Crude oil climbs as demand outlook firm amid slowing virus spread, EU stimulus

MOSCOW (MRC) -- Oil futures settled at four-month highs July 21 as positive COVID-19 vaccine news and the passage of a European stimulus package boosted demand outlooks, reported S&P Global.

NYMEX August WTI was up USD1.15 at market close to settle at USD41.96/b and ICE September Brent climbed USD1.04 on the day to finish at USD44.32/b.

Front-month ICE Brent last settled higher on March 6 while front-month WTI was strongest since March 5.

"Crude prices are surging after both EU leaders wrapped up a landmark rescue fund and as the US seems to be getting a handle of the coronavirus spread," OANDA senior market analyst Edward Moya said. "Oil is tentatively breaking out of its tight trading range, but still seems to lack a strong enough catalyst for WTI crude to break above the USD45 level."

Oil prices climbed overnight after European Union leaders announced a Eur750 billion stimulus package aimed at offsetting the economic impact of the coronavirus crisis. The stimulus report came on the heels of reports on July 20 that a vaccine jointly developed by British drugmaker AstraZeneca and Oxford University has been shown to lower immune responses with minimal side effects.

While the positive headlines regarding vaccine treatments was bullish for forward demand outlooks, there are signs that the recent resurgence in COVID-19 has begun to fade.

The number of new COVID-19 infections reported daily in the US has steadily declined since a July 16 peak of nearly 76,000, according to New York Times data. On July 20, the seven-day moving average of new cases declined for the first time since early June. Worldwide, daily new infections has dropped for four consecutive days from a record high of 252,500 on July 16 to 214,600 on July 19, latest data from John Hopkins University showed.

Second-month WTI futures settled at a 4 cents/b premium to the front-month contract, marking the first time prompt month futures have been in backwardation since mid-May.

Energy prices were also supported by a weaker US dollar. Front-month ICE US Dollar Index futures fell to 95.145 in afternoon trading, the weakest since March 9. Oil prices and the US dollar are typically inversely correlated.

Refined product futures moved sharply higher on the day. NYMEX August RBOB settled 5.12 cents higher at USD1.2797/gal and August ULSD was up 4.45 cents at USD1.2800/gal.

As MRC informed previously, 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.

And 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.
MRC

MOSCOW (MRC) -- Crude throughput at China's domestic refineries is likely to hit another record high in July as the state-owned oil companies, which collectively account for 69% of the country's refining capacity, have boosted their average utilization rate to a six-month-high of 83.6% this month from 80% in June, data collected by S&P Global showed July 24.

China's crude throughput jumped 9% year on year to hit an all-time-high of 14.14 million b/d in June, General Administration of Customs data showed.

Persistent leaps in its throughput would help China continue to actively digest huge volumes of crude oil cargoes purchased during the second quarter.

The higher run rate in July is likely driven by Sinopec and PetroChina's flagship refineries, which resumed operations this month after undergoing maintenance works. This include Sinopec's 23 million mt/year Zhenhai Petrochemical and the 13.8 million mt/year Tianjin Petrochemical refineries, as well as PetroChina's 2.05 million mt/year Dalian Petrochemical refinery.

Moreover, Sinopec's new 10 million mt/year Zhongke Petrochemical has been running at 50% of its capacity in July after its official start on June 16, according to market sources.

The increased runs at these refineries have tempered the impact of throughput cuts by some of their peers, including those along the Yangtze River, after widespread flooding in about 23 provinces forced them to cut output on weakening consumer and industrial oil consumption and alter their scheduled maintenance plans, Platts data showed.

Platts collected information for 38 state-owned refineries in July, with a combined capacity of 8.6 million b/d covering 19 Sinopec refineries, 17 PetroChina refineries, and CNOOC's Huizhou Petrochemical as well as Sinochem's Quangzhou Petrochemical.

These refineries plan to process 7.2 million b/d of crude in July. Sinopec led the pack with a four percentage point increase in run rates from June, while PetroChina and CNOOC each raised rates by three percentage points.

In total, at least 20 state-owned refineries across the country, which have no maintenance plan, have cut run rates in July by 1-17 percentage points from June. These comprise seven refineries under PetroChina, 12 from Sinopec, and Sinochem's solo refinery Quanzhou Petrochemical.

The 8.5 million mt/year Sinopec-SK Wuhan Petrochemical cut the most, by 17 percentage points from June, to run at an average 82% of its capacity this month as heavy flooding interrupted transportation for sending out its oil products, Platts reported.

Wuhan is one of the cities in the middle-stream of Yangtze River that has been battered by recent floods.

Meanwhile, PetroChina's refineries - the 7 million mt/year Jinxi Petrochemical and the 5 million mt/year Ningxia Petrochemical - have been shut over the month for maintenance, capping the total throughput.

On the other hand, independent refineries' run rates still remain high despite declining slightly from June amid narrowing margins. They account for about 31% of China's refining capacity.

Zhejiang Petroleum & Chemical continued to operate at higher run rates of its nameplate capacity of 20 million mt/year in July, compared with 130% in June, while the 20 million mt/year Hengli Petrochemical (Dalian) lowered run rates slightly to around 108% in July, down from 115% in June, information collected by Platts showed.

The 45 small-scale independent refineries in Shandong province lowered their average run rate to around 72.7% as of July 22 from a record high of around 79% in June, according to local information provider JLC.

In contrast, the Shandong refineries' average run rate was at 60.2% in July 2019 and 72% in December 2019, when China's throughput hit the previous record high of 13.84 million b/d before the COVID-19 outbreak.

The average refining margin of the small-scale independent refineries was at Yuan 19/mt ($2.74/mt) in the week started July 19, dropping from about Yuan 285/mt in June, according to JLC.

As MRC wrote before, top Chinese state refiner Sinopec Corp said in mid-June it had started up a USD6 billion new refinery and petrochemical plant in south China, making it the country’s third integrated complex to start operations in the past 18 months or so. The Sinopec venture, situated in coastal city of Zhanjiang, comprises a 200,000 barrel per day (bpd) crude oil refinery and an 800,000 tonne-per-year ethylene facility, built at a cost of 44 billion yuan (USD6.2 billion), Sinopec said in a statement.

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.
MRC

MOSCOW (MRC) -- Givaudan (Vernier, Switzerland) says it is acquiring French biotechnology company Alderys (Orsay, France) as part of its long-term strategy to expand its capabilities in bioengineering technologies, said S&P Global.

No value for the transaction has been given, although Givaudan says Alderys’ business would have represented EUR3 million (USD3.3 million) of incremental revenue to its results in 2019 on a proforma basis. The transaction will be funded from existing resources, it adds.

Alderys, founded in 2009, develops innovative approaches to the biological engineering of valuable compounds from renewable plant feedstock. The projects it develops are aimed at the chemical and cosmetic industry sectors, as well as nutrition, and are “fully complementary” to Givaudan’s fragrance and active beauty businesses, according to Givaudan.

"It will allow us to expand our portfolio of natural and biosourced products, thanks to their strong research and development bioengineering platform. It will be an additional tool to drive our future development and innovation in the active cosmetic ingredients space and beyond,” says Maurizio Volpi, president/fragrance division at Givaudan. “Alderys has a strong track record in designing innovative biological pathways to produce environmentally-friendly raw materials, which is essential to the way we develop our cosmetic ingredients,” adds Laurent Bourdeau, head of Givaudan’s active beauty business.

The proposed acquisition remains subject to formal approvals from the relevant regulatory authorities, with the transaction expected to close in the second quarter of 2020.

As MRC informed earlier, Russia's output of chemical products rose in June 2020 by 2.6% year on year. However, production of basic chemicals increased year on year by 4.9% in the first six 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-June. Production of benzene was 106,000 tonnes in June 2020, compared to 110,000 tonnes a month earlier. Overall output of this product reached 721,000 tonnes over the stated period, up by 3.9% year on year.
MRC

MOSCOW (MRC) -- Russian fuel oil exports rose 21% on the year to 2.476 million mt, according to data released Friday by the Central Dispatching Unit of the Russian Energy Ministry, said S&P Global.

The rise in exports was down to weak domestic demand and river navigation, a major outlet for fuel oil exports, opening earlier this year following a mild winter.

Exports were down 12% on the month, partly due to April being a shorter month. Exports were also affected by lower throughput at Russian refineries which carried out planned maintenance, but also cut runs due to weaker demand for oil products in the wake of restrictions introduced to combat the coronavirus' spread.

Domestic fuel oil deliveries totaled 581,241 mt in April. This was down 50% on the year, and 39% from March. Domestic demand for fuel oil dropped as the heating season gradually came to an end, meaning demand for power generation fell. Demand was also hit after some industries closed as April was declared a non-working month.

Russian fuel oil output totaled 3.225 million mt in April, down 7.5% on the year and 14.2% on the month.

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.
MRC

MOSCOW (MRC) -- Four large new crackers are poised to start operations in China in the next 3-6 months, in a sharp expansion of the country's petrochemical cracker sector, said Argusmadia.

State-controlled Sinochem today said it has commissioned the 3mn t/yr condensate unit at its Quanzhou complex in Fujian province. The key upstream facility produces naphtha for use as a cracker feedstock.

Sinochem conducted successful trial runs at cracker furnaces and a derivative 200,000/500,000 t/yr ethylene oxide/ethylene glycol (EO/EG) plant on 15-16 June.

Quanzhou's naphtha cracker — Sinochem's first cracker — was commissioned in December. The unit has 1mn t/yr of ethylene and 500,000 t/yr of propylene capacity.

Sinochem started construction of the cracker and a refinery expansion project at Quanzhou in October 2017. The project has a full stream of petrochemical derivative units, including 100,000 t/yr ethylene vinyl acetate (EVA), 400,000 t/yr high density polyethylene (HDPE), 200,000/450,000 propylene oxide/styrene (PO/SM), 580,000 t/yr polypropylene (PP), 120,000 t/yr butadiene (BD), 100,000 t/yr MTBE, 350,000 t/yr BTX and 800,000 t/yr paraxylene (PX) capacity, as well as the 200,000/500,000 t/yr EO/EG unit.

The refinery expansion includes a residual fluid catalytic cracker (RFCC) with 230,000 t/yr of propylene capacity.

Fellow state-controlled firm Sinopec is also nearing a cracker start-up at its new Zhanjiang complex in Guangdong province. The cracker is likely to come on line in July-August, after Sinopec started operating the new 200,000 b/d Zhanjiang refinery on 16 June. The 40bn yuan ($5.6bn) project also includes an associated ethylene cracker complex.

The naphtha cracker has 800,000 t/yr of ethylene and 430,000 t/yr of propylene capacity and is integrated with 250,000/400,000 t/yr EO/EG, 350,000 t/yr HDPE, 100,000 t/yr EVA and 550,000 t/yr PP derivative units. The refinery also has a RFCC unit with 320,000 t/yr of propylene capacity.

Two private-sector Chinese firms are also making progress on cracker projects.

Refiner Bora Chemical is preparing to start its 1.1mn t/yr ethylene cracker project at Panjin in northeast Liaoning province. The company held successful trial runs at its downstream 450,000 t/yr linear low-density polyethylene (LLDPE) unit on 25 May and is now aiming to feed in the cracker in August-September.

The cracker will consume 1.65mn t/yr of naphtha and light products from Bora's 140,000 b/d Panjin refinery, as well as 1.1mn t/yr of propane and butane that will be bought from the market.

The complex has 450,000 t/yr LLDPE, 350,000 t/yr HDPE, 350,000 t/yr SM and 600,000 t/yr PP derivative capacity.

Global petrochemical firm LyondellBasell agreed in early March to take a 50pc stake in the project and set up a joint venture, Bora LyondellBasell, which will operate the ethylene cracker and associated polyolefin derivatives complex. The project has a total expected cost of about USD2.6bn.

Private-sector Wanhua Chemical is poised to commission its LPG-fed cracker at Yantai in Shandong province. It plans to start up the cracker around September-October this year.

The cracker, fed by 2.4mn t/yr of propane and butane, can produce 1mn t/yr of ethylene and 500,000 t/yr of propylene. Wanhua started construction work in 2017.

The cracker's petrochemical derivative facilities include a 350,000 t/yr HDPE unit, 450,000 t/yr LLDPE plant, 300,000/650,000 t/yr PO/SM plant, 150,000 t/yr EO unit, two 320,000 t/yr EDC plants, 300,000 t/yr PP unit and an 80,000 t/yr BD plant.

Wanhua Chemical owns China's single-largest capacity propane dehydrogenation (PDH) plant at Yantai in Shandong province. The PDH unit has 750,000 t/yr of propylene capacity and fully integrated derivatives units. Wanhua is also the world's largest methylene diphenyl diisocyanate (MDI) manufacturer.

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.
MRC