Brent edges lower but hovers just above USD43/b on mild optimism

MOSCOW (MRC) -- Crude prices edged mildly lower at midday during European trade July 17, as market participants digested OPEC+'s supply boost announced earlier this week and awaited more clarity on the demand picture as several countries ease out of lockdowns, reported S&P Global.

At 1138 GMT, ICE Brent September crude futures were 34 cents lower than the previous settle at USD43.03/b while the NYMEX light sweet August crude contract was down 21 cents at USD40.54/b.

OPEC+ confirmed at its key July 15 Joint Ministerial Monitoring Committee meeting that it would begin tapering production cuts by 2 million b/d over August to December. However, over-compensation by past laggards means that the actual taper is expected to be about 1.1 million b/d.

The rolling back of the cut was unlikely to result in an immediate rise in crude throughput and oil products output due to the fragility of the global fuel demand recovery, market sources said.

"After initiating a gradual withdrawal of the production cuts on Wednesday, the alliance is letting go of the reins to some extent and relying more on external factors again," Eugen Weinberg at Commerzbank said.

Fears of a second-wave of the global pandemic have sparked again, after the US recorded 138,358 fatalities along with 3,576,221 cases of COVID-19, according to data from Johns Hopkins University's Coronavirus Resource Center.

"Risks remain on the demand side because renewed lockdowns are possible and demand may rise more slowly than anticipated as a result of the recession and changed consumer behaviour. OPEC expressed concern yesterday that a second corona wave could destroy its efforts to rebalance the oil market." Weinberg said.

Some remain bullish on the recent production cuts, however.

Monica Malik, chief economist at Abu Dhabi Commercial Bank said, "We do expect the supply-demand mismatch to reverse in July, where demand outstrips supply, thanks to the (OPEC+) supply cuts."

Despite the challenges presented by the rising cases of infections, the overall picture looked mildly optimistic for oil, analysts say.

In its closely watched Monthly Oil Market Report released July 14, OPEC boosted its forecast of 2020 oil demand by 130,000 b/d to 90.72 million b/d.

And in its first 2021 market outlook, OPEC projected oil demand would surge to 97.72 million b/d, still below pre-pandemic levels but an acute recovery from the hard-hit second quarter of 2020.

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) -- Formosa Petrochemical Corporation Company (FPCC) has to shut its No. 2 naphtha cracker in Mailiao, Taiwan until further notice, reported CommoPlast.

Thus, this cracker was taken off-stream on 15 July after a fire broke out at a residue desulphurizer (RDS) unit belong to FPCC at the same site earlier that day.

The number.2 RDS unit is designed to process 80,000 barrels per day, which is a part of 540,000 barrel per day oil refinery complex. The No. 2 cracker has an annual capacity of 1.03 million tons/year of ethylene, 515,000 tons/year of propylene, and 162,000 tons/year of butadiene.

It is unclear at the moment if the production at downstream production would be affected.

As MRC informed earlier, Formosa Petrochemical plans to shut down its No.3 cracker in Taiwan for maintenance in mid-August, 2020. The 1.2-MMt/y No. 3 cracker is due to be offline until end-September.

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.

Formosa Petrochemical is involved primarily in the business of refining crude oil, selling refined petroleum products and producing and selling olefins (including ethylene, propylene, butadiene and BTX) from its naphtha cracking operations. Formosa Petrochemical is also the largest olefins producer in Taiwan and its olefins products are mostly sold to companies within the Formosa Group. Among the company's chemical products are paraxylene (PX), phenyl ethylene, acetone and pure terephthalic acid (PTA). The company"s plastic products include acrylonitrile butadiene styrene (ABS) resins, polystyrene (PS), polypropylene (PP) and panlite (PC).
MRC

MOSCOW (MRC) -- Chinese paraxylene buyers in the CFR Taiwan/China market have been requesting to take delivery of cargoes later in the month of August, attempting to push back deliveries to the second half of the month, from the first-half, post-declaration for August delivery cargoes, market sources said this week, said S&P Global.

With supply chains disrupted by the COVID-19 pandemic, it has become the norm across Asia's petrochemical markets for both producers and end-users to be experiencing high inventories. As a result, PX buyers have been requesting for cargoes to arrive later in the month, post-declaration.

Producers, on the other hand, are looking to load at the earliest possible laycan for inventory management purposes, resulting in an "operational mess", market sources said. But this is no surprise to market participants as this issue has been recurring for months, exacerbating market's frustrations.

"This is becoming such a norm in the market where seller would declare first-half of the laycan, followed by buyer's request to push it to the second-half. While we accommodate as much as we can, there are many instances when we cannot adjust as vessels have already been chartered," an Asian trader said.

As stocks continue to build, the number of outlets capable of taking delivery is shrinking, made worse when specific requests cannot be met. Further, while arrangements can be made to match H1 laycan delivery to other buyers in earlier months, it has gotten tougher for August-delivery as the bulk of the cargoes are arriving in H1, several sources said.

"All my cargoes were declared for H1 delivery and buyers are requesting for H2 laycan. I can only pass the message up the chain. And there are so few outlets available now," another trader said.

The nomination process in the Asian PX market involves declaration of port and half-month laycan for delivery by the evening of the 15th of each month. As per market convention, the seller declares the half-month of delivery for the next month, while the buyer declares the delivery port.

PX is a feedstock for the production of purified terephthalic acid (PTA). PTA is used to produce polyethylene terephthalate (PET), which, in its turn, is used in the manufacturing of plastic bottles, films, packaging containers, in the textile and food industries.

According to ICIS-MRC Price report, in Russia, July formulae prices for contract customers were in the range of Rb65,000-67,500/tonne CPT Moscow, including VAT. Prices of material in the spot market remained steady last week, Russian producers continued to ship material from 20 tonnes at a price of Rb70,000-72,000/tonne CPT Moscow, including VAT.
MRC

MOSCOW (MRC) -- Plagued by high crude stockpiles and weak margins, Chinese independent refiners have curtailed buying cargoes in the September-loading cycle, impacting differentials for several China-focused grades in the region, said S&P Global.

Chinese refiners' top crude picks, including Oman and Russia's ESPO Blend grades, have taken a hit in recent days amid tepid buying appetite from teapots, another name for China's independent refineries.

"The Chinese market is still flooded with supply, inventories are still high and refining margins are still weak," a source from a Chinese trading house said.

Reflecting a weaker Oman market, the cash Oman-Dubai spread has trended narrower this year, data from S&P Global Platts showed. The spread averaged 13 cents/b in July so far, compared with 14 cents/b over the second quarter, and 34 cents/b over the first quarter, the data showed.

ESPO blend crude differentials have also narrowed to lows seen two months earlier. The spot differential of ESPO M1 to Dubai was assessed 5 cents/b lower day on day at USD1.45/b at the Asia close on July 21, and was last narrower at USD1/b on May 18, the data showed.

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) -- Elliott Group announced plans to close its Packaging Solutions operations in Belle Vernon, Pennsylvania by the end of 2020, and to consolidate design engineering and manufacturing operations for unit packaging and auxiliary systems with its primary Engineered Products business in Jeannette, said Hydrocarbonprocessing.

"The decision to close our Belle Vernon facility was a difficult but necessary step to sustain Elliott’s auxiliary products portfolio while reducing the fixed costs associated with maintaining a separate, stand-alone operation,” said Michael Lordi, CEO of Elliott Group. “Closing the Packaging Solutions operation will impact the 40 people who work there, but we are making every effort to absorb some positions into Jeannette."

Over the next several weeks, Elliott will phase out operations at the Belle Vernon Facility as open orders are completed. We will process new orders for unit packaging and auxiliary systems through our Engineered Products business in Jeannette.

"Leveraging the capabilities of our Jeannette operations and our broad based network of global, suppliers will improve our competitive position and strengthen our ability to support customer requirements for unit packaging, lube oil systems, and buffer and dry gas panels,” said Shugo Hosoda, Vice President of Engineered Products. “Throughout the transition, we will maintain existing points of contact and provide uninterrupted customer service and supply chain support."

As MRC informed earlier, China Resources Packaging, a major manufacturer of petrochemicals in the country, plans to commission a new line at its polyethylene terephthalate (PET) plant in Zhuhai, Guangdong, southern China, in the fourth quarter of this year. The capacity of the new line will be 500 thousand tons per year. With its launch, the company's total capacity for the production of bottle PET granules in China will grow to 2.1 million tonnes per year.

According to ICIS-MRC Price report, in Russia, July formulae prices for contract customers were in the range of Rb65,000-67,500/tonne CPT Moscow, including VAT. Prices of material in the spot market remained steady last week, Russian producers continued to ship material from 20 tonnes at a price of Rb70,000-72,000/tonne CPT Moscow, including VAT.
MRC