Crude oil futures rangebound on stable fundamentals

MOSCOW (MRC) -- Crude futures were rangebound during mid-morning trade in Asia Oct. 19, as fundamentals in the oil markets were stable, reported S&P Global.

At 10.20 am Singapore time (0220 GMT), ICE Brent December crude futures were down 13 cent/b (0.3%) from the Oct. 16 settle to USD42.880/b, while the NYMEX November light sweet crude contract was down 14 cents/b (0.34%) at USD40.74/b. Both international crude markets had dipped 0.39% and 0.20% to settle at USD42.92/b and USD40.88/b, respectively, on Oct. 16, after the Energy Information Association's Oct. 15 data showed that US crude exports had fallen to the lowest in 14 months in the week ended Oct. 9.

Amid steady fundamentals, market analysts said that during the week ending Oct. 23, the crude oil price trajectory will be tethered to news flow concerning the coronavirus pandemic.

The coronavirus pandemic continues to threaten global economic recovery, with Italy announcing tightened restrictions to curb the spread the virus on Oct. 18, and Ireland set to do the same later Oct. 19. Just last week, the UK, France and Germany had also adopted more restrictive measures in their battle against the pandemic.

Stephen Innes, chief market strategist at AXI, said in an Oct. 19 note: "The coronavirus pandemic will continue to dominate attention as case numbers rise in Europe and the US [and] as governments move to impose mobility restrictions. And with a trajectory for COVID-19 infections skewed firmly upwards at this juncture, it indeed raises doubts about the robustness of the anticipated economic recovery and thus the prospects for oil demand growth."

Against this gloomy backdrop, the market continues to pin its hopes on the possibility that the OPEC+ alliance will decide against easing their production cuts by almost 2 million b/d as scheduled from 2021 onwards, even after the UAE's energy minister Suhail al-Mazrouei said on Oct. 13 that there are no such plans to do so at the moment.

Barkindo, when presented with the possibility of extended cuts at the Energy Intelligence Forum on Oct. 15 said: "A lot of variables may be reintroduced, but we will focus on how to best assist this market to accelerate the recovery to restore the stability, and also to sustain the stability...Whatever decision that will be taken is to ensure that the recovery in 2021 will be at a favorable pace, will gather momentum in this Q4 and will accelerate."

Market analysts believe that given the bleak demand outlook, and the return of Libyan oil to the market, it is not advisable for OPEC+ to add more oil to the market.

"The toxic combination [of the sustained spread of the coronavirus pandemic and the return of Libyan barrels] makes the scheduled tapering on Jan. 1, 2021, very unlikely. Frankly, adding oil to the market at this juncture, with demand so fragile, is a flat-out bad idea if the group's real intentions are to stabilize and support," AXI's Innes said.

As MRC informed earlier, global oil demand is forecast to peak by around 2040 because transport-fuel demand will decline steeply and economic growth will slow in the post-coronavirus world, the Institute of Energy Economics, Japan, said in its annual IEEJ Outlook 2021 on Oct. 15.

We remind that global oil demand may have already peaked, according to BP's latest long-term energy outlook, as the COVID-19 pandemic kicks the world economy onto a weaker growth trajectory and accelerates the shift to cleaner fuels.

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 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.
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1.European Commission raises EU GHG emissions reduction target to at least 55% by 2030

MOSCOW (MRC) -- The European Commission has recently presented its 2030 climate target plan, in which it sets out a program to reduce EU greenhouse gas (GHG) emissions by at least 55% by 2030, compared with 1990, despite a call from the European Parliament in September for GHG emissions to be reduced 60% by 2030, reported Chemweek. The new target is based on a comprehensive assessment of the social, economic, and environmental impacts, which shows that this “course of action is realistic and feasible,” the Commission says. The raised target puts the EU on a balanced pathway to reaching climate neutrality by 2050 and underlines the EU's continued global leadership in this area, ahead of the next UN climate conference (COP26), it says. “We are doing everything in our power to keep the promise that we made to Europeans: make Europe the first climate-neutral continent in the world, by 2050. Today marks a major milestone in this journey. With the new target to cut EU greenhouse gas emissions by at least 55% by 2030, we will lead the way to a cleaner planet and a green recovery. Europe will emerge stronger from the [COVID-19] pandemic by investing in a resource-efficient circular economy, promoting innovation in clean technology and creating green jobs,” says Ursula von der Leyen, president of the European Commission.


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MOSCOW (MRC) -- Shin Etsu declared force majeure on deliveries of all polyvinyl chloride (PVC) grades from its plant in Pernis, the Netherlands on October 13, reported NCT with reference to market sources.

The plants production capacity is 450,000 tons/year.

The producer could not be reached for confirmation at the time of publication.

It is not yet known when the force majeure will be lifted.

As MRC informed earlier, completion of Shintech's USD1.49 billion expansions across the PVC chain at its Louisiana complex has been pushed back to the first quarter of 2021 from late 2020 because of a slowdown in the work to ensure safety protocols on coronavirus pandemic concerns. Shintech, the North American division of one of the largest Japanese companies - Shin-Etsu Chemical Co. Ltd.

We remind that Shintech completed a turnaround at its 1.4 million mt/year polyvinyl chloride (PVC) complex, also in Texas in April of 2020.

According to MRC's ScanPlast report, Russia's overall PVC production totalled 718,500 tonnes in January-September 2020, down by 0.3% year on year. At the same time, only two producers managed to increase their PVC output.
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MOSCOW (MRC) -- Mexican Energy Minister Rocio Nahle said that construction of the country’s new refinery at the southern Gulf coast port in Dos Bocas was almost a quarter completed, said Reuters.

A confidant of Mexican President Andres Manuel Lopez Obrador, an energy nationalist who favors a stronger state role in the sector, Nahle said construction was 24% completed and had entered the next phase. The government has said it aims to finish the refinery by 2022.

The government has put an $8 billion price tag on the refinery, but independent analysts have said that figure is low. Investors and ratings agencies have criticized the project, arguing that resources should go instead to more profitable parts of state oil company Petroleos Mexicanos, or Pemex.

"We want to be self-sufficient,” Lopez Obrador reiterated at the same event, held in his home state, Tabasco. “It’s very important that we continue with this project."

As MRC informed earlier, European and U.S. oil refineries face a wave of closures due to plateauing fuel demand, tightening environmental rules and overseas competition, prompting some owners to opt for an easier alternative - converting plants to produce biofuels.

As MRC wrote before, on 15 October, The European Commissionadopted the EU's chemicals strategy for sustainability, describing it as the first step towards a zero-pollution ambition for a toxic-free environment announced in the European Green Deal.

We remind that Russia's output of chemical products rose in August 2020 by 5% year on year. At the same time, production of basic chemicals increased year on year by 5.3% in the first eight months of 2020, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-July output. August production of benzene fell to 102,000 tonnes from 95,300 tonnes a month earlier due to scheduled shutdowns for maintenance at several producers. Overall output of this product reached 918,300 tonnes over the stated period, down by 0.9% year on year.

At the same time, August production of primary polymers rose to 888,000 tonnes against 838,000 tonnes in July due to increased capacity utilisation at ZapSibNeftekhim, Stavrolen and Gazprom neftekhim Salavat. Overall output of polymers in primary form totalled 6,630,000 tonnes over the stated period, up by 15.2% year on year.
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MOSCOW (MRC) -- Nippon Shokubai and Sanyo Chemical have postponed their plan to merge via a share transfer, which would have formed an integrated holding company named Synfomix Co, said Chemweek.

The deal was announced in May 2019. The companies had planned to establish the holding company on 1 October 2020, located in Kyoto, Japan, subject to regulatory approval.

The companies say that the global outbreak of the COVID-19 pandemic and resulting sharp decline in oil and oil product markets have made the business environment unpredictable. They say that significant changes in raw material prices and product prices, as well as heightened uncertainty surrounding product demand in the future made it difficult to carry out the planned business integration.

Shokubai and Sanyo have combined annual sales of about GBP511.2 billion (USD4.7 billion) and operating profit of GBP39 billion. The merged entity would have been the 11th-largest chemical company in Japan, ranked by sales. Shokubai is currently the 14th-largest firm and Sanyo ranks 20th, according to company reports.

Shokubai said earlier that the business environment surrounding the chemical industry is increasingly difficult. In Japan, demand for chemicals is expected to decline due to a changing social structure including a decrease and aging of the population, which is causing intense competition between chemical manufacturers.

Demand for chemicals is increasing in emerging countries due to rising population and income levels, but the expansion of chemical manufacturers in those countries and increasing scale disparity with big European and US chemical players are causing the Japanese chemical industry to be less competitive, Shokubai added.

Shokubai currently has a 5.0% stake in Sanyo. The biggest shareholders in Sanyo are Toyota Tsusho with 19.4% and Toray Industries with 17.3%.

As MRC reported earlier, JXTG Nippon Oil and Energy brought on-stream its cracker in Kawasaki on April 28,2020, following a turnaround. The cracker was shut for maintenance on February 27, 2020. Located at Kawasaki in Japan, the cracker has an ethylene production capacity of 460,000 mt/year and propylene production capacity of 235,000 mt/year.

We remind that Russia's output of chemical products rose in August 2020 by 5% year on year. At the same time, production of basic chemicals increased year on year by 5.3% in the first eight months of 2020, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-July output. August production of benzene fell to 102,000 tonnes from 95,300 tonnes a month earlier due to scheduled shutdowns for maintenance at several producers. Overall output of this product reached 918,300 tonnes over the stated period, down by 0.9% year on year. At the same time, August production of primary polymers rose to 888,000 tonnes against 838,000 tonnes in July due to increased capacity utilisation at ZapSibNeftekhim, Stavrolen and Gazprom neftekhim Salavat. Overall output of polymers in primary form totalled 6,630,000 tonnes over the stated period, up by 15.2% year on year.
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