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US oil inventories point to fragile recovery

August 28/2020

MOSCOW (MRC) -- US petroleum inventories are gradually becoming less bloated as crude imports remain low and refiners limit fuel production, but the slow pace of the drawdown underscores the fragility of oil market rebalancing, reported Reuters.

Total stocks of crude oil and products fell last week, the fifth decline in six weeks, according to data from the US Energy Information Administration (Weekly petroleum status report, EIA, Aug. 19).

With a fall of 5 million barrels last week total stocks are now down by 23 million barrels from the record 2.11 billion barrels at the start of July.

In line with previous weeks, inventory draws were again led by crude (-4 million barrels) and gasoline (-3 million) while distillate fuel oil and jet fuel stocks were unchanged and there were small builds in other products.

Crude stocks are still 4% above the five-year seasonal average, but that is an improvement on the surplus of almost 6% in the middle of July.

Gasoline stocks are 7% above average (but down from 12% in mid-April) and distillate stocks are 24% above average (down from 29% at the start of June).

Fuel consumption remains far below normal, but by restricting crude processing, refiners are gradually working off excess stocks.

The total volume of petroleum products supplied to the domestic market has been 12% below the five-year average over the past four weeks. Refinery crude processing, meanwhile, has been 15% below average.

Despite restricted crude processing, crude stocks have continued to fall, partly owing to the unusually slow rate of imports, especially from Saudi Arabia.

Oil inventories are slowly normalising, but progress has been slower than expected at the end of the second quarter, principally because of the lingering impact of the COVID-19 pandemic on consumption.

In its latest assessment, published on Wednesday, the Joint Ministerial Monitoring Committee of OPEC+ drew attention to the oil markets fragility, especially on the consumption side.

If consumption continues to recover more slowly than originally projected, OPEC+ will eventually have to revise its production schedule to cut output deeper for longer.

As MRC informed earlier, US crude oil, gasoline and distillate inventories fell last week as refiners ramped up production and demand improved, according to a government report. Refinery utilization rose 1.4 percentage points to 81% of total capacity nationally in the week to Aug. 7, the Energy Information Administration said in a weekly report. On the East Coast, refinery utilization rates climbed to 71.8% of total capacity, the highest since August 2019, according to the data.

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.
Author:Margaret Volkova
Tags:Europe, PP, PE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, BASF, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals, Russia, USA.
Category:General News
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