional demand

MOSCOW (MRC) -- With low sulfur fuel oil crack spreads in Asia under pressure from oversupply and lackluster demand, refineries in Thailand, Taiwan and South Korea are reducing their July LSFO production and exports, company sources at regional refineries said July 6, said S&P Global.

"For July, we've balanced our supply to just meet our domestic LSFO bunker term commitments, as the LSFO margins right now are weak, so we'll probably skip [LSFO] exports this month," a refining source close to Taiwan's CPC Corporation said. "We're likely to have a cargo to export in early August instead," she added.

The Asian LSFO crack spread, measured as the difference between the front-month Singapore Marine Fuel 0.5%S swap and the Dubai crude oil swap, was assessed at USD7.83/b on July 3, marginally higher than the Q2 average of USD7.47/b. The July 3 spread is, however, a quarter of the USD29.77/b spread on Jan. 2, after the International Maritime Organization's regulations on cleaner marine fuel came into effect on Jan. 1, S&P Global Platts data showed. The crack spread averaged USD6.76/b over June.

In response, refineries in South Korea, Taiwan and Thailand -- which have exported LSFO cargoes to Singapore in H1 2020 --have started reducing their LSFO production towards the end of the second quarter, in some cases by as much as 50%, and have cut exports to focus on domestic bunker demand.

"Our maximum LSFO production capacity is around 300,000 mt/month, but we're producing less than 200,000 mt/month, about 40% less," a source close to South Korean refiner Hyundai Oilbank said. "Low sulfur bunker demand [in South Korea] has been fairly stable at approximately 600,000-650,000 mt/month, but we're also facing increased competition from ports like Shanghai, so the bunker premiums [in South Korea] have not increased much," said a source at South Korean refiner SK Energy, which is producing at 50% of its LSFO production capacity of 400,000 mt/month.

SK Energy has sold 40,000 mt of LSFO for July loading from its Incheon refinery, unchanged from June, another company source said. The average difference between delivered low sulfur bunker prices at South Korea and Shanghai stood at USD6.17/mt over Q2, versus the Q1 average of minus USD18.90/mt, when South Korean prices were lower, Platts data showed.

The situation is no different in Taiwan and Thailand, where most refiners have yet to offer any July-loading LSFO spot cargoes for export due to low margins, preferring instead to focus on domestic demand, or in the case of Taiwan's Formosa, adjust to temporarily producing higher sulfur cargoes while run rates at its three crude distillation units are reduced, company sources said.

Formosa has not sold any LSFO for loading in July, although the last two cargoes it sold, each 40,000 mt and loading over H1 June and mid-July contained 0.9% sulfur, higher than the maximum 0.5% sulfur specification they typically produce, according to traders who participate in the company's tenders.

PTT Global Chemical, the biggest LSFO exporter in Thailand, sold 60,000 mt of IMO-compliant fuel oil for July loading, down from 70,000 mt for June loading. The company normally supplies LSFO for the domestic market, while the balance is exported. "Domestic bunker demand is recovering," a PTTGC source said.

As MRC informed earlier, Formosa Petrochemical Corp (FPCC) restarted No2 cracker in Mailiao, Taiwan on 4 June after brief outage. The craker No2 of capacity 1.035m ethylene, 520,000 propylene tonnes/year was shut on 1 June 2020 on technical issues. The company is currently operating its No 2 cracker at around 90% of capacity after resuming operation on 5 June, according to a market source.

Ethylene and propylene are feedstocks for producing PE and PP.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.

MRC