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US oil refineries slow as gasoline demand softens

October 26/2020

MOSCOW (MRC) -- By restricting crude processing and focusing on making gasoline, US petroleum refiners have made progress in reducing excess stocks of middle distillates such as diesel and heating oil, reported Reuters.

In the first half of October, however, the strategy has been challenged by softening domestic gasoline consumption, forcing them to make even deeper cuts in crude processing in an effort to stay on track.

The volume of gasoline supplied to domestic users fell in both the two most recent weeks, interrupting the previous recovery, according to estimates from the US Energy Information Administration.

Gasoline supplied to domestic users is now 9% below the previous five-year average, from a deficit of 4% at the start of the month.

In a sign of weak consumption, inventories increased by 2 million barrels last week, the largest one-week increase since the end of May, reversing the previous downward trend.

Gasoline refining margins have fallen to USD7 per barrel, from USD9 earlier in the month, reversing the previous upward trend, based on futures prices for deliveries in December.

Refiners have attempted to limit the build up in gasoline inventories by making even deeper reductions in crude throughput and gasoline production.

Crude processing was 16% below the five-year seasonal average last week, down from a deficit of 13% the previous week, and again reversing an improving trend.

The refiners' strategy has proved broadly successful, bringing gasoline stocks down to the five-year average, and gradually reducing the surplus of both crude and distillates.

But progress has been slow and total stocks outside the strategic petroleum reserve are still 113 million barrels or nearly 9% above the five-year average.

Globally, oil consumption has not recovered fast enough to absorb the increase of 2 million barrels per day in crude oil production scheduled by OPEC+ for the start of next year.

Saudi Arabia, Russia and their OPEC+ partners will almost certainly have to postpone the increase for at least three months until the start of April, or risk increasing stocks again.

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.


mrcplast.com
Author:Margaret Volkova
Tags:Europe, PP, PE, LLDPE, crude and gaz condensate, PP random copolymer, propylene, ethylene, petrochemistry, BASF, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals, Russia, Saudi Arabia, USA.
Category:General News
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