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IEA raises 2020 oil demand forecast but oil refining may fall more than IEA anticipates

July 14/2020

MOSCOW (MRC) -- The International Energy Agency (IEA) bumped up its 2020 oil demand forecast on Friday but warned that the spread of COVID-19 posed a risk to the outlook. But oil refining activity in 2020 is set to fall by more than the IEA anticipated last month and to grow less in 2021, reported Reuters with reference to its statement.

The Paris-based IEA raised its forecast to 92.1 million barrels per day (bpd), up 400,000 bpd from its outlook last month, citing a smaller-than-expected second-quarter decline.

"While the oil market has undoubtedly made progress ... the large, and in some countries, accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside," the IEA said in its monthly report.

The easing of lockdown measures in many countries caused a strong rebound to fuel deliveries in May, June and likely also July, the IEA said.

But oil refining activity in 2020 is set to fall by more than the IEA anticipated last month and to grow less in 2021, it said.

Demand in 2021 will likely be 2.6 million bpd below 2019 levels, with kerosene and jet fuel due to a drop in air travel accounting for three-quarters of the shortfall.

"For refiners, any benefit from improving demand is likely to be offset by expectations of much tighter feedstock markets ahead. Refining margins will also be challenged by a major product stocks overhang from the very weak second quarter of 2020," the IEA said.

On the supply front, the IEA said the Organization of the Petroleum Exporting Countries and other producers including Russia, a grouping known as OPEC+, had shown 108% compliance with their pact to rein in output.

Market driven cuts had also affected other producers, especially the United States, though US supply was expected to slowly recover in the second half of 2020 while the lifting of force majeure on exports of Libyan crude could add another 900,000 bpd to global markets by the end of the year.

As MRC wrote 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.


mrcplast.com
Author:Margaret Volkova
Tags:Europe, PP, PE, LLDPE, crude and gaz condensate, PP random copolymer, propylene, ethylene, petrochemistry, BASF, Borealis, BP Plc, PolyOne, Sabic, Total Petrochemicals, Rossiya, USA.
Category:General News
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