Oil holds near five-month high on US output cuts, virus concern weighs

MOSCOW (MRC) -- Oil held near USD46 a barrel, close to its highest since March, lifted by US producers shutting most of their offshore Gulf of Mexico output ahead of Hurricane Laura and a report showing a drop in US crude inventories, according to Hydrocarbonprocessing.

Renewed worries over the COVID-19 pandemic, which has squeezed demand and sent prices to record lows in April, capped gains after reports this week of patients being re-infected, raising concerns about future immunity.

Brent crude slipped 6 cents, or 0.1%, to USD45.80 a barrel by 1230 GMT, while US West Texas Intermediate crude fell 16 cents, or 0.4%, to USD43.19. Both benchmarks settled at a five-month high on Tuesday.

“Oil traders will be preoccupied with the hurricane today,” said Tamas Varga of broker PVM. “Once the danger passes, demand considerations will come into focus again.”

The US energy industry was preparing on Tuesday for a major hurricane strike. Producers shut 1.56 MMbpd of crude output, representing 84% of the Gulf of Mexico’s offshore production and close to the 90% outage that Hurricane Katrina brought 15 years ago.

“We do see some support on the back of hurricane activity,” Dutch bank ABN AMRO said in a report. “The threat of being infected by the COVID-19 virus threatens a further recovery in oil demand.”

Oil was also boosted on Tuesday by U.S. and Chinese officials reaffirming their commitment to a Phase 1 trade deal. Further support came from American Petroleum Institute figures showing U.S. crude stocks fell more than expected.

A record oil output cut by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia has helped to lift Brent from April’s 21-year low below USD16.

The US government’s Energy Information Administration report at 1430 GMT will be in focus to see if it confirms the API figures.

As MRC wrote previously, several chemical producers are shutting down in advance of the hurricane, according to air emission event reports submitted to the Texas Commission on Environmental Quality (TCEQ). CPChem intends to shut down its Pasadena plastics complex, where the company has about 1 million metric tons/year (MMt/y) of polyethylene capacity. Motiva Chemicals is shutting down its steam cracker at Port Arthur, which has 0.7 MMt/y of ethylene capacity and 0.2 MMt/y of polymer-grade propylene (PGP) capacity. INEOS is shutting down its Olefins 1 steam cracker at Chocolate Bayou, which has 0.9 MMt/y of ethylene capacity and 0.3 MMt/y of PGP capacity.

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) -- 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 market’s “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.
MRC

MOSCOW (MRC) -- SK Innovation has decided to invest another USD940 million to build a new electric vehicle (EV) battery manufacturing plant in Commerce, Georgia, United States, according to Chemweek.

This new project is in addition to the company’s USD1.67 billion investment to develop two manufacturing facilities in Georgia.

The company says that with an annual capacity of gigawatt-hours (GWh), its first EV battery manufacturing plant in Georgia is under construction and expected to start operating in 2021. The firm will break ground on its second plant in Georgia, which is set to produce 11.7GWh a year, in July this year. When the second plant in Georgia goes into mass production in 2023, SK Innovation will reach an annual global capacity of 71GWh, consolidating its position as one of the largest EV battery producers in the world.

SK Innovation is expanding its battery production base not only in the US, but also in South Korea, Hungary, and China. Mercedes-Benz, Hyundai-Kia Motors, and Ford Motor Company are among SK Innovation’s battery business customers. The company’s goal is to be among the top-three global players in the EV battery market, aiming to produce 100 GWh by 2025.

As MRC reported earlier, SK Global Chemical, a subsidiary of SK Innovation, plans to shut down its production processes for ethylene and ethylene propylene diene monomer (EPDM) within its naphtha cracking center in Ulsan, South Korea. The 200,000-t/y naphtha cracker, which started commercial operation in 1972, and the EPDM unit, which began commercial operation in 1992, will be mothballed from December 2020 to shift the company's focus to high-value added chemicals.

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) -- Abu Dhabi National Oil Co, the UAE's biggest energy producer, and Abu Dhabi conglomerate ADQ will set up an investment platform to fund local chemicals projects amid a push to invest USD45 billion in downstream activities, reported S&P Global.

The joint venture will oversee the development of projects in the planned Ruwais Derivatives Park, which is part of the Ruwais industrial hub in the emirate of Abu Dhabi, ADNOC said in its statement in late July. The venture will allow ADNOC to further its aims to boost operations in petrochemicals and other downstream lines. It didn't disclose funds being made available.

Under the terms of the agreement, ADNOC will hold a 60% stake and the remainder will be held by ADQ, with both companies jointly evaluating and investing in chemical projects. Both companies will reveal the results of a study before the end of this year, with details on opportunities available for investors and partners. ADQ holds stakes in Abu Dhabi companies operating in various fields including transportation, power, real estate, media, healthcare, agriculture and financial services.

"Our partnership with ADQ will expand on existing efforts to maximize the value of our assets in Ruwais, to kick start the development of the UAE's downstream derivatives sector, support the transformation of Ruwais into a global hub for industry and attract additional foreign direct investment," Sultan al-Jaber, ADNOC CEO and UAE minister of industry and advanced technology, said in the statement.

ADNOC revealed in 2018 plans to invest USD45 billion with partners to develop its local downstream activities, including the expansion of its Ruwais refinery and petrochemical capacity in the industrial hub.

The company has courted international investors to expand its oil and gas production and monetize its assets, including the June deal worth more than USD10 billion with a group of investors to sell a 49% stake in its gas pipelines a year after striking a similar transaction for its oil pipelines.

A consortium grouping Global Infrastructure Partners, Brookfield Asset Management, Singapore 's sovereign wealth fund GIC, Ontario Teachers' Pension Plan Board, South Korea 's NH Investment & Securities and Italy's Snam will invest in select ADNOC gas pipeline assets valued at USD20.7 billion.

ADNOC last year clinched a USD5 billion deal with a consortium that includes GIC, BlackRock Inc., KKR & Co and Abu Dhabi Retirement Pensions and Benefits Fund to sell them select pipeline infrastructure and collectively hold a 49% stake in ADNOC Oil Pipelines, a subsidiary of the parent company.

As MRC informed earlier, in early May, 2020, Abu Dhabi National Oil Company (ADNOC) began a gradual restart of its Ruwais oil refinery complex after a scheduled maintenance shutdown. The Ruwais complex, which has capacity of 835,000 barrels per day, was shut down early this year, the ADNOC spokesman said.

And in late July 2019, ADNOC said its Ruwais refinery west cracker was offline for maintenance.

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) -- Sinopec Shanghai Petrochemical, a refining subsidiary of Asia’s top refiner Sinopec, plans to raise daily crude oil throughput by 7.8% in the second half of 2020, as per Hydrocarbonprocessing.

The Chinese company aims to process 7.68 million tonnes of crude oil in July-December, equivalent to 304,700 barrels per day, a company official said at a briefing on Thursday.

That compares to 7.02 million tonnes of crude oil in the first half of 2020, which was down 6.1% from the same period last year due to the coronavirus outbreak and refinery overhaul.

The firm has annual crude refining capacity of 16 million tonnes.

That indicates Sinopec Shanghai would still lag behind its 2020 crude oil throughput target of 15.3 million tonnes.

Shanghai Petchem recorded a net loss of 1.7 billion yuan (USD247.10 million) in the first half of 2020 based on Chinese accounting standards, as the coronavirus pandemic dampened fuel demand, according to company statements filed with the Shanghai Stocks Exchange.

“The coronavirus outbreak had brought huge pressure on our production and operation in the first half of 2020...We were forced to cut crude throughput...and we were just able to ease inventory pressure since May,” said Huang Fei, a vice general manager at Shanghai Petchem at the briefing.

Huang also said the coronavirus crisis had forced the company to cut fuel exports in the second quarter.

However, the group’s average crude oil refining cost in the first six months of 2020 fell 17.9% year-on-year to 2,717 yuan per tonne, or around $54 per barrel, thanks to the decades-low oil prices.

Shanghai Petchem bought around 84% of its crude oil from the middle east and around 10% from Latin American countries in January-June.

It plans to maintain a full-load refining operation in the second half of this year, in particular increasing production of low sulphur marine fuel.

“We are confident of turning losses into gains in the second half and posting a full-year profit,” said Guan Zeming, general manager of Shanghai Petchem.

As MRC reported before, Sinopec Zhongyuan Petrochemical, also part of Sinopec Group, is in plans to bring on-stream its cracker following a maintenance turnaround. The company is likely to resume operations at the cracker by mid-September, 2020. The cracker was shut for maintenance on August 1, 2020. Located at Henan in China, the cracker has a ethylene capacity of 220,000 mt/year and propylene capacity of 95,000 mt/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.

China Petrochemical Corporation (Sinopec Group) is a super-large petroleum and petrochemical enterprise group established in July 1998 on the basis of the former China Petrochemical Corporation. Sinopec Group"s key business activities include the exploration and production of oil and natural gas, petrochemicals and other chemical products, oil refining.
MRC