MOSCOW (MRC) -- Premiums for Mediterranean oil grades over dated Brent have eased in the past few days as European refiners turn to cheaper alternatives to Russian Urals and other crudes, said Hydrocarbonprocessing.
The price differential for Russia’s Urals oil surged well above USD2 per barrel a week ago after the loading plan for July showed a 45% fall in exports from Baltic ports from June, but has pulled back significantly since then. Urals crude oil premiums eased to below USD1.50 per barrel on average this week in northwest Europe - down some 80 cents per barrel from a week ago, Refinitiv Eikon data showed.
Cargoes with prompt loading dates traded at a premium below USD1 per barrel, market participants said. “Sellers noticed refiners were well-prepared to leave the Russian grade aside, so they had to either limit their appetite or stay with unsold barrels," a source with an international trading firm said.
European refiners expected Urals oil loadings to be low in July after a surge in Russian gasoline demand in June prompted producers to feed the domestic market. Exports have also been curbed by an OPEC+ output pact. Refiners turned to alternatives available in the market - mostly U.S. oil, which remains relatively cheap, and Nigerian and Angolan crude, two traders said.
"We’ve seen sour refineries taking sweet barrels instead as it’s cheaper now," a trader in European market said. Caspian grades, Kazakhstan’s CPC Blend and Azerbaijan’s Azeri BTC have also dipped against dated Brent from recent multi-year records.
CPC Blend eased by USD1 per barrel this week, while Azeri BTC is down by some 70 cents per barrel, according to Refinitiv Eikon data. "The market got overheated after the quick transition from oil flood to supply deficit,” a trader with refiner in Mediterranean market said. “Now it’s trying to find a balance."
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