Russian share of Europe oil market under threat as exports hit 20-year lows

MOSCOW (MRC) -- Russian oil exports to Europe are set to hit their lowest levels in two decades in July, with an output cut deal prompting other suppliers to fill the gap left by Moscow, reported Reuters with reference to data from traders and Refinitiv Eikon.

Russia is set to slash seaborne Urals supplies to Europe to 3.8 million tonnes (900,000 barrels per day) next month, its lowest since 1999, when President Vladimir Putin first came to power as prime minister.

“This is a shock for everyone ... Even the American oil is currently more profitable to refine ... Requests for oil supplies from the United States have increased,” a trading source said.

Light oil flows from the United States to Europe were close to 3 million tonnes in both May and June, just 1 million tonnes lower than a record high in March, Refinitiv Eikon data shows.

Supplies from the United States to Europe remain ample despite oil production decrease in the US by 2.1 million bpd from March, as oil prices have plummeted due to overproduction and the fallout from the coronavirus crisis.

Through May to July, Russia produced 2 million bpd less due to the global oil output cut deal, which Washington is not part of. With less Urals available, its prices have spiked, hurting the demand further.

Urals have traded at a hefty premium of more than USD2 per barrel to dated Brent, global benchmark, since April, up from a discount of around $4 per barrel.

Russian crude sales have also been hit by recovering oil production in Europe, where output had been stagnant for decades until Norway launched the huge Johan Sverdrup oilfield last year.

The new grade, JS Blend, has lower sulphur content than Urals, making it more attractive to some refineries. Norway is not part of the global cuts either and production at Johan Sverdrup is seen rising to 440,000 bpd this summer.

“There is a high risk of not finding a (Urals) cargo at all, so we are looking for alternatives from the start,” a trader at a European refinery said.

As MRC wrote before, Russian offline primary oil refining capacity was seen declining in June to 1.583 million tons from an upwardly revised plan of 4.168 million tons expected in May, reported Reuters in late June with reference to energy ministry data, as seasonal maintenance comes off its peak.

We also 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.

And 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 DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- Stepan reports second-quarter net income if USD35.8 million, 18.6% higher year-on-year (YOY), as strong demand for cleaning and disinfectant products due to COVID-19 more than offset weakness in construction and oilfield markets, said Chemweek.

Adjusted earnings of USD1.65/share was 10.0% higher YOY and handily beat the analysts’ consensus estimate of USD1.20/share, as reported by Refinitiv (New York). Net sales decreased 2.6% YOY, to USD460.5 million.

Surfactant operating income increased 51% YOY, to USD48.5 million, on sales up 6%, to USD332.3 million. The increase was primarily attributable to a 10% increase in global Surfactant volume and an improved product mix. The sales volume growth was principally due to higher demand in the global consumer product end markets driven by increased demand cleaning and disinfection products as a result of COVID-19, and a USD5.0 million operating income improvement in Mexico.

Polymer operating income fell 32% YOY, to USD15.5 million, on sales down 20%, to USD112.4 million. This decrease was mostly attributable to a 13% decline in sales volume versus prior year. Global rigid polyol sales volume declined 8% driven by Europe and North America, due to COVID-19 construction project delays and cancellations, partially offset by strong growth in China. Lower volume and higher raw material inventory cost within the phthalic anhydride business also contributed to the decline in operating income versus the prior year.

Specialty Product operating income fell 46% YOY, to USD3.2 million, on sales down 17%, to USD15.8 million. This decrease was primarily attributable to order timing differences in Stepan’s food and flavor business and lower margins within its medium chain triglycerides product line.

"2020 will continue to be a difficult year for the world, our country and our industry. We believe Stepan's business remains better positioned to perform than most as we demonstrated in the second quarter. Our teams are working to minimize vulnerabilities and capture opportunities that are available to us," said F. Quinn Stepan, Jr., Chairman, President and CEO. "We believe our Surfactant volume in the consumer product end markets should remain strong as a result of heightened demand for disinfection, cleaning and personal wash products. We anticipate that demand for surfactants within the agricultural market will approximate last year and that the oilfield market will remain down for the balance of 2020. Although the long-term prospects for our Polymer business remain attractive as energy conservation efforts and more stringent building codes should increase demand, we believe the business will be challenged in the short term as re-roofing and new construction projects continue to be deferred or canceled."

As MRC informed earlier, Stepan Co. says that, through subsidiaries in Mexico, it has entered into an agreement with Clariant (Mexico) to acquire Clariant's anionic surfactant business and associated sulfation equipment at Santa Clara, Mexico. The transaction is expected to close in the third quarter of 2020, subject to regulatory approvals and satisfaction of certain other requirements. Financial terms of the transaction were not disclosed.

Besides, in May 2020, Clariant’s CATOFIN catalysts was selected by Advanced Global Investment Co. (AGIC), a joint venture between Advanced Petrochemical Company (APC) and SK Group, to build a PDH facility in the Middle East.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, 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

MOSCOW (MRC) -- Indonesia's Pertamina is likely to keep planned import volumes in August tepid on the back of sluggish demand, adding further downside pressure to an already lackluster Asian gasoline market, industry sources told S&P Global Platts in the week that began July 19, said S&P Global.

Pertamina's August gasoline import volumes are pegged in the range of 5-6 million barrels, according to market participants, within the previously planned range in July, sources said. The muted import volumes come even as Indonesian domestic gasoline consumption witnessed an uptrend following the easing of large scale social restrictions, or PSBB, early-June.

The acting general manager of Pertamina MOR IV, Rahman Pramono Wibowo, said in a statement that the "average fuel consumption of gasoline in early July [has] increased by 20%, where daily consumption is currently at 2,100 kiloliters [per day]." The average daily consumption of gasoline was higher than May's average of 1,750 kilo liters/day, the statement added.

In May, as the country remained in PSBB, Indonesia's gasoline imports fell to 5.929 million barrels, the lowest since Platts started tracking the country's gasoline import volumes in 2013. The uptick in gasoline consumption mirrors increased activity, with driving across Indonesia recorded at 13% below baseline levels in the week ended July 12, in contrast to April's low of 70% below baseline levels, mobility data from Apple showed.

But with the import volumes for August far from the normal range of around 10 million barrels, sources remained bearish over supply-demand fundamentals. "It [the import volumes] is really very bad," a Singapore-based source said.

In 2019, Indonesia -- Southeast Asia's largest buyer of gasoline -- imported an average of 10.294 million barrels per month, according to data from Statistic Indonesia. Another source echoing similar views said "their Pertamina'] domestic refineries are still running. With the lower [gasoline] consumption rates, it seems unlikely that they Indonesia will come out to buy."

"Pertamina has been discharging cargoes at the end of the month. We saw this in June and it will happen in July again. For them [Pertamina] to come out on spot market they have to finish using these gasoline that is going into their tanks," a third source said.

With muted buying from Indonesia, supply-side pressures due to increased gasoline cargoes from China will continue to weigh in the near term, added market participants.

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 DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- The European Council decided, after a special meeting held on 21 July, to introduce a levy on non-recycled discarded plastic as part of the EU's COVID-19 recovery plan, reported Chemweek.

However, Germany's chemical industry association VCI (Frankfurt) had, prior to the EU Council’s meeting, expressed opposition to the project because it adds a regulatory and cost burden rather than supporting packaging recyclability.

The EU Council says, “As a first step, a new own resource will be introduced and apply as of 1 January 2021 composed of a share of revenues from a national contribution calculated on the weight of nonrecycled plastic packaging waste with a call rate of EUR0.80 per kilogram with a mechanism to avoid an excessively regressive impact on national contributions.”

The German chemical industry is critical of the project, because the “levy comes at an untimely time and sends the wrong signals. Europe's economy now needs more than ever the framework for more innovation, but not new regulations. The proposal also loses sight of the resource-saving effects plastics have and instead creates a false incentive to switch to less efficient materials," says Wolfgang Gro?e Entrup, CEO at VCI.

VCI notes that using plastics in packaging helps with the conservation of resources and the reduction of greenhouse gases. The recyclability of packaging is already at the heart of product developments in companies and it must be pursued consistently, it says. However, “recycling at all costs cannot be the answer to the problems we also see in the plastics sector, when resource conservation suffers from an overall view,” Gro?e Entrup says.

The proposed fee on non-recycled discarded plastic may also create an additional cost burden for plastics producers in Germany, VCI says. This is because the German government could decide to tax plastics producers in the country to recover the amount it had to pay the EU under the new levy, VCI says. This could hamper these companies' investment plans in resource-conservation technologies, VCI says.

"If we want to strengthen recycling, it only makes sense to promote and recognize sustainable technologies, but not to impose additional levies that slow down the necessary transformation processes," Gro?e Entrup says.

As MRC informed before, members of the European Parliament (MEPs) are proposing ways to step up green energy storage solutions such as hydrogen or home batteries, in a report that was adopted in one of the Parliament’s voting sessions on Friday, 10 July. The proposals outlined in the report are set to play a crucial role in reaching the goals of the Paris Agreement on Climate Change, as more efficient energy-storage options in the EU will help "spur decarbonization," the EU Parliament says. In addition, since solar and wind have a variable electricity output, more storage solutions should become available to secure supply, MEPs say.

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- Crude oil futures edged lower in mid-morning trade in Asia July 22 after an unexpected build in US crude inventories derailed an overnight rally on COVID-19 vaccine hopes and a stimulus package agreement in Europe, said S&P Global.

At 10:19 am Singapore time (0219 GMT), ICE Brent September crude futures were down 26 cents/b (0.59%) from the July 21 settle at $44.06/b, while the new front-month NYMEX September light sweet crude contract was 27 cents/b (0.64%) lower at USD41.65/b.

Front-month September ICE Brent futures briefly touched a four-month high above USD44.80/b during the US trading session as promising results from multiple COVID-19 vaccine trials and declining daily infection rates in the US and elsewhere renewed investor optimism.

This was further supported by a unanimous agreement among the 27 European Union member states July 21 for an unprecedented Eur750 billion emergency stimulus package aimed at offsetting the economic impact of the coronavirus and the prospects of a new trillion-dollar stimulus package by the US government, according to media reports.

"Crude oil prices gained as government stimulus packages raised hopes of a strong economic recovery. The unprecedented stimulus package the European Union leaders agreed too was also joined by regulators eyeing the potential approval of the first COVID-19 vaccine this year," ANZ analysts said in a note July 22.

However the rally lost steam after an inventory report released by the American Petroleum Institute July 21 estimated US crude oil inventories rose 7.5 million barrels in the week ending July 17, defying trader expectations of a 2 million-barrel draw, according to analyst reports.

"Oil markets do not have the luxury of looking through the rise in COVID-19 while gaining the same immediate sentiment boost from government stimulus that the forward-looking stock markets receive. When it comes to oil demand or commodities for that matter, it's all about the here and now," AxiCorp chief global markets analyst Stephen Innes said in a note July 22.

Market participants will look to the more definitive weekly US inventory report due for release by the Energy Information Administration later in the day for further cues.

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 DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

MRC