OPEC+ expected to keep current output cuts, despite signs of weakening oil market

MOSCOW (MRC) -- Key OPEC+ ministers will convene online Sept. 17 in the face of stalling global oil demand, patchy compliance with output cuts, and Libya's potential return to the market after a month-long blockade that shut down almost all of its crude production, reported S&P Global.

But despite frustration among members that oil prices have failed to rise as much as hoped, delegates say the OPEC+ alliance is unlikely to reintroduce deeper cuts to buttress the oil market's comeback from the coronavirus pandemic.

Already-slipping compliance among some members would make imposing any tighter quotas more difficult, and talks among the nine-country Joint Ministerial Monitoring Committee, co-chaired by the alliance's biggest members Saudi Arabia and Russia, are instead likely to focus on shoring up discipline, they added.

OPEC and its nine allies achieved 101% of their pledged 7.7 million b/d cuts in August, according to delegates, but not all members shared the burden equally.

The UAE has emerged as a potential flashpoint, with its traditionally strong compliance blemished by what its energy minister has already confessed is a 100,000 b/d breaching of its quota in August.

Nigeria also has work to do to bring its production down in line with its quota, as do a handful of other countries.

And while Iraq was in full compliance in August, it has said it will likely need more time to implement the so-called compensation cuts - due by the end of September - that the OPEC+ deal requires for pumping above its quota in previous months.

Saudi Arabia, which has declared its tolerance for OPEC+ free riders over, has cracked the whip on compliance over the last few months, pressuring recalcitrant members, both privately and publicly, to improve their performance.

But oil prices have been mired between USD40-USD45/b since June, far below what many countries have budgeted for, and the global economy is still encountering headwinds in controlling the coronavirus impact. The 7.7 million b/d in collective cuts are scheduled to remain in place through the end of 2020, after which they will ease to 5.8 million b/d for 2021 and the first quarter of 2022.

Saudi energy minister Prince Abdulaziz bin Salman will have to tread a fine line in enforcing compliance, while not upsetting members too much, particularly with close ally UAE undermining his pressure campaign, one delegate said on condition of anonymity.

"The Saudis are going to push them to comply, [but] there are a lot of angry countries," the delegate said.

Another delegate said he expects the talks over compliance and future compensation cuts to be "complicated."

The JMMC is tasked with monitoring market conditions, tracking member compliance and recommending any changes to the OPEC+ deal, if needed.

Its meeting comes as the International Energy Agency, the US Energy Information Administration and OPEC itself have downgraded their global oil demand forecasts, seeing a much weaker recovery.

In its latest monthly oil market report on Sept. 14, OPEC projected that 2020 oil demand would come in 400,000 b/d lower than it had predicted in August, while 2021 was revised down by about 770,000 b/d.

"From the OPEC monthly outlook, you can easily make (out) that demand will not come back," a third delegate said. "The concern will be the pace of demand growth until it is back."On the supply side, US production could rebound faster than previously expected, the OPEC report stated, while Libya could be a wildcard in the months ahead.

Rebel militia leader Khalifa Haftar has said his Libyan National Army could drop an oil blockade of the country's ports, in place since January, that has caused about 1 million b/d of its crude production to be shut in.

The LNA in August agreed to a ceasefire with the UN-backed Government of National Accord, though state-owned National Oil Corp. has yet to lift a force majeure on crude exports.

Any return of Libyan barrels would make the OPEC+ coalition's market rebalancing job more challenging, at a time when it is already grappling with how to manage struggling global oil demand.

As MRC informed before, 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. 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.

We remind that in early May, 2020, 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 ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.
MRC

MOSCOW (MRC) -- SABIC, a global leader in the chemical industry, today announced its partnership with Elkamet Kunststofftechnik GmbH, an industry leader in the plastics processing industry, said the company.

Elkamet will be using SABIC’s LEXAN™ polycarbonate (PC) resin based on certified renewable feedstock in several end applications for the lighting industry. In October 2019, SABIC launched its polycarbonate based on certified renewable feedstock – an engineering thermoplastic resin that is part of the company’s TRUCIRCLE™ solutions for certified renewable products. The polycarbonate provides SABIC and its direct and ultimate customers with more sustainable solutions and associated benefits. Based on our cradle-to-gate peer-reviewed LCA study, use of SABIC’s LEXAN polycarbonate resin can potentially result in reductions in carbon footprint of up to 61% and fossil depletion reduction of up to 35%.

"Our polycarbonate (PC) based on certified renewable feedstock solution supports the pursuit of a more circular economy, one that prioritizes resource conservation and environmental sustainability, recycling and recovery technologies, allowing us to capture the greatest value from materials that have traditionally been discarded”, said Mark Vester, Circular Economy Leader at SABIC. “We are delighted to be partnering with Elkamet, part of our ongoing commitment to our customers who are increasingly looking for more sustainable solutions in response to consumer requirements," Vester continued.

"Elkamet is the first in the lighting industry to offer an alternative for our customers in order to keep up with the trend towards more sustainability in the development of plastic components,” said Lukas Platt, Sales, at Elkamet. “Diffusors/covers are one of the biggest parts of a luminaire that are made of plastic. By producing them using renewable resources, lighting manufacturers can make a huge sustainability impact. We are very happy to partner with SABIC, whose polycarbonate based on certified renewable feedstock ensures that the customer does not have to make a compromise between sustainability and material properties. In addition, a huge benefit of this solution is that design and application requirements for Elkamet profiles made of SABIC’s material remain the same,” concluded Platt.

Elkamet has also been ISCC certified, in order to give SABIC and Elkamet’s common customers a consistent proof of a sustainable supply chain. "Since the launch of our renewable PC at K2019 trade show in Dusseldorf last year we have had a lot of interest shown in the solution from a broad range of industries. We are delighted to have Elkamet onboard. A further step towards transforming the value chain together – to realize a more responsible value chain, creating positive impact on environmental challenges,” said Lennard Markestein, Director Engineering Thermoplastics at SABIC.

SABIC’s TRUCIRCLE portfolio and services for circular solutions span; design for recyclability, mechanically recycled products, certified circular products from feedstock recycling of used plastics and certified renewables products from bio-based feedstock. To learn more about SABIC’s polycarbonate based on certified renewable feedstock please see here. For more information on Elkamet please see here.

As MRC reported earlier, major petrochemicals producer SABIC expects the lifestyle changes brought about by the COVID-19 pandemic to shape the different usage of plastics going forward.

We remind that Saudi Basic Industries Corp., the petrochemicals giant 70%-owned by Saudi Aramco, saw average petrochemical prices in the second quarter plunge by 27% year-on-year as it posted a third consecutive quarterly loss, according to CEO Yousef al-Benyan's statement Aug. 6.

According to ICIS-MRC Price report, PC prices went up in the Russian market in August. Prices will continue their upward trend in the country in September. The Kazan producer's prices of extrusion grade material were at Rb145,000/tonne FCA plant, including VAT, in August, whereas prices of injection moulding material were at Rb152,000/tonne FCA plant, including VAT. The plant's selling prices will rise by Rb20,000/tonne this month largely because of the growth of the dollar and euro exchange rates against the rouble.

Saudi Basic Industries Corporation (Sabic) ranks among the world"s top petrochemical companies. The company is among the world"s market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.
MRC

MOSCOW (MRC) -- China is set to register a sharp decline in oil product exports for calendar 2020 and oil companies may fail to fully utilize their export quotas as they find sales in the international market difficult during the coronavirus pandemic, said S&P Global.

Over January-September, China was likely to export about 36.2 million mt of oil products, S&P Global Platts estimated based on recent customs data and company export plans. This could mean that Chinese oil companies would have to offer about 20 million mt of oil products into the international market in the fourth quarter if they are to fully use up their quotas.

Oil companies typically strive to utilize all their quota allocation by year end in a bid to increase the chances of securing their export permits for the following year. In 2019, they used 99% of their quota by raising export volumes by 20% year on year to 55.37 million mt, Platts data showed.

However, the state-run refinery official said authorities may take a more lenient approach in assessing export permit grants for next year as domestic fuel producers struggle to sell their cargoes overseas amid lackluster international demand due to the pandemic.

"China's oil product exports will fall far behind the quota volume, but the government should understand as this year is very special due to the COVID-19 pandemic," the trading official said.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.
MRC

MOSCOW (MRC) -- Mexican President Andres Manuel Lopez Obrador said the 2021 budget would call for spending on priority infrastructure, including refineries and oil production, and would not raise taxes, reported Reuters.

The Finance Ministry is due to present the budget next Tuesday, with the government facing scrutiny over an economy that has been battered by the coronavirus pandemic.

Gross domestic product could shrink almost 13% this year, the central bank has warned.

Asked during his daily news conference if the new budget would include a plan to reactivate the economy based on infrastructure projects, he listed a variety of works slated for public spending, including refineries, oil production and electric power.

Financing will also be allocated for highways and roads, the completion of a new international airport for Mexico City, and construction on the “Mayan Train” tourist railway on the Yucatan Peninsula.

The projects will include the private sector, “but without putting the country into debt,” the president said.

Lopez Obrador said he did not agree with a proposal by lawmakers from his own Morena party to increase taxes on products such as junk food.

“You can’t traffic in the health of the people,” he said, adding he preferred government campaigns promoting nutrition and exercise.

Lopez Obrador has said previously there will be no tax increases before 2021.

Mexican Finance Minister Arturo Herrera, in a television interview on Wednesday, backed up the president’s vow not to increase taxes.

“Today, companies have little money, families have little money. It’s not the moment to think of that,” Herrera said.

As MRC informed earlier, Mexico's oil giant Pemex is advancing a refinery rehabilitation program that will enable it to process 1.2 million b/d of crude oil by the end of 2020 and evaluating a reconfiguration of its petrochemical facility at Cangrejera, Mexico, into what would be its eighth refinery.

We also remind that in 2016, Pemex shut its steam cracker at its Cangrejera complex for maintenance on February 15. The cracker was idle for about 14 days. The conducted repairs at the cracker were a part of planned 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) -- Saad Helal, the Chairman of Egyptian Petrochemicals Holding Company (ECHEM), stated that his company is rapidly working on implementing a number of seven new projects to the national plan for the period of 2020-2035, according to a press release.

He said that these projects include one by Wood Technology Company for producing medium-density fibreboard (MDF) wood which is being installed and implemented by Petrojet, a methanol derivative production project which produce a capacity of 140 tons per year and is worth USD117 million, and a project by the Egyptian Ethylene and Derivatives Company (Ethydco) for producing rubber polybutadiene at a capacity of 36,000 tons per year with costs USD183 million.

Helal added that the company is finalizing the procedures for Al Alamein project which costs USD7.5 billion, in addition to a complex for medium and small industries relying on the production of Al Alamein complex. He explained that they are preparing a detailed feasibility study for Suez refining and petrochemical project which is worth USD7 billion, clarifying that these two projects are targeting to produce diverse petrochemical and petroleum products to meet the local market needs and export the surplus.

The chairman mentioned that the company is intensifying the efforts to economically improve the petrochemical complex in Al Nahda at Alexandria which will raise the productivity of the petroleum companies there.

Helal noted that ECHEM and its subsidiaries produced about four million tons of petrochemical products during the fiscal year (FY) of 2019/20 despite the challenges they faced, pointing that the company is keen on providing the needed funds to implement the national plan projects.

This came during the general assembly meeting of the company which was headed by the Minister of Petroleum and Mineral Resources, Tarek El Molla to approve the operational results of FY 2019/20.

For his part, El Molla stressed on developing and updating the national plan for petrochemical projects to cope up with the sector’s developments giving directives towards implementing such projects rapidly to increase production.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.
MRC