Crude rises on expectation of tamer US lockdowns, Asian trade agreement

MOSCOW (MRC) -- Crude prices rose in mid-morning trade in Asia Nov. 16, as the market was comforted by the strong possibility that any new lockdowns in the US will be less severe than the nationwide lockdowns seen in spring, with the signing of the Regional Comprehensive Economic Partnership (RCEP) also providing a boost to sentiment, reported S&P Global.

At 10:37 am Singapore time (0237 GMT), ICE Brent January crude futures were up 41 cents/b (0.96%) from the Nov. 13 settle at USD43.19/b, while the NYMEX December light sweet crude contract was up 50 cents/b (1.25%) at USD40.63/b.

January ICE Brent and December NYMEX crude futures surged 8.44% and 8.05% higher in the week ended Nov. 13 to settle at USD42.78/b and USD40.13/b, respectively, on reports of progress in the development of a COVID-19 vaccine.

Market analysts attributed the upward trajectory in oil prices this morning to rising hopes that if any lockdown measures are implemented in the US, they will not be as strict as the ones seen during the first wave of the virus in spring.

"Oil is trading higher at the open after Dr. Vivek Murthy, a former US surgeon general [who is also one of Joe Biden's top advisers on the virus], told "Fox News Sunday" that any lockdown at this stage of the pandemic would look different than the sweeping closures which states enacted in the spring to suppress the virus," said Stephen Innes, chief global market strategist at axi, in a Nov. 16 note.

"Last week, traders speculated that the US could move into very rigid lockdowns over the holiday season, impacting road fuel demand over Thanksgiving and Christmas, so we are seeing some of those shorts give way at the open," Innes added.

Margaret Yang, strategist at DailyFX, echoed the above sentiment, and told S&P Global Platts that "Biden's advisory suggesting that [they are] reluctant to implement harsh nationwide lockdowns is good news for energy demand in North America. This is one of the major headlines driving prices higher this morning."

Yang added that the signing of the RCEP - the world's biggest trade agreement involving 15 nations and covering almost a third of the world economy - and the weakening US dollar also contributed to the bullishness seen in the market this morning.

"The sentiment in Asian markets is positive this morning, and this is also because of the signing of the RCEP trade agreement on Nov. 15, which is expected to provide a long-term boost in the region's economic activity," Yang said. "Last but not least, the falling US dollar this morning may have provided some additional support to oil prices."

However, despite the uptrend in prices this morning, and even without strict US lockdowns, both Innes and Yang surmised that the oil complex will likely remain pressured in the near-term by coronavirus-induced demand concerns, especially since COVID-19 cases in both Japan and the US have been rising unabated, and since most of Europe remains under some degree of lockdown.

ANZ analysts said in a Nov. 16 note: "European motorway traffic is down almost 50% in recent weeks in some countries (such as France) as lockdown measures are increased. (Even though US authorities have been reluctant to implement lockdowns,) people movement is slowing, with vehicle miles traveled on US highways falling 3% w/w in the week ending Nov. 8."

"Fundamentals are still bleak and are unlikely to support oil prices, which I believe will consolidate at around USD40-USD42/b in the near term," Yang concluded.

As MRC informed previously, 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).

ccording to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

MOSCOW (MRC) -- The Ukrainian plant Karpatneftekhim (Kalush, Ivano-Frankivsk region) has resumed operations at its high density polyethylene (HDPE) production capacities after a scheduled maintenance, according to ICIS-MRC Price report.

The plant's customers said the Ukrainian producer had resumed its HDPE production by 17 November, after the scheduled turnaround. The outage began on 24 October.

At the same time, suspension polyvinyl chloride (SPVC) production is planned to be resumed by the end of the week.

According to MRC's ScanPlast report, Karpatneftekhim produced 53,900 tonnes of HDPE and 205,000 tonnes of PVC in the first nine months of 2020, down by 19% and up by 19%, respectively, year on year.

Karpatneftekhim is one of the largest enterprises of Ukraine's petrochemical complex. Currently, the plant can produce annually 300,000 tonnes of PVC, 200,000 tonnes of caustic soda, about 180,000 tonnes of chlorine, as well as 250,000 tonnes of ethylene and 100,000 tonnes of polyethylene.
MRC

MOSCOW (MRC) -- Overall imports of unmixed polyvinyl chloride (PVC) into Belarus totalled 38,900 tonnes in the first nine months of 2020, up by 33.5% year on year, according to MRC's DataScope report.

According to the statistics committee of the Republic of Belarus, local converters raised their purchases of PVC to a record level on the back of high seasonal demand for finished products, overall imports exceeded 6,200 tonnes, whereas a month earlier this figure was 5,700 tonnes. Russian resin accounted for the main increase in purchasing.

Thus, imports of unmixed PVC reached 38,900 tonnes in January-September 2020, compared to 29,100 tonnes a year earlier.
Russian producers with the share of about 85% of the Belarusian market were the key suppliers of resin to Belarus over the stated period. Producers from Germany and Ukraine with the share of approximately 7% and 5%, respectively, were the second and third largest suppliers.

MRC

MOSCOW (MRC) -- Chemtrade Logistics Income Fund (Toronto, Ontario, Canada) says volumes during the third quarter were down year-over-year (YOY) in all segments except water products, and pricing dropped in electrochemicals, according to Chemweek.

Net income came to a loss of CD48.3 million, down YOY from a loss of CD0.2 million in the year-ago quarter. Revenue totaled D346 million, down 13% from CD396 million. Earnings per share came to CD0.52, down YOY from breakeven and short of the average analyst estimate of a CD0.06 loss as compiled by Refinitiv (New York).

“The COVID-19 pandemic continued to adversely affect the demand for some, but not all of our products,” says Mark Davis, president and CEO. “Demand for our water business was unaffected, resulting in another strong quarterly performance. Once the economic effect of the pandemic eases we expect to see demand for the adversely affected products increase.”

Sulphur products and performance chemicals revenue totaled CD105 million, down 18% YOY on lower sales volumes for regen and merchant sulfuric acid and other products owing to the COVID-19 pandemic, says Chemtrade. Adjusted EBITDA was CD31 million, down YOY from CD44 million.

The water products and specialty chemicals segment turned in revenue of CD120 million, down 2% YOY on lower sales volumes of water solutions products and specialty chemical products, partially offset by higher selling prices of water solutions products. Adjusted EBITDA was CD29 million, up YOY from CD24 million owing to higher selling prices and lower raw material costs for water products, says Chemtrade.

The electrochemical segment reported revenue of CD121 million, down 17% YOY on lower sales volumes for hydrochloric acid (HCl) and caustic soda, a 30% decline in selling prices for HCl, and an 11% decline in selling prices for caustic soda, partially offset by a 4% increase in selling prices for chlorine. Adjusted EBITDA came to CD25 million, down YOY from CD43 million on lower selling prices and low operating rates at the North Vancouver facility.

As MRC reported earlier, in November 2017, Chemtrade Logistics announced force majeure circumstances for the supply of caustic soda, chlorine and hydrochloric acid from its plant in North Vancouver (North Vancouver, British Columbia, Canada). In a statement, the company said that the force majeure was caused by a technical failure of the equipment.

We remind that September production of sodium hydroxide (caustic soda) in Russia were 108,000 tonnes (100% of the basic substance) versus 99,200 tonnes a month earlier. Russia's overall output of caustic soda totalled 945,600 tonnes in the first nine months of 2020, down by 1.6% year on year.

Chemtrade operates a diversified business providing industrial chemicals and services to customers in North America and around the world. Chemtrade is one of North America's largest suppliers of sulphuric acid, spent acid processing services, inorganic coagulants for water treatment, liquid sulphur dioxide, sodium nitrite, sodium hydrosulphite and phosphorus pentasulphide. Chemtrade is a leading regional supplier of sulphur, sodium chlorate, potassium chloride, and zinc oxide. Additionally, Chemtrade provides industrial services such as processing by-products and waste streams.
MRC

1. BP files notices of possible worker layoffs in Chicago area

MOSCOW (MRC) -- BP Plc notified officials in Chicago and the state of Illinois of possible layoffs affecting more than 250 salaried employees at the company’s offices, reported Reuters with reference to BP's statement. BP is also reviewing the organizational structure at its Whiting, Indiana, oil refinery 28 miles (45 km) southeast of Chicago. BP’s US Pipelines and Logistics office is located in Chicago and the company has a technology campus in the nearby suburb of Naperville, Illinois.


MRC