Crude edges lower as surprise build in US crude stocks deflates rally

MOSCOW (MRC) -- Crude oil futures edged lower in mid-morning trade in Asia July 22 after an unexpected build in US crude inventories derailed an overnight rally on COVID-19 vaccine hopes and a stimulus package agreement in Europe, said S&P Global.

At 10:19 am Singapore time (0219 GMT), ICE Brent September crude futures were down 26 cents/b (0.59%) from the July 21 settle at $44.06/b, while the new front-month NYMEX September light sweet crude contract was 27 cents/b (0.64%) lower at USD41.65/b.

Front-month September ICE Brent futures briefly touched a four-month high above USD44.80/b during the US trading session as promising results from multiple COVID-19 vaccine trials and declining daily infection rates in the US and elsewhere renewed investor optimism.

This was further supported by a unanimous agreement among the 27 European Union member states July 21 for an unprecedented Eur750 billion emergency stimulus package aimed at offsetting the economic impact of the coronavirus and the prospects of a new trillion-dollar stimulus package by the US government, according to media reports.

"Crude oil prices gained as government stimulus packages raised hopes of a strong economic recovery. The unprecedented stimulus package the European Union leaders agreed too was also joined by regulators eyeing the potential approval of the first COVID-19 vaccine this year," ANZ analysts said in a note July 22.

However the rally lost steam after an inventory report released by the American Petroleum Institute July 21 estimated US crude oil inventories rose 7.5 million barrels in the week ending July 17, defying trader expectations of a 2 million-barrel draw, according to analyst reports.

"Oil markets do not have the luxury of looking through the rise in COVID-19 while gaining the same immediate sentiment boost from government stimulus that the forward-looking stock markets receive. When it comes to oil demand or commodities for that matter, it's all about the here and now," AxiCorp chief global markets analyst Stephen Innes said in a note July 22.

Market participants will look to the more definitive weekly US inventory report due for release by the Energy Information Administration later in the day for further cues.

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.

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MOSCOW (MRC) -- BASF announced the commercial launch of Altrium, a new Fluid Catalytic Cracking (FCC) catalyst for mild to heavy resid feedstock, according to Hydrocarbonprocessing.

Altrium incorporates BASF’s newest Advanced Innovative Matrix (AIM) and the proven technology IZY (Improved Zeolite-Y). It has been optimized to increase transportation fuels yield (gasoline and distillate) while having a deeper coke selective bottoms conversion of resid feeds.

Altrium’s commercial trials have confirmed its ability to deliver better economic performance through coke selectivity, deeper resid bottoms conversion, and by improving the gasoline and distillate yields that help increase a refiners’ profitability.

BASF’s AIM technology consolidates several novel matrix technologies that are selectively incorporated into the catalyst design for a broad selection of performance targets and applications. AIM technology enhances the performance of the FCC catalysts through the creation of a unique meso pore architecture to improve access for heavy resid molecules and improves the metals tolerance of the catalyst. Linking the AIM technology together with IZY technology creates this unique catalyst which can help refiners improve margins and provide the operating flexibility needed to quickly react to market changes.

“BASF continues to drive innovation to help our customers be more successful and Altrium is a creative combination of technologies creating value for our customers,” says Detlef Ruff, Senior Vice President, Process Catalyst at BASF. “We are excited to see performance improvement with Altrium and the potential to make the refineries more profitable.”

“BASF continues to rapidly respond to our customers’ needs,” says Jim Chirumbole, Vice President, Refining Catalysts at BASF. “Customers told us they needed a coke selective bottoms upgrading catalyst improvement and this product is a step up to meet the needs of the resid market looking to maximize transportation fuels. We are delighted to deliver this new product to the market.”

As MRC reported earlier, BASF Total's cracker in Port Arthur, Texas, is undergoing maintenance and expected to restart on 23 July, 2020, according to the company's statement in a filing with Texas Commission on Environmental Quality (TCEQ). An unexpected outage occurred at BASF Total Petrochemical’s joint-venture (JV) olefins unit at Port Arthur, Texas, on Thursday afternoon, 11 June, 2020. The cause of the outage is being investigated, with a compressor shutdown cited as a possible factor, according to TCEQ filing. The JV’s steam cracker at Port Arthur has a production capacity of more than 1 million metric tons/year of ethylene and 544,000 metric tons/year of propylene, according to IHS Markit data.

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.

BASF is the leading chemical company. It produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases, basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries. BASF generated sales of EUR59 billion in 2019.
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MOSCOW (MRC) -- Oil and gas companies Total and ExxonMobil have idled workers at the troubled Papua New Guinea LNG expansion project due to the COVID-19 pandemic, project partner Oil Search said July 21 in its earnings statement, said S&P Global.

The lower staffing is part of a reduction in Oil Search's global workforce of around 34% by year end as part of its restructuring and cost cuts. This signals further complications at the project that has already been delayed due to disagreements between the new Papua New Guinea government and the project partners.

"Due to COVID-19 and its impact on oil and gas prices, Total and ExxonMobil have demobilized the majority of their LNG expansion technical and commercial staff," the Australian Securities Exchange-listed Oil Search said. Oil Search did say that it was maintaining its 2020 investment expenditure guidance of USD440 million-USD530 million, of which the LNG expansion activities in PNG are part of.

ExxonMobil and the government of PNG had suspended negotiations around a key project component, the P'nyang Gas Agreement, in January as they couldn't reconcile over production sharing. The parties conducted informal exploratory discussions that were completed in May when the parties re-engaged in negotiations, Oil Search said.

But the pandemic has generally stalled project work across Australia's oil and gas sector, and Oil Search said it is undertaking a strategic review whose outcome will be announced in the fourth quarter of 2020. RBC Capital Markets analyst Gordon Ramsay that Oil Search benefited in terms of pricing during the April-June quarter by a comparatively lesser exposure to spot LNG prices. "LNG pricing was significantly stronger than what Woodside reported last week," he said.

He said this was due to Oil Search's proportion of spot sales to overall volumes being 22% compared to Woodside's 46%. Oil Search reported its average realized LNG and gas price of USD7.34/MMBtu in the April-June quarter, which was down from USD9.30/MMBtu in the same period last year and USD9.08/MMBtu in the January-March period.

Ramsay said this fell slightly below RBC's estimate of around USD7.80/MMBtu, which reflected a two to three month lag reported by Oil Search on its LNG pricing. The company also increased its PNG LNG production guidance for 2020 to 24.5 million-25.5 million barrels of oil equivalent, up from a previously expected 24 million-25 million boe. The increase was due to a strong first half production resulting from a decision to defer maintenance to 2021, which had previously been scheduled for May.

Oil Search reported the company's net production from PNG LNG at 6.4 million boe for the June quarter, up from 6.16 million boe a year earlier and from 6.35 million boe in the January-March quarter. That represents an annualized rate of 8.8 million mt/year.

As MRC informed before, Total has recently disclosed that it is evaluating construction of a new gas cracker at its Deasan, South Korea, joint venture (JV) with Hanwha Chemical.

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.

Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
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MOSCOW (MRC) -- Covestro has recently introduced a new polycarbonate (PC) film with more than half of its carbon content sourced from plant-based raw materials, reported Chemweek.

The partially biobased film, in which a portion of oil-based primary products are replaced by biomass material, will be the first in the company’s product portfolio and will reduce the film’s carbon dioxide (CO2) footprint by approximately 20%, it says. Increased use of alternative resources for in-house production is part of the company’s long-term strategic program as it “fully commits” to a circular economy, it adds.

The new film can be used in applications in the electrical, consumer, and automotive industries, as is typical for conventional PC films, Covestro says.

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.
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MOSCOW (MRC) -- AkzoNobel says that its net profit in the second quarter of 2020 dropped 44% year on year (YOY), to EUR129 million (USD149 million), said Chemweek.

Sales went down 19%, to €1.98 billion from EUR2.45 billion in the same period of the previous year. The fall in sales, which dragged profits down, is mainly due to the impact of COVID-19 on end-market demand that resulted in 18% lower volumes YOY, the company says. EBITDA fell 25% YOY, to EUR297 million, the company says. Margin-management and cost-saving programs were able partly to offset the negative effect of lower demand, the company says. AkzoNobel announced preliminary results last week.

"Despite lower end-market demand, our business return on sales increased 30 basis points to 14% for the second quarter as a result of continued focus on margin-management and cost-saving measures,” says Thierry Vanlancker, CEO at AkzoNobel. Total cost savings delivered EUR116 million, of which EUR38 million in structural savings related to transformation initiatives, the company says.

The company's performance coatings business was hurt most severely by the impact of COVID-19 on end-markets, especially the automotive and aerospace industries, recording a 24% YOY decline in sales, to €1.09 billion, AkzoNobel says. Sales of the company's decorative paints business went down 10% YOY, to EUR899 million, it says. Raw material and other variable costs in the second quarter were EUR32 million lower compared with the year-earlier quarter, the company says.

For the first half of 2020, the company’s net profit was 18% lower YOY at EUR243 million, AkzoNobel says. Sales were down 13%, to €4.04 billion compared with EUR4.63 billion in the first half of 2019. EBITDA decreased by 4%, to EUR574 million, the company says.

Earlier this year, AkzoNobel suspended its 2020 financial ambition in response to the significant market disruption resulting from the pandemic. Despite the easing of headwinds related to COVID-19 during the second quarter, with sales almost 30% lower in April and almost 5% lower in June, the economic environment will remain uncertain in the second half due to the pandemic, the company says. Raw material costs are expected to have a favorable impact, and continued margin-management and cost-saving programs are in place to address the current challenges, the company says.

As it was written before, AkzoNobel finalized the acquisition of BASF’s global Industrial Coatings business, which supplies a range of products for industries including construction, domestic appliances, wind energy and commercial transport, strengthening its position as the global number one supplier in coil coatings.

As MRC informed earlier, BASF would expand the capacity of ethylene oxide and ethylene oxide derivatives at its Verbund site in Antwerp, Belgium. The total investment adds about 400 000 tpy to BASF’s production capacity for the corresponding products with an expected investment amount exceeding EUR500 million.

Ethylene is a feedstock for producing polyethylene (PE).

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.

Akzo Nobel N.V., trading as AkzoNobel, is a Dutch multinational, active in the fields of decorative paints, performance coatings and specialty chemicals. Headquartered in Amsterdam, the company has activities in more than 80 countries, and employs approximately 55,000 people. Established in 1992 and specializing in sustainable water-based and advanced eco-friendly products, Mapaero operates a production facility in France and has around 140 employees.

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