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Sweeter, lighter, cheaper: refiners seek oil to meet rising gasoline demand

July 06/2020

MOSCOW (MRC) --  With more cars taking to the roads as coronavirus lockdowns ease, demand for lighter, sweeter oil more suitable for refining into gasoline is ticking up, said the Hydrocarbonprocessing.

European refiners especially are moving away from sour varieties like Russian Urals, which have risen in price since a supply cut pact by producer countries made the grades scarcer, towards alternatives such as U.S. West Texas Intermediate (WTI), West African grades, CPC Blend and Azeri oil.

"Many discounted barrels from the U.S. are arriving in Northwest Europe," one European importer of both Nigerian and U.S. oil said. "Demand is increasing from a bottom in April, and in July and August demand should be higher," they added.

Although gasoline stocks in northwest Europe remain not far from all-time highs and refining margins are still in the doldrums, they fell by almost 9% in the week to Thursday in the third consecutive weekly drop. The bargain price of lighter, sweeter crude is hard to refuse.

"Refiners are switching to sweet. And the arbitrage is open, so WTI is being offered in the Mediterranean and Asia with (strong) demand," another trader said. Nigeria in particular hopes that slow sales brought on by volatility and long transit times to key markets will soon end.

Mele Kyari, head of the Nigerian National Petroleum Corporation, said in June that the countrys oil would be the grade of choice with the rise in consumption being driven by gasoline-rich crude. Still, flows from West Africas top oil exporter to Europe have been the lowest in two years, according to Refinitiv Eikon data, while volumes of cheaper U.S. light oil hover near all-time highs.

But with WTI prices firming in Europe to around USD1 above dated Brent, Nigerian grades at around the same price are coming into play, traders said. Meanwhile, CPC Blend is expected to sell at a premium to dated Brent with traders expecting a reduction in export volumes.

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.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, petrochemistry.
Category:General News
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