COVID-19 stabilization could push Brent oil prices to USD50/b: Abu Dhabi bank

MOSCOW (MRC) -- Brent crude prices could rise towards USD50/b by the start of 2021, if the COVID-19 pandemic is contained, though the path may be choppy, said Monica Malik, reported S&P Global with reference to chief economist at Abu Dhabi Commercial Bank.

"At the moment it is trading in a relatively tight band of between USD40 and USD45/b, and in the near-term, that's the range we expect it to see it remaining in," said Malik, on a July 16 webcast for the International Monetary Fund's MENA Economic Outlook. "In a case of global environment where you see COVID-19 controlled and global demand continuing to pick up, we expect oil by the end of this year and into next year moving towards the USD50/b range."
OPEC and its allies, including Russia, had implemented record oil production cuts of 9.7 million b/d in May, as the market was wallopped by the pandemic, but with many countries easing lockdown measures and economic activity picking up, the alliance is set to ease the cuts to 7.7 million b/d in August.

"We do expect the supply-demand mismatch to reverse in July, where demand outstrips supply, thanks to the (OPEC+) supply cuts," Malik said.

However, she noted that the sharp increase in inventories that were built in the first five months of the 2020 would take time to work down, even with the production cuts and pick-up in demand.

OECD oil stocks in May rose relative to the five-year average that OPEC+ has said it is targeting for the fifth straight month, coming in at 3.17 billion barrels -- 209.5 million above the benchmark, according to the latest OPEC monthly oil market report.

Another potentially bearish factor is the re-adjustment in the US shale production. If oil prices rise too fast, US producers may not stay down for as long as the OPEC+ coalition is looking for, Malik said.

But an additional assurance of stabilization comes from the key Gulf producers -- Saudi Arabia, the UAE and Kuwait -- voluntarily implementing deeper cuts when the market requires.

In June, Saudi Arabia cut an additional 1 million b/d of its crude oil production below its quota under the OPEC+ agreement, while the UAE and Kuwait followed suit with announcements they will cut an additional 100,000 b/d and 80,000 b/d, respectively.

Those cuts were discontinued in July but contributed to a substantial tightening of the market.

"If we see demand side pressure emerging again the core (Gulf) producers will adjust production to support the oil price," Malik said.

Current oil prices are still well below the budget breakeven prices for Gulf countries, but at a comfortable level for the economies from a fiscal stance, Malik said.

For 2020, Saudi Arabia's fiscal breakeven price stands at USD76.1/b, the United Arab Emirates is USD69.1/b, Oman is $86.8/b, and Kuwait's is USD61.1/b, according to the IMF.

The IMF on July 13 said Middle East oil exporters, which form the core of OPEC, are in for extreme pain in 2020, revising downward its estimate of economic growth to -7.3%. It said its forecast reflects the "'double whammy' from oil price fluctuations (and supply cuts) and the pandemic-linked lockdowns."

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

MOSCOW (MRC) -- Saudi Arabia's crude oil exports plunged to a nine-year low in May as the historic OPEC+ cuts began, reported S&P Global with reference to data released July 16 by the Joint Organisations Data Initiative.

Shipments dropped to 6.02 million b/d, the lowest since October 2010, from a record 10.237 million b/d just a month earlier. The 23-country OPEC+ coalition enacted a 9.7 million b/d production cut accord starting in May in response to the coronavirus crisis.

The drop in exports came as the kingdom's output declined to 8.486 million b/d, the lowest since December 2010, from the all-time high of 12.07 million b/d in April. The kingdom still managed to boost crude stockpiles to 147.561 million barrels from a 16-year low of 143.502 million barrels a month earlier.

OPEC and its allies will ease their record production cuts on schedule in August after they helped pushed oil prices back above $40/b from historic lows in April, ministers said July 15, confident that recovering global demand will soak up the additional supply.

The kingdom's oil product exports climbed to 1.456 million b/d, a 14-month high, from 1.098 million b/d in April.

Oil products include LPG, naphtha, motor and aviation gasoline, kerosene and diesel oil. The amount of crude processed by the kingdom's own refineries in May advanced to 1.929 million from 1.84 million b/d in April, the JODI data showed.

Saudi Arabia's direct use of crude burned for power generation climbed to a seven-month high of 407,000 b/d in May from 355,000 b/d in April.

Combining the exports, refinery intake and direct-use figures indicates Saudi Arabia supplied 8.356 million b/d to the market in May, down from 12.432 million b/d to the market in April.

The JODI database is maintained by the Riyadh-based International Energy Forum.

As MRC wrote previously, oil demand has rebounded close to 90 million b/d, partly reversing a slump in consumption caused by the COVID-19 pandemic, said Saudi Aramco's president and CEO Amin Nasser's statement in the transcript of an interview published on June 30.

We remind thatSaudi Aramco’s acquisition of petrochemical maker SABIC will accelerate the company’s downstream strategy and transform it into a global petrochemical player, said an official of the state oil giant's statement to al-Arabiya TV.

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) -- Chevron Corp restarted the 112,229 barrel-per-day (bpd) Pasadena, Texas, refinery night after completing a multi-unit overhaul that was extended because of the COVID-19 pandemic, reported Reuters with reference to sources familiar with plant operations.

The entire refinery was shut from mid-April until late last week with the last units returning to production on Tuesday, the sources said. The overhaul was originally to finish in mid-June, but was extended to mid-July.

As MRC informed earlier, in March 2020, Chevron Corp cut its capital spending budget by USD4 billion, leading a wave of cost-cutting announcements across the reeling oil-and-gas industry as the coronavirus pandemic had slashed demand and triggered a dramatic slide in oil prices.

We remind that US-based Phillips 66 remains open to developing another ethane cracker for its Chevron Phillips Chemical (CP Chem) joint venture, the refiner's CEO said in March 2018.

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.

Headquartered in San Ramon, California, Chevron Corporation is the the second-largest integrated energy company in the United States and among the largest corporations in the world. Chevron is involved in upstream activities including exploration and production, downstream activities including refining, marketing and transportation, and advanced energy technology. Chevron is also invested in power generation and gasification processes.
MRC

MOSCOW (MRC) -- Procter & Gamble (P&G) has pledged to ensure that its operational emissions are neutralised by 2030 - an aim is striving to achieve through investment in nature-based climate solutions, said the company.

Building on an existing pledge to halve Scope 1 (direct) and Scope 2 (power-related) emissions by 2030 against a 2010 baseline, the new commitment will see P&G using a mixture of insetting and offsetting to bring residual emissions across these scopes to net-zero. P&G estimates that its annual Scope 1 and Scope 2 emissions will be 30 million metric tonnes in 2030, once it has completed the shift to 100% renewable electricity.

While some insetting and offsetting initiatives centre around renewable energy and clean fuel, P&G has chosen to back nature-based projects which serve to protect, improve or restore habitats. Key focus areas will be peatlands, wetlands and forests.

"The company’s intent is to work with NGO partners to ensure any project it advances under this effort is appropriately vetted to ensure the project, its impacts, and any accounting methodologies used are credible and consistent with best practice,” P&G said in a statement. The consumer goods giant is working with Conservation International, WWF and the Abor Day Foundation already and says it is open to forging additional partnerships.

"Our role as leaders is to make a lower-emission economy possible, affordable and desirable for everyone,” P&G’s chief sustainability officer Virginie Helias said. “It is our responsibility to protect critical carbon reserves and invest in solutions that regenerate our planet."

While the new target does not cover Scope 3 (indirect) emissions, P&G is working with the Science-Based Targets Initiative (SBTi) to develop and deliver against new ambitions in this area. The firm’s previous carbon footprint mapping exercises have proven that the vast majority – 85% - of its Scope 3 emissions are associated with consumer use and disposal of products. As such, it sees communication with consumers as a key level for reducing emissions, providing on-pack and online information on responsible use.

Russia's output of chemical products rose by 4.4% year on year in May 2020 . Thus, production of basic chemicals increased year on year by 5.4% in the first five months of 2020. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-May.
MRC

MOSCOW (MRC) -- PT Chandra Asri Petrochemical (CAP) has reached on-spec output at its 400,000 tons/year linear low density polyethylene (LLDPE) unit following several weeks of facing technical difficulties that severely affected the availability of the grade, reported CommoPlast.

“However, we are still working to optimize operation rates. It might take a little bit of time,” a source close to the producer said. Meanwhile, market participants are not expecting spot availability to normalize anytime so soon as the producer might need to clear out the previous backlogs.

As MRC informed before, CAP began conducting a trial production at its newly expanded polyethylene (PE) plant in Cilegon in March 2020 to produce metallocene PE grade (MLLDPE). The company expanded PE capacity in 2019 by adding one more production line that pushed the total output to 736,000 tons/year. CommoPlast was informed that the newest 400,000 tons/year high density polyethylene (HDPE)/ linear low density polyethylene (LLDPE) swing line would be utilized for the MLLDPE trial production purpose.

According to MRC's ScanPlast report, May LLDPE shipments to the Russian market rose to 31,290 tonnes from 30,450 tonnes a month earlier, production increased. Overall LLDPE shipments to Russia totalled 153,080 tonnes in the first five months of 2020, down by 5% year on year. Production and exports increased by 2 times.

CAP is the largest integrated petrochemical company in Indonesia and operates the country’s only world-scale size Naphtha Cracker. The CAP plant is strategically located in Banten province, providing convenient access to key customers.
MRC