Crude oil futures lower on weakening demand, rising supply

MOSCOW (MRC) -- Crude oil futures were lower in mid-morning trade in Asia Aug. 3 as weakening demand and rising supply weighed on market sentiment, reported S&P Global.

At 10:48 am Singapore time (0248 GMT), the new front-month ICE Brent October crude futures fell 26 cents/b (0.6%) from the July 31 settle at USD43.26/b, while NYMEX September light sweet crude contract was down by 30 cents/b (0.74%) at USD39.97/b.

The unabated COVID-19 spread and rising fatalities worldwide continue to be the most significant issue capping oil demand recovery. The global case count stands at 17.97 million, with total deaths at 687,067, according to the latest data from John Hopkins University.

The US' gross domestic product fell by a record 32.9% in the second-quarter, while the number of Americans filing for initial unemployment benefits increased for the second consecutive week to 1.43 million, according to government data released on July 30, indicating that economic recovery may be flat lining.

In Australia, the government of Victoria declared a state of disaster on Aug. 2 and imposed a nightly curfew from 8 pm to 5 am for the capital, Melbourne, as high levels of COVID-19 infections continue, according to media reports.

On the supply front, concerns are rising that a rebound in global production as OPEC+ pulls back from unprecedented production cuts in August and returning US production will further weaken supply-demand fundamentals.

OPEC+ agreed to end its record production cut of 9.7 million b/d as scheduled after a Joint Ministerial Monitoring Committee meeting on July 15 and ease into a lower 7.7 million b/d production cut in August. However, compensation cuts of roughly 840, 000 b/d indicates that only about 1.1 million b/d of production will return.

"The balance between positive longer-term sentiment and near-term negatives, (mainly) increasing coronavirus infections, rising OPEC+ and US onshore production, has kept oil in a relatively tight range in recent weeks and on an upward trend for three consecutive months," Stephen Innes, chief global markets analyst at AxiCorp, said in a note Aug. 3.

"Still, I think positive sentiment could be tested in August as growing near-term pressure on the supply side becomes harder to ignore," he added.

As MRC informed before, china's crude stockpiles reached a record high level in July as refiners struggle to digest mass crude oil cargoes purchased during the second quarter, while domestic fuel consumption slowed amid widespread flooding across 23 provinces during the month. 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 only refinery Quanzhou Petrochemical.

We remind that Sinopec SABIC Tianjin Petrochemical Co. (SSTPC), a 50-50 joint venture of Sinopec and SABIC, completed the debottlenecking of its ethylene cracker on 11 July 2020, adding another 30,000 tons/year output to its current capacity. Followed the expansion, the Tianjin based plant become the country's largest compressor unit, producing 1.3 million tons of ethylene annually.

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

Firm volume for N. America weekly chemical rail

MOSCOW (MRC) -- Chemical railcar traffic in North America remained firm during the week ended 1 August, according to data released by the Association of American Railroads (AAR), said Chemweek.

Volume totaled 44,069 carloads, up 3.5% from the previous week and down 2.4% year-over-year (YOY). On a four-week basis, volume was down 4.4% from 2019, versus the 5.0% shortfall recorded last week, and down 7.6% from 2018, versus last week’s 7.8% shortfall (chart).

For the year to date, chemical railcar loadings in North America are down 4.6% from 2019 and 5.7% from 2018. Total railcar loadings are down 14.4% from 2019.

Chemical railcar traffic in the US contributed 31,256 carloads to the total, down 5.1% YOY and up 4.0% from the previous week. For the year to date, US chemical railcar traffic is down 5.0%.

Canadian chemical rail traffic totaled 11,970 carloads, up 5.9% YOY and up 3.3% from the previous week. For the year to date, Canadian chemical railcar traffic is down 3.4%.

Chemical railcar traffic in Mexico totaled 843 carloads, a YOY decrease of 5.1% and a sequential decrease of 8.1%. For the year to date, Mexican chemical railcar traffic is down 6.2%.

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

Trinseo raises August PS, ABS, and SAN prices in Europe

MOSCOW (MRC) -- Trinseo, a global materials company and manufacturer of plastics, latex binders, and synthetic rubber, and its affiliate companies in Europe, have announced a price increase for all polystyrene (PS), acrylonitrile-butadiene-styrene (ABS) and acrylonitrile-styrene copolymer (SAN) in Europe, according to the company's press release af of 6 August.

Effective August 1, 2020, or as existing contract terms allow, the contract and spot prices for the products listed below rose as follows:

- STYRON general purpose polystyrene grades (GPPS) -- by EUR30 per metric ton;
- STYRON and STYRON A-Tech and STYRON X- Tech and STYRON C- Tech high impact polystyrene grades (HIPS) - by EUR30 per metric ton;
- MAGNUM ABS resins - by EUR50 per metric ton;
- TYRIL SAN resins - by EUR40 per metric ton.

As MRC informed before, Trinseo raised its prices for all PS grades on 1 July 2020, as stated below:

- STYRON GPPS -- by EUR95 per metric ton;
- STYRON and STYRON A-Tech and STYRON X- Tech and STYRON C- Tech HIPS - by EUR95 per metric ton;
- MAGNUM ABS resins - by EUR100 per metric ton;
- TYRIL SAN resins - by EUR85 per metric ton.

According to ICIS-MRC Price report, prices of Russian PS will rise by an average of roubles (Rb) 5,000/tonne in August. Some of the largest market participants confirmed that Nizhnekamskneftekhim's selling prices would go up by this amount this month.

Trinseo is a global materials company and manufacturer of plastics, latex and rubber. Trinseo's technology is used by customers in industries such as home appliances, automotive, building & construction, carpet, consumer electronics, consumer goods, electrical & lighting, medical, packaging, paper & paperboard, rubber goods and tires. Formerly known as Styron, Trinseo completed its renaming process in 1Q 2015. Trinseo had approximately USD3.8 billion in net sales in 2019, with 17 manufacturing sites around the world, and approximately 2,700 employees.
MRC

Marathon Petroleum sells Speedway, looks to repurpose idled refinery

MOSCOW (MRC) -- Marathon Petroleum sold its Speedway retail operations and is keeping offline two refineries shut earlier during the coronavirus pandemic, while increasing runs at its other refineries in the third quarter to meet rising demand following the easing of coronavirus-induced lockdowns, reported S&P Global with reference to CEO Mike Hennigan's statement on August 3.

Marathon Petroleum on August 2 agreed to sell its Speedway retail assets to 7-Eleven for USD21 billion in cash. The agreement includes a 15-year fuel supply agreement which calls for Marathon to supply 7-Eleven approximately 7.7 billion gallons/year or just over 500,000 b/d of transportation fuel.

Marathon also said it is indefinitely idling the two refineries it had shut down earlier when demand first crashed due to the pandemic--the 26,000 b/d El Paso, Texas, plant and the 161,000 b/d Martinez, California plant.

California was the first state to shut down, with Governor Gavin Newsome ordering all residents – except essential workers -- to stay at home on March 19, causing gasoline demand to fall by about half and prices to plummet, reducing refinery cracks.

As a result, Los Angeles 88.5 CARBOB prices fell to an average of USD1.08/gal in the second quarter from USD1.68/gal in the first quarter, Platts price assessments show. So far, third quarter prices are averaging USD1.45/gal.

"By shutting Martinez, MPC [Marathon Petroleum Corporation] will not only be able to cut fixed costs but will also operate Los Angeles (363,000 b/d) refinery in a more profitable environment", said Credit-Suisse analyst Manav Gupta in a research note.

"Gallup is a small refinery with high fixed cost and was profitable when Midland diffs were wide. Shutting it lowers costs and MPC will see product markets tightening in El Paso where it already has refining capacity [131,000 b/d]," he added.

Marathon said it was unsuccessful in its attempt to sell the El Paso plant, but will keep logistics operating there despite the plant closure.

Marathon is evaluating re-purposing Martinez into a 48,000 b/d renewable diesel plant.

"We have the unique opportunity to take advantage of a strong set of logistics for the area and three significant processing units that are an ideal fit for making renewable diesel," said Hennigan.

Martinez has three high pressure, hydroprocessing units which, if retrofitted, could produce renewable diesel about equal to about one-third of the refinery's nameplate crude capacity, said Raymond Brooks, Marathon's head of refining.

"There are also existing hydrogen plants, power generation and extensive inbound and outbound logistics that are all needed to produce renewable diesel," he added.

"So our intention is to pivot to the production of higher value, low-carbon intensity diesel for California,' he said.

The plant currently produces about 54,000 b/d of ULSD. If Marathon decides to go ahead with the project, it is expected to be online in 2022 with initial production of 48,000 b/d of renewable diesel and "ramping up from there," he added.

Marathon Petroleum expects its total system third quarter refinery throughput to average 2.345 million b/d, up from the 2.276 million b/d in the second quarter as runs increase at its Midwest and US West Coast plants. Second quarter utilization was 71% across its 16-refinery system which has over 3 million b/d of refining capacity.

Marathon expects third quarter Midwestern throughput of 1.045 million b/d compared with the 957,000 b/d processed in the second quarter. US West Coast refinery runs are expected to average 435,000 b/d topping the second quarter's 419,000 b/d, despite a total turnaround planned for its 68,000 b/d Kenai, Alaska, refinery and hydrocracker work underway at its 363,000 b/d Los Angeles complex during the quarter.

On the US Gulf Coast, third quarter throughput is expected to be lower, averaging 920,000 b/d, compared with the 970,000 b/d in the second quarter, as third quarter catalyst changes are planned for Marathon's two largest refineries – the 585,000 b/d Galveston Bay, Texas, plant and the 578,000 b/d Garyville, Louisiana plant.

As MRC reported earlier, US refiner Marathon Petroleum Corp is delaying all maintenance projects at its 102,000 barrel-per-day St. Paul Park, Minnesota, refinery for 2020 amid concerns related to the spread of the novel coronavirus. Several refiners have delayed planned maintenance at their plants this year due to concerns around the spread of the coronavirus among workers, or as part of capital and operational expense cuts.

Besides, Marathon Petroleum Corp idled its 166,000 barrel-per-day (bpd) refinery in Martinez, California beginning April 27 in response to the coronavirus pandemic’s hit to demand for refined products.

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

SP Chemicals undertakes unscheduled shutdown at SM plant in China

MOSCOW (MRC) -- SP Chemicals has taken off-stream its styrene monomer (SM) plant owing to technical issues, according to Apic-online.

A Polymerupdate source in China informed that the company halted operations at the plant on August 4, 2020. The plant is likely to restart on August 8, 2020.

Located at Taixing in Jiangsu province of China, the plant has a production capacity of 320,000 mt/year.

As MRC reported earlier, SP Chemicals last conducted a scheduled turnaround at SM plant in Jiangsu province from 19 to 30 March, 2020.

SM is the main feedstock for the production of polystyrene (PS).

According to MRC's ScanPlast report, Russia's estimated consumption of PS and styrene plastics was 225,870 tonnes in the first half of 2020, down by 8% year on year. PS consumption increased by 2% year on year in June 2020, totalling 39,590 tonnes.

SP Chemicals, a Singapore-based company, is one of the largest ion-membrane chlor-alkali producer and aniline producer in China. The company's products include: aniline, caustic soda, chlorine, chlorobenzene, nitrochlorobenzene, nitrobenzene, vinyl chloride monomer (VCM). SP Chemicals plans to invest approximately RMB1.1 billion in facilities for the production of styrene monomer, an intermediate raw chemical used in making polystyrene plastics, protective coatings, polyesters and resins.
MRC