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MOSCOW (MRC) -- Crude oil futures were marginally higher in mid-morning Asian trade Aug. 7 as optimism over a better-than-expected US jobs report and pledged compensation cuts by Iraq buoyed the market despite the growing COVID-19 case counts worldwide, reported S&P Global.
At 10:25 am Singapore time (0225 GMT), the ICE Brent October crude futures was up 6 cents/b (0.09%) from the August 6 settle at USD45.15/b, while NYMEX September light sweet crude contract was up by 4 cents/b (0.1%) at USD41.99/b.
The global crude complex found strong support this week on the back of a larger-than-expected 7.37 million barrels drawdown in US commercial crude inventories as well as improvement in US factory orders for June and manufacturing PMIs in July.
This slew of positive economic data allowed the Brent marker to break out of its USD45/b resistance level, while WTI was also able to settle above USD42/b.
Further support was extended to the market over the state of the US economy after US initial jobless claims for the week ended Aug. 1 was reported at 1.186 million, lower than analysts' expectations of around 1.4 million and the 1.435 million figure reported in the previous week, US Labor Department data released on Aug. 6 showed.
This snapped a two-week uptrend of rising claims that had sown doubt regarding the strength of the US economic recovery. Investors will be looking to fresh cues from the official US non-farm payroll data for July due later today.
Meanwhile, Iraq had pledged to cut an extra 400,000 b/d in August to compensate for overproduction in the previous three months, as it tries to meet quotas under the OPEC+ supply agreement, S&P Global Platts reported earlier. This is positive for the global supply and demand fundamentals, especially as the group had begun to ease their output curbs to 7.7 million b/d in August.
However, the rapidly rising number of COVID-19 case counts worldwide continued to weigh heavily on market sentiments, capping further gains in the global crude complex. Global COVID-19 cases stand at 18,986,629, on track to breach the 19 million mark, latest data from John Hopkins University showed.
The number of daily infections worldwide had also climbed back up to 271,164 on Aug. 5, after four consecutive day of declines that culminated in a 3-week low of 202,486 cases on Aug 3.
Furthermore, rising geopolitical tensions between US and China remains a key concern.
"Given Asia's traders unfortunate predisposition to US-China tensions ahead of the August 15 trade talks, I expect Asia oil market activity, barring a big headline, could remain muted as it has been the past few days, but even more so ahead of the US Non-Farm Payroll report," Stephen Innes, chief global markets analyst at AxiCorp, said in a note Aug. 7.
As MRC informed before, US crude oil inventories moved sharply lower during the week ended July 24 as exports and refinery demand climbed to multi-month highs, US Energy Information Administration data showed July 29. Commercial crude stocks fell 10.61 million barrels to 525.97 million barrels that week, EIA data showed. While the draw pushed stockpiles to 14-week lows, they remained more than 17% above the five-year average for this time of year.
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
Crude oil futures edge higher on US jobs report; Iraq's compensation cuts
PE imports to Ukraine increased by 2% in January-July
Last month, external supplies of polyethylene to Ukraine amounted to slightly less than 23,100 tonnes against 23,700 tonnes in June, local companies reduced their purchases of HDPE due to the introduction of an 18% import duty. Thus, overall PE imports reached 159,500 tonnes in January-July 2020, compared to 156,600 tonnes a year earlier. HDPE and LDPE imports increased, whereas imports of other PE grades decreased.
The supply structure by PE grades looked the following way over the stated period.
Last month, imports of HDPE reached 6,600 tonnes against 7,800 tonnes in June, Ukrainian companies reduced the volume of purchases of film and injection moulding polyethylene, including due to import duties. Overall HDPE imports exceeded 61,000 tonnes in the seven months of 2020 versus 56,300 tonnes a year earlier.
July LDPE imports were slightly over 7,900 tonnes, compared to 7,700 tonnes a month earlier, local companies raised their purchasing amid easing of the quarantine and under the pressure of seasonal factors. Overall LDPE imports reached 47,100 tonnes over the stated period, compared to 45,300 tonnes a year earlier.
July imports of linear low density polyethylene (LLDPE) into the country were about 7,100 tonnes, which was close to the previous month level. Overall LLDPE imports reached 43,600 tonnes in January-July 2020, compared to 47,500 tonnes a year earlier.
Imports of other PE grades, including ethylene-vinyl-acetate (EVA), totalled 7,800 tonnes over the stated period.
MRC
OPEC+ monitoring committee pushes back meeting to August 19
MOSCOW (MRC) -- The OPEC+ Joint Ministerial Monitoring Committee has pushed back its next online meeting by a day to Aug. 19, due to a request from Russia, reported S&P Global with reference to officials.
The committee, co-chaired by Saudi Arabia and Russia, meets monthly and is tasked with adjudicating compliance with OPEC+ production quotas and analyzing market conditions.
It can make recommendations for changes to the OPEC+ production cut agreement, although Russian energy minister Alexander Novak said none were likely for the upcoming meeting.
"No sharp movements or additional proposals are on the table," Novak told reporters Aug. 13, according to the Prime news agency.
The OPEC+ alliance in May instituted historic 9.7 million b/d production cuts - nearly 10% of pre-coronavirus pandemic demand - in response to the market collapse as a result of the health crisis.
The cuts eased to 7.7 million b/d in August and are scheduled to scale back further to 5.8 million b/d starting in 2021 through April 2022.
Under the deal, countries that failed to meet their quotas in May, June and July will be required to make so-called "compensation cuts" beyond their quotas in August and beyond, offsetting some of the production rise from other members.
Iraq has already said it will implement a 400,000 b/d compensation cut in August and September.
OPEC+ quota compliance fell to 96% in July, from 106% in June, with its collective output increasing by 1.10 million b/d, according to S&P Global Platts' latest survey of the alliance's production.
As MRC informed earlier, Russia’s Energy Ministry said in early August that the country’s oil output in July was unchanged from levels seen in June, in line with an OPEC+ agreement. The ministry added that its level of compliance with the deal in July was close that recorded in June, when it stood at 99%.
We remind that data collected and tabulated by the American Chemistry Council (ACC) show that due to growth in China, global chemicals production rose by 0.6 percent in June, an improvement from the 0.5 percent decline in May, Production has been declining throughout this year, with the last monthly gain occurring in December 2019. During June, chemical production fell in major regions except Asia-Pacific. Headline global production was off 7.2 percent year-over-year (Y/Y) on a three-month moving average (3MMA) basis and was off 7.4 percent from the peak December level. Global output stood at 109.8 percent of its average 2012 levels.
At the same time, 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. June production of polymers in primary form fell to 791,000 tonnes from 820,000 tonnes in May partially because of a scheduled shutdown for maintenance at ZapSibNeftekhim. Output of polymers in primary form totalled 4,900,000 tonnes over the stated period, up by 14.8% year on year.
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
Indian Oil reports rise in petchem profit
MOSCOW (MRC) -- Indian Oil Corporation Ltd (IOC) on Friday reported a net profit of Rs 1,911 crore for the first quarter of FY2020-21 (FY21), a 47 per cent drop year-on-year compared to the same period of the previous fiscal, said Newindianexpress.
But, while the precipitous drop in revenues from operations during the quarter reflected the impact the lockdowns had on demand, the company also recorded an inventory loss due to the collapse of the crude oil markets in the month of April.
According to the company, its income from operations fell to Rs 88,936.54 crore in April-June from Rs 150,136.70 crore a year ago. "The company’s sales during the month of April 2020 were impacted significantly by the nationwide lockdown and consequently capacity utilisation of the plants was lower. However, the same has come back close to normal levels by the month of June 2020," IOCL said. IOC Chairman Shrikant Madhav Vaidya told reporters that the oil marketing company recorded an inventory loss of Rs 3,196 crore in Q1 as compared to inventory gain of Rs 2,362 crore a year back.
Inventory losses are recorded booked when a company buys raw material at a certain price, but by the time it is able to process it into finished product, prices have fallen. Since refinery prices are determined by prevailing international oil prices, an inventory loss is recorded by marketing companies like IOCL.
The official also said that Covid had impacted capacity utilisation during the quarter, with the company’s refineries averaging 69 per cent. This has risen to to 93 per cent in July but subsequent lockdowns by states have lowered the capacity utilisation to 75 per cent. "We won’t get back to normal times in the near future” due to way pandemic was spreading, the company’s chairman said.
We remind that Indian Oil Corp restarted operation at its naphtha cracker in India in early-October, 2019, after completing maintenance works. The cracker was shut in early-September, 2019 for a maintenance turnaround. Located in Panipat, in the northern Indian state of Haryana, the cracker has an ethylene production capacity of 857,000 mt/year and propylene capacity of 425,000 mt/year.
According to MRC's DataScope report, 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.
Indian Oil Corporation Limited, or IndianOil, is an Indian state-owned oil and gas corporation with its headquarters in New Delhi, India.
MRC
Shell swings to net loss of USD18 billion on oil and gas assets write-down
MOSCOW (MRC) -- Shell reports adjusted second-quarter group earnings of USD638 million, an 82% decline year on year (YOY), excluding a post-tax USD16.8-billion write-down in the value of its oil and gas assets due to its reduced expectations for medium- and long-term energy prices and refining margins, reported Chemweek.
Including the impairment charge, Shell suffered a net loss on a current cost of supply (CCS) basis of USD18.1 billion and has announced an interim dividend of USD0.16 per ordinary share.
The adjusted earnings figure beat analysts’ consensus estimate, compiled by Shell, which showed a consensus expectation for a USD674-million adjusted CCS loss. Second quarter sales of USD32.5 billion, down 64.1% YOY, missed by USD21.2 billion. Shell issued a market statement at the end of June, which included notification of an expected multi-billion-dollar write-down of its upstream assets.
Despite “downcycle conditions” in its chemicals business compounded by the COVID-19 pandemic that drove overall volumes and realized margins lower, Shell says its chemicals segment achieved second-quarter adjusted earnings on a CCS basis of USD206 million, up 56% from USD132 million in the prior-year period and also reflecting lower operating expenses (opex). Cash flow from chemicals operating activities for the quarter was USD734 million. Most end market segments were negatively impacted but there was “increased demand, primarily in cleaning and disinfectant products,” it says.
The lower opex figure YOY for its chemical business was due mainly to structural improvements and maintenance scheduling, Shell says. A chart provided by the company shows an improvement of USD103 million YOY in the chemical segment’s opex, as well as a USD20-million YOY improvement in base chemicals margins. Intermediate margins, however, declined USD58 million YOY, the chart shows.
Chemicals sales volumes in the second quarter declined 4% YOY to 3.62 million metric tons, with the sales volumes figure for the first six months of 2020 down 5% YOY to 7.49 million metric tons. Chemicals sales volumes in the third quarter are expected to be between 3.6–3.9 million metric tons, it says. Chemicals manufacturing plant utilization in the second quarter was 78%, up from 73% in the prior-year period. Shell expects utilization to be between 78–88% in the third quarter.
Shell has slashed cash capital expenditure in its chemicals business by USD710 million YOY to USD369 million in the second quarter.
For the first six months of 2020, Shell’s chemicals business reports adjusted earnings of USD354 million, down 39% YOY, reflecting lower realized margins and the impact of COVID-19, it says.
The company says it is on track to deliver overall group cost-reduction targets for 2020, with underlying opex in the second quarter reduced by USD1.1 billion compared to the first quarter, and a reduction of USD3-4 billion by the end of the first quarter of 2021. Cash capex was cut by USD1.4 billion in the second quarter compared to the first, with the target for the year to reduce cash capex to USD20 billion or less. Shell’s net debt increased in the second quarter by USD3.4 billion to USD77.8 billion, it says.
The company delivered resilient cash flows in a “remarkably challenging environment,” says Ben van Beurden, Shell’s CEO.
As MRC wrote before, Shell will announce a major restructure by the end of the year as the company prepares to accelerate its shift toward its net-zero emissions goal by 2050, said CEO Ben van Beurden to employees. The restructuring will include workforce reductions as part of broader cost-cutting measures, although no figures have been decided yet, the CEO reportedly said during an internal webcast.
We remind that Royal Dutch Shell Plc plans to idle a sulfur recovery unit (SRU) at the joint-venture Deer Park, Texas, refinery in 2021, said Shell spokesman Curtis Smith in July 2020. Currently, the refinery is operating at about 75% of its 318,000 barrel-per-day capacity because of reduced demand due to the COVID-19 pandemic.
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.
Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
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