Saudi Arabia may raise August crude oil prices to Asia

MOSCOW (MRC) -- Top oil exporter Saudi Arabia may raise its August official selling price (OSP) for crude sold in Asia, hiking for a third straight month due to rising Middle East benchmarks and a rebound in Asian refining margins, reported Reuters with reference to industry sources.

Three sources from Asian refineries expect the August OSP for flagship Arab Light crude to rise, although forecasts range from USD1 a barrel to as much as USD3 a barrel, a Reuters survey showed.

A fourth source expects prices to remain flat or rise just 10-20 cents a barrel, while another called on Aramco to roll over its July prices to August or cut by some 50-60 cents a barrel.

“Looking at market structure and margins, OSPs should go up, but actually refiners are not making much money now ... Prompt refining margins improved but forward margins still look lackluster. If OSPs rise by USD1-USD2, refiners will have a hard time,” the source said.

The front-month Dubai cash futures spread rose by USD3.60 in June, thanks partly to tighter supply, while Asia’s margins for gasoline, naphtha, gasoil and jet fuel improved on demand recovery.

LSFO margins were pressured by weak demand and excess supplies, while HSFO margins held relatively firm.

Saudi OSPs for lighter grades such as Arab Extra Light and Arab Light could rise less than for heavier grades, with August-loading peer light sour grades from Abu Dhabi - Murban and Das - traded at discounts to their OSPs in the spot market.

From August, the supply of Middle East crude could increase as OPEC and Russia will likely ease record oil production cuts.

Four OPEC+ sources told Reuters no discussions have taken place so far about extending record 9.7 million barrels per day (bpd) in cuts into August, meaning they were most likely to be eased to 7.7 million bpd until December.

Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million bpd of crude bound for Asia.

State oil giant Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.

Saudi Aramco officials as a matter of policy do not comment on the kingdom’s monthly OSPs.

As MRC informed earlier, on June 17, Saudi Aramco said it completed the share acquisition of a 70% stake in petrochemicals company Saudi Basic Industries Corporation, or SABIC, from the Public Investment Fund, the sovereign wealth fund of Saudi Arabia, for a total purchase price of Riyal 259.125 billion (USD69.1 billion). However, the transaction terms have been changed to increase the timeline over which Aramco makes the payments by almost three years. An upfront cash payment of 36% of the deal value has also been eliminated from the deal.

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) -- Sasol Ltd. warned of a further delay at its giant US chemicals project, pushing back the startup of the final unit by a couple of months, reported Bloomberg.

The Lake Charles complex in Louisiana has been dogged by mismanagement and cost overruns, forcing the South African company to accelerate asset sales to reduce debt. The latest holdup follows a fire that damaged the site’s low-density polyethylene (LDPE) unit back in January.

“The unit is expected to achieve beneficial operation before the end of October,” rather than “before September” as previously planned, Sasol said Thursday. “Challenges were experienced in the completion of the restoration process, resulting in a slight delay.”

The company has piled on debt to develop the Lake Charles site, whose cost has risen sharply from early estimates to almost USD13 billion. Setbacks at the development, coupled with oil’s crash amid the coronavirus pandemic, have dragged Sasol’s shares down more than 50% this year. The stock slipped 1.5% on Thursday at 10:53 a.m. in Johannesburg.

Sasol expects a loss from the US project in 2020 after the spread of the virus wiped out fuel demand and sent oil prices tumbling. The company has had a total of 774 Covid-19 infections, mainly in South Africa, with two related deaths, it said in a statement. A continuous increase in cases “could potentially impact our operations in the near term,” it said.

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. SasolпїЅs 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 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.

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

MOSCOW (MRC) -- Air Products today reported net income down 9% year-on-year (YOY), to USD446.5 million, on sales down 7% YOY, to USD2.07 billion. Adjusted earnings fell 7% YOY, to USD2.01/share, slightly ahead of analysts’ consensus estimate of USD1.99/share, as reported by Refinitiv (New York, New York), said Chemweek.

COVID-19 reduced earnings by 35-40 cents/share, with a 3% YOY drop in volumes partly offset by a 2% increase in prices and cost cuts.

"Our onsite business—which represents more than half of our sales—remains stable, and we continued to execute on our growth strategy, announcing two new megaprojects in Saudi Arabia and Indonesia which together represent planned Air Products investment of approximately USD5.7 billion," says Air Products chairman and CEO Seifi Ghasemi.

Americas segment sales declined 11% YOY, to USD850 million, while segment adjusted EBITDA was roughly flat, at $411 million. Volumes fell by 5% YOY, largely due to lower merchant volumes on COVID-19, and energy pass-through was down 6%. Selling prices rose 2% YOY, boosting margins.

Asia segment sales fell 4% YOY, to $652 million, while segment adjusted EBITDA declined 2%, to USD327 million. Volumes fell 3% YOY, on COVID-19 impacts and maintenance outages at certain plants. Pricing grew 2% YOY, although margins declined.

EMEA segment sales decreased 13% YOY, to $430 million, while segment adjusted EBITDA was down 11%, to USD170 million. Volumes declined 7% YOY, due to lower merchant demand on COVID-19, and energy pass-through declined 6%. Prices grew by 3% YOY, although margins still fell.

As MRC reported earlier, in December 2014, SIBUR-Khimprom (a subsidiary of SIBUR Holding) and Air Products entered into an agreement to build a new air separation unit in Perm and to supply the facility with locally produced gases. The unit came on-stream in 2016. After the commissioning Air Products will supply industrial gases for SIBUR-Khimprom over the next 20 years.

Besides, we remind that in September 2019, SIBUR, the largest petrochemical comples in Russia and Eastern Europe, and BASF, Geman petrochemical major, agreed to closely cooperate on sustainable development to share their best practices.

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

MOSCOW (MRC) -- China is set to boost its gasoline and gasoil exports from August as state-run refiners actively seek to clear the country's surging oil product stockpiles with heavy rains and floods significantly denting domestic consumer and industrial fuel demand, said S&P Global.

Since June, 23 provinces and Chongqing municipality have been suffering from heavy rains and floods. During the period, the region along the Yangtze river recorded the highest accumulative rainfall since 1961 at 410.4 mm, according to China Meteorological Administration.

As a result, the regions' transportation, construction and broader industrial activities came to a grinding halt, putting the brakes on the domestic fuel demand recovery since the peak of COVID-19 pandemic during February-April.

Despite the set back in domestic fuel demand, Chinese refineries have been maintaining high run rates in order to digest record-high crude imports, prompting oil product inventory to surge. An official from a Sinopec refinery in Wuhan said its oil product storage tanks were all full despite the plant's throughput cut to about 80% since July 14 from over 100% previously.

Wuhan is one of the major cities located in the middle-stream of Yangtze river that suffered from floods. China's crude throughput reached an all-time high of 14.14 million b/d in June, up 9% year on year, data from National Bureau of Statistics showed.

The country's crude throughput is expected to remain high in July as there are still a large number of crude oil cargoes to be discharged. More than combined total of 80 million barrels of tankers are still waiting in Chinese waters for more than 15 days because of the ongoing port congestion, data intelligence firm Kpler showed on July 21.

The surge in fuel inventories has put a lot of pressure on China's major fuel exporters to actively seek overseas outlets to clear their excess supplies at home. As almost all the state-owned refineries along the Yangtze river are managed by Sinopec, it is necessary for the refining giant to manage the domestic demand-supply balance and lead the exports, industry and trading sources said.

"We have proposed an increase in product exports next month to the head office in order to offset product inventory pressure," said an official at a Sinopec refinery in Shanghai.

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) -- Covestro swung to a net loss of EUR52.0 million (USD60.3 million) in the second quarter from a net profit of EUR189 million in the corresponding period of last year on sales down 32.9% to about EUR2.2 billion, according to Chemweek.

The company confirms that EBITDA plunged 72.8% year on year (YOY) to EUR125 million, which it had communicated in preliminary results released earlier this month. The figures were “significantly impacted by the further spread” of the COVID-19 pandemic in Europe and North America, which caused core volumes to decrease 22.7% YOY on a “massive drop in demand in all key customer industries.”

The strongest impact from COVID-19 on volumes was in April and there has been sequential improvement since mid-May, the company says. Sales in EMEA and North America declined more sharply than in APAC, mainly due to the time lag in the impact of the pandemic, Covestro says.

Despite the slump, EBITDA was ahead of the company’s earlier expectations due to “an accelerated recovery in demand,” especially in the polycarbonates segment, in June, Covestro says. Free operating cash flow swung to a positive €24 million from a negative EUR55 million a year earlier as a result of strict liquidity management, the company says.

“As anticipated, the global coronavirus pandemic had a significant impact on our results in the second quarter,” says Markus Steilemann, CEO of Covestro. “We took the right measures in timely fashion to protect our employees, maintain production and supply chains, and ensure continuous supply to our customers. We have managed to accomplish that very successfully to date and will continue to steer Covestro resolutely through this crisis.”

The company has confirmed its full-year guidance, which it had revised in April. However, the uncertainties associated with the COVID-19 pandemic and its impact on economic development remain high, the company notes.

All Covestro’s businesses were hurt by COVID-19 in the second quarter. The polyurethanes segment saw core volumes drop 25.9% YOY and the trend affected all key customer industries, the company says. Sales were down 38.7% to EUR913 million, mainly due to the lower volumes sold and lower average selling prices. EBITDA for the business swung to a negative EUR24 million from a positive EUR172 million a year earlier as margins weakened, Covestro says.

Second-quarter core volumes in the polycarbonates segment fell 14.4% YOY. The decreased volumes, a result of significant drops in demand from the automotive and transport industries, were cushioned by less of a decline in volumes from the electrical, electronics, and household appliances industries and volume growth in the construction industry. Sales decreased 27.8% YOY to €648 million as selling prices declined and EBITDA plunged 37.7% to EUR96 million.

Core volumes in the coatings, adhesives, and specialties segment were down 25.3% YOY. The pandemic resulted in far weaker demand from key customer industries, a trend that was reflected in particular by a downturn in volumes in the automotive and transport industries. Sales of the business fell 28.7% to €443 million, mainly due to the decline in volumes and lower selling prices. EBITDA dropped 60.0% to EUR60 million as margins softened.

Covestro’s management and supervisory boards, as well as its workforce, are making a joint solidarity contribution to enhance the company’s resilience in the current environment. For Covestro’s German businesses, the management board and employee representatives have agreed on a model to reduce working hours and remuneration for all employees by the end of November 2020. All Covestro’s group companies outside Germany are implementing comparable country-specific, cost-saving measures.

As MRC informed earlier, Covestro has closed the sale of its European polycarbonates (PC) sheets business to the Munich-based Serafin Group effective January 2, 2020. This includes key management and sales functions throughout Europe as well as production sites in Belgium and Italy.

According to MRC's ScanPlast report, Russia's estimated PC consumption (excluding imports and exports to/from Belarus) rose in January-May 2020 by 19% year on year to 38,900 tonnes (32,700 tonnes a year earlier).

Covestro (formerly Bayer MaterialScience) is an independent subgroup within Bayer. It was created as part of the restructuring of Bayer AG from the former business group Bayer Polymers, with certain of its activities being spun off to Lanxess AG. Covestro manufactures and develops materials such as coatings, adhesives and sealants, polycarbonates (CDs, DVDs), polyurethanes (automotive seating, insulation for refrigerating appliances) etc. With 2018 sales of EUR 14.6 billion, Covestro has 30 production sites worldwide and employs approximately 16,800 people (calculated as full-time equivalents) at the end of 2018.
MRC