Oil prices fall over 2% as coronavirus cases mount

MOSCOW (MRC) -- Oil prices fell over 2% to their lowest in a week on Tuesday on worries about the outlook for fuel demand as Europe and the United States grappled with a surge in new coronavirus infections, said Hydrocarbonprocessing.

An industry report in the afternoon from the American Petroleum Institute (API) is expected to show U.S. crude stockpiles increased 1.4 MM barrels last week. On its second to last day as the front-month, Brent futures for November delivery fell USD1.15, or 2.7%, to USD41.28 a barrel by 10:41 a.m. EDT (1441 GMT). The more active Brent contract for December fell 2.4% to USD41.85.

U.S. West Texas Intermediate (WTI) crude fell $1.31, or 3.2%, to USD39.29 per barrel. More than a million people worldwide have died from COVID-19, according to a Reuters tally, a bleak milestone in a pandemic that has devastated the global economy and demand for fuel.

"The evolving Covid landscape is a massive downside risk for crude prices," said Craig Erlam, senior analyst at OANDA. The heads of the world's largest trading houses predicted tepid oil demand recovery and flat prices in the coming months and possibly even years.

Clashes between Armenia and Azerbaijan over the Nagorno-Karabakh region have also kept markets on edge. If the conflict escalates, it could affect oil and gas exports from Azerbaijan. "Disruptions to output and exports do not seem imminent. Nevertheless, the conflict has raised the geopolitical risk temperature," said oil broker PVM's Tamas Varga.

Kuwait's ruling Emir Sheikh Sabah al-Ahmad al-Sabah has died, his office said in a statement read out on state television. And in a clear sign of weak demand in Japan, the world's fourth-biggest crude buyer, official data showed the country's August oil imports fell more than 25% from a year earlier.

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) -- Azeri state energy company SOCAR said the country’s oil and gas infrastructure was safe thanks to measures taken by the army over military conflict in the region of Nagorno-Karabakh, said Reuters.

The worst spate of fighting between Armenia and Azerbaijan since the 1990s raged for a third day on Tuesday and the civilian death toll mounted. The clashes have not so far taken place near the major energy assets.

Ibrahim Akhmedov, a spokesman for SOCAR, said that the country’s oil and gas infrastructure was operating normally and that its exports were being carried out as usual. Oil major BP said the business operations at its projects in Azerbaijan were continuing as usual.

Analysts said on Monday that military clashes between Armenia and Azerbaijan over the territory of Nagorno-Karabakh have not affected energy supplies from the region, but could disrupt oil and gas exports should the conflict escalate. Azerbaijan’s primary route for oil exports is the Baku-Tbilisi-Ceyhan pipeline, which accounts for around 80% of the country’s oil exports and runs via Georgia and on to the Turkish Mediterranean coast.

It has capacity of 1.2 MM barrels per day, or more than 1% of global oil supplies. BP is leading the international consortium developing Azerbaijan’s giant Shah Deniz field, which is expected to make its first deliveries to Europe later this 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

MOSCOW (MRC) -- Dow says it will record a charge of between USD500-600 million in the third quarter for costs associated with the company’s ongoing restructuring program, and has outlined more details of its previously announced plan to close manufacturing facilities in the US and Europe to enhance its long-term competitiveness as the worldwide economy recovers from the COVID-19 pandemic, said Chemweek.

Dow will rationalize its manufacturing asset footprint in its industrial intermediates and infrastructure business by “shutting down certain amines and solvents facilities in the United States and Europe as well as select small-scale downstream polyurethanes manufacturing facilities,” it says. In its performance materials and coatings segment it will shut down manufacturing assets, primarily small-scale coatings reactors, and “also rationalize its upstream asset footprint in Europe and in the United States and Canada by adjusting the supply of siloxane and silicon metal to balance to regional needs,” it says. The specific facilities to be closed have not been detailed at this stage.

The USD310-million sale to Watco Companies (Pittsburg, Kansas) of Dow’s rail infrastructure assets at six North American sites will also be closed today, three months earlier than planned, it adds. The sale was announced on 6 July. Earlier this month the company announced plans to divest certain marine and terminal operations and assets to Vopak Industrial Infrastructure Americas for cash proceeds of USD620 million, with that transaction expected to close by the end of the year.

Dow’s restructuring program, first detailed in its second quarter earnings announcement in July, will cut its global workforce costs by approximately 6%. Along with the rationalization of its manufacturing assets, Dow restates that these actions are expected to result in total annualized EBITDA savings of more than USD300 million by the end of 2021. The company said in July it intended to shed uncompetitive assets, lay off about 2,000 employees, and hold off on new capital projects.

The third-quarter charge of USD500-600 million will consist of severance and related benefit costs; costs associated with exit and disposal activities; and asset write-downs and write-offs, according to Dow. The restructuring program is in addition to the previously stated USD500 million of operating expense savings Dow says it will achieve by the end of 2020. The company adds that it remains on target to achieve its reduced capital expenditure target of USD1.25 billion for 2020, down from USD2.0 billion in 2019.

"Given the expected gradual and uneven global economic recovery from COVID-19, we announced in July that we are taking necessary actions to continue to optimize our asset footprint, reduce structural costs and enhance the competitiveness of our business over the long-term,” says Jim Fitterling, Dow chairman and CEO. “We continue to stay focused on delivering strong cashflow, strengthening our financial profile and maximizing our operational advantages, and we remain well positioned to capture significant growth as market conditions improve."

Dow says it will involve local stakeholders as defined in each country and in compliance with relevant information and consultation processes. Dow president and CFO Howard Ungerleider told CW in July that the layoffs would be spread fairly evenly across businesses and geographies, but that they would be tilted toward assets and sites serving markets most challenged by the COVID-19 shutdowns and the recovery outlook. The manufacturing shutdowns would result in a total charge in the range of USD700 million to USD1.3 billion, most of it paid in 2021–2022, Ungerleider estimated.

Dow reported a second-quarter net loss of USD217 million in July, down from income of USD90 million in the year-ago period, on sales down 24% year on year to USD8.35 billion.

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) -- Nigeria’s long-awaited oil reform bill would privatize the Nigerian National Petroleum Company, amend changes to deep water royalties made late last year and scrap key regulatory agencies in favor of new bodies, according to a copy of the bill, said Reuters.

President Muhammadu Buhari has sent the bill to the Senate, which along with the House of Representatives must sign off on it before it can become law. Nigeria is Africa’s largest crude exporter.

The closely watched legislation has been in the works for the past 20 years, and the main laws governing Nigeria’s oil and gas exploration have not been fully updated since the 1960s because of the contentious nature of any change to oil taxes, terms and revenue-sharing within Nigeria.

As MRC informed earlier, Nigerian National Petroleum Corporation (NNPC) has fired 850 workers, many of them from refineries, amidst the coronavirus pandemic, an oil union said. The workers are both skilled and unskilled contractors, including technicians who helped maintain Nigeria’s oil refineries, said Lumumba Okugbawa, general secretary of the Petroleum and Natural Gas Senior Staff Association of Nigeria, speaking on the phone.

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

1. China oil hub urges refiners to make payments to government risk fund

MOSCOW (MRC) -- The tax office in China’s Shandong province has urged refiners in the oil hub to make payments to a government risk reserve fund to cover periods when oil prices fell below USD40 a barrel this year, in line with government policy, said Hydrocarbonprocesing. Global oil prices held below that level for more than three months and the payments due are estimated to be in the billions of yuan. Beijing set a policy in 2016 that required refiners to pay their profit margins to the central government fund whenever crude fell below USD40 a barrel, which is the floor price for retail gasoline and diesel.


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