Crude oil futures maintain overnight losses on fear of supply glut

MOSCOW (MRC) -- Crude oil futures were steady during mid-morning Asian trade Oct 13, maintaining overnight losses, as production capacity in the US Gulf of Mexico started to come back online, heightening concerns of a supply glut amid an unimproved demand outlook, reported S&P Global.

At 10.25 am Singapore time (0225 GMT) ICE Brent December crude futures were up 1 cent/b (0.02 %) from the Oct. 12 settle to USD41.74/b, while the NYMEX November light sweet crude contract was up 2 cents/b (0.05%) at USD39.45/b. Both international crude markets had dived 2.64% and 2.88% to settle at USD41.72/b and USD39.43/b, respectively, on Oct. 12, after supply disruptions caused by a Norwegian labor strike and a hurricane in the US Gulf of Mexico were resolved.

In the US Gulf of Mexico, after the dissipation of Hurricane Delta, oil and gas producers have begun resuming production, and have thus far found little serious damage to their infrastructure, S&P Global Platts reported on Oct. 12.

According to data by the US Bureau of Safety and Environmental Enforcement, over 400,000 b/d of offshore crude production was back online as of Oct. 12, after Delta had shuttered 91%, or 1.697 million b/d, of production capacity on Oct. 10.

"The crude oil market was under pressure from easing supply concerns. BHP and Chevron said they would begin restoring operations at the US Gulf oil platforms affect by Hurricane Delta. The storm had shut about 90% of oil production in the gulf, but the region appears to have sustained little damage," an ANZ analyst said in an Oct. 13 note.

On a slightly bullish note, due to the shut-downs necessitated by Delta, analysts surveyed by Platts expect a US commercial crude inventory draw of 2.3 million barrels in the week ended Oct. 9. Such a draw would bring total commercial inventories down to about 490.6 million barrels, putting them only 11.9% above the five-year average of US Energy Information Administration data -- the tightest overhang since May.

Regardless, the upcoming return of barrels from the US Gulf of Mexico could lead to a supply glut in the oil markets, especially since it coincides with Libya's National Oil Corp lifting the force majeure on the Sharara oil field -- the country's largest with a 300,000 b/d capacity -- equivalent to current Libyan production combined.

"The Libyan Oil supply's permanency is proving to be one of the biggest headaches for OPEC and oil bulls alike," Stephen Innes, chief market strategist at AXI, said in an Oct. 13 note.

Meanwhile, the resurgent coronavirus pandemic continues to threaten renewed lockdown restrictions, which will impede global economic recovery and sap oil demand.

Edward Moya, senior market analyst at OANDA, said in an Oct. 13 note: "Energy markets are looking beyond hurricane season and (are) focused on the glut concerns as the demand outlook appears vulnerable to restrictive measures since the northern hemisphere can't get the virus under control before the dreaded winter wave."

As MRC wrote before, Sasol Ltd. said its Lake Charles Chemicals Project in Louisiana remains shut, though no apparent damage to equipment was found following the nearby landfall of Hurricane Delta. While a preliminary assessment is underway, crews also indicated no flooding damage was experienced at the site from the hurricane that hit on Oct. 9, the company said in a reply to questions. Some power supply was lost overnight. “We will resume the coordinated startup sequence of Sasol’s Lake Charles facilities when it is safe to do so,” the company said. “Start-up will depend on the availability of electricity and other feedstocks as well as the restoration process underway from Hurricane Laura.”

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

Infinite Power signs agreement with Marubeni to use power cell technology

MOSCOW (MRC) -- Britain's Infinite Power announced it has signed a letter of intent with Marubeni's Nuclear Fuel Dept of Japan to seek potential markets to use the firm's power cell technology in Japan, said Reuters.

Infinite Power has developed power cells which operate in a similar way to solar cells, but instead of converting the sun's rays into electricity Infinite Power's cells convert the radiation wave emitted from a radioisotope, which is an atom that has excess nuclear energy, into electricity.

Inifinite Power said last month it was seeking to raise 25 million pounds (USD32 million) to construct its first production facility in Britain to make the power cells to provide clean energy to industry.

Discussions are ongoing with investors in the United States and Britain, the firm said.

As per MRC, Enterprise Products Partners LP (EPP), through one of its affiliates, has entered a long-term agreement with Marubeni Corp. of Japan, under which Marubeni will offtake polymer-grade propylene (PGP) produced from a second propane dehydrogenation plant (PDH 2) currently under construction at EPP’s operations in Mont Belvieu, Tex., for supply to global customers.

We remind that Russia's output of products from polymers grew in August 2020 by 4.1% year on year. However, this figure increased by 1.9% year on year in the first eight months of 2020, reported MRC analysts. According to the Russian Federal State Statistics Service, August production of unreinforced and non-combined films rose to 126,300 tonnes from 118,200 tonnes a month earlier. Output of films products grew in January-August 2020 by 8.3% year on year to 863,200 tonnes. August production of non-porous polymer boards, sheets and films exceeded 38,700 tonnes versus 36,400 tonnes in July. Thus, overall output of these products reached 271,900 tonnes over the stated period, up by 3.5% year on year.
MRC

Russian companies settle row with Total over dirty oil supplies

MOSCOW (MRC) -- Russian oil pipeline monopoly Transneft and producer Rosneft have reached a settlement with Total over dirty oil supplies to the French company’s Leune refinery in Germany, Transneft said, as per Reuters.

Up to 5 MM tons of Russian oil in route to central Europe via the Druzhba pipeline were found to be contaminated last year. Total declared a force majeure in June 2019 on the production of jet fuel at its Leuna refinery in Germany following the supply of contaminated crude from Russia.

Transneft did not disclose how much compensation would be paid to Total. The pipeline operator, headed by Nikolai Tokarev, a close ally of Russian President Vladimir Putin, had said it would pay compensation of no more than $15 per barrel.

It had been agreed that buyers such as BP, Shell , Total, Eni and PKN Orlen would put forward claims to Russian suppliers, while Transneft agreed to bear the brunt of the contamination-related costs. Russian exporters, such as Rosneft, would then address buyers’ claims to Transneft for compensation.

Transneft has compensated Hungary’s MOL and all the Kazakh companies affected by crude oil contamination in its pipelines. Organic chlorides were found in Urals crude export flows in late April last year.

As MRC informed earlier, PJSC Tatneft’s Tatneftegazpererabotka (UTNGP) is adding a new unit as part of an ongoing modernization program at its Minnibayevo gas processing plant (MGPP) in Tatarstan’s Almetyevsk region. Recently approved for its permit to build, the project includes construction of a normal butane (n-butane) processing unit and associated off-site installations within the boundaries of the existing MGPP complex.

We remind that Russia's output of products from polymers grew in August 2020 by 4.1% year on year. However, this figure increased by 1.9% year on year in the first eight months of 2020, reported MRC analysts. According to the Russian Federal State Statistics Service, August production of unreinforced and non-combined films rose to 126,300 tonnes from 118,200 tonnes a month earlier. Output of films products grew in January-August 2020 by 8.3% year on year to 863,200 tonnes. August production of non-porous polymer boards, sheets and films exceeded 38,700 tonnes versus 36,400 tonnes in July. Thus, overall output of these products reached 271,900 tonnes over the stated period, up by 3.5% year on year.
MRC

Chevron Phillips Chemical leaves force majeure for PE in USA in force

MOSCOW (MRC) -- Chevron Phillips Chemical still has not lifted force majeure on its polyethylene (PE) products after assessing the impact of Hurricane Laura to its Gulf Coast PE operations, reported S&P Global.

The force majeure circumstances were declared on 1 September, 2020.

CP Chem operates a 420,000 mt/year high-density polyethylene (HDPE) plant in Orange, Texas, and an 855,000 mt/year cracker in Port Arthur.

The company plans to minimize the impact of the event and return to full PE deliveries as soon as possible.

As MRC informed earlier, on 18 August, 2020, Chevron Corp reported a fire at its 112,229-barrel-per-day (bpd) Pasadena, Texas facility. "At this time, flames, smoke may be noticeable to the community. We are coordinating with local officials, and working to resolve the issue as soon as possible," the company reported on August, 19.

We remind that US-based Phillips 66 remains open to developing another ethane cracker for its Chevron Phillips Chemical (CP Chem) joint venture, the refiner's CEO said in March 2018.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Headquartered in San Ramon, California, Chevron Corporation is the the second-largest integrated energy company in the United States and among the largest corporations in the world. Chevron is involved in upstream activities including exploration and production, downstream activities including refining, marketing and transportation, and advanced energy technology. Chevron is also invested in power generation and gasification processes.
MRC

LSB seals nitric acid supply deal

MOSCOW (MRC) -- LSB Industries (Oklahoma City, Oklahoma) has signed a long-term contract to supply up to 100,000 metric tons/year of nitric acid to an unnamed customer. No value for the contract has been given, said Chemweek.

The company will supply between 70,000-100,000 metric tons/year, with sales expected to begin in the first quarter of 2021, it says. The contract “advances one of our key operating initiatives to leverage our underutilized nitric acid production capacity at our El Dorado [Arizona] facility,” says president and CEO Mark Behrman.

The latest deal is the result of focused efforts by LSB “to sell our excess production capacity and change product mix in order to enhance our margins. We expect these agreements, when combined with the impact of a new fertilizer storage facility that we completed construction on in April, will provide a meaningful increase in incremental annual EBITDA when fully implemented,” he says.

As MRC informed earlier, Spain-based La Seda de Barcelona (LSB) is planning to dispose of its PET polymer and raw material plants to raise new capital to develop its PET and chemical operations. LSB has PET plants in Spain, Italy, Greece and Turkey and raw material chemical units in Spain and Portugal. The company wants to sell the plants only if it is unable to get the help of other industrial partners to form a joint venture in order to support its chemical operations.

We remind that Russia's output of products from polymers grew in August 2020 by 4.1% year on year. However, this figure increased by 1.9% year on year in the first eight months of 2020, reported MRC analysts. According to the Russian Federal State Statistics Service, August production of unreinforced and non-combined films rose to 126,300 tonnes from 118,200 tonnes a month earlier. Output of films products grew in January-August 2020 by 8.3% year on year to 863,200 tonnes. August production of non-porous polymer boards, sheets and films exceeded 38,700 tonnes versus 36,400 tonnes in July. Thus, overall output of these products reached 271,900 tonnes over the stated period, up by 3.5% year on year.
MRC