Oil pulls back as OPEC punts on production cut extensions

MOSCOW (MRC) -- Oil futures settled lower Nov. 30 as OPEC delegates finished a first day of negotiations without a deal on whether to extend crude production quotas into the new year, reported S&P Global.

NYMEX January WTI settled 19 cents lower at USD45.34/b, and ICE January Brent finished the session down 59 cents at USD47.59/b.

The OPEC+ alliance at one point seemed close to a decision to maintain its collective 7.7 million b/d in output cuts through at least March to buttress oil prices against the impact of rising COVID-19 infections, but fissures have emerged as fatigue among many countries to rein in so much of their crude production has grown, and talks so far have failed to achieve a watertight consensus.

NYMEX December RBOB settled 3.31 cents lower Nov. 30 at USD1.2489/gal, and December ULSD was down 2.46 cents at USD1.3559/gal.

Year-ahead WTI futures settled in a 2 cents/b backwardation compared with the front-month contract, but Brent forward curve fell deeper into contango with the year-ahead contract settling at a 45 cent/b premium to front month.

OPEC held its formal meeting Nov. 30, intending to clinch a deal ministers would then hammer out the following day with its nine non-OPEC partners. Delegates said the framework of a cut extension for three months had been reached, but the UAE, which has been wavering in its commitment to OPEC, has yet to take a position, endangering the negotiations.

"It is becoming apparent that you are not having everyone fall in line here, and rightfully so; the Asian economic recovery is strong," OANDA senior market analyst Edward Moya said. "If the recovery continues like it is, (a quota extension) is basically giving US shale producers the greenlight to win back market share."

Chinese refinery runs hit a fresh all-time high of 14.15 million b/d in October, National Bureau of Statistics data showed Nov. 25.

Even an agreement among OPEC is not certain to be ratified by the non-OPEC members. Russia has expressed a desire to gradually increase quotas, while Kazakhstan wants to see the cuts rolled back as scheduled, sources told S&P Global Platts after preliminary consultations among some members were organized Nov. 29.

Without an extension agreement, the OPEC+ curbs are scheduled to ease to 5.8 million b/d from January, which many analysts have said could overwhelm the market given the recent surge in crude production from quota-exempt Libya.

"We calculate the market surplus could be as high as 1.5 million-3 million b/d in H1 2021 if it doesn't extend cuts," ANZ analysts said in a note Nov. 30.

As MRC reported 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% 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 1,594,510 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) -- Petrochemical producer Braskem Idesa is investing in an additional ship-unloading pier to increase its ethane imports, reported S&P Global with reference to Braskem's CFO Pedro Freitas' statement in November.

The initiative is part of the "fast track" project, which is responsible to provide imported ethane to the Veracruz complex in Mexico.

"We expect that in the beginning of 2021 we will be able to import more than 25% of our ethane requirements," Freitas said.

According to the executive, if working perfectly today, the "fast track" can deliver up to 20% of the complex needs, but this is "very hard to do".

Mexican state-owned Pemex is Braskem Idesa's main ethane provider, but the company is struggling to fulfill the agreed amount.

The supply contract signed between the two companies has come under scrutiny after former Braskem Idesa president Emilio Lozoya Austin's statement was delivered to the Mexican Attorney General's Office as part of an investigation.

The investigation is looking into claims of corruption in the deal as Mexican President Andres Manuel Lopez Obrador accuses Braskem Idesa of damaging Pemex in millions of dollars by making the oil company supply Braskem Idesa with artificially low-priced ethane.

"We remain in touch with Pemex to find a constructive solution regarding ethane," Freitas said.

As MRC informed before, in early February, 2020, Braskem said its Braskem Idesa joint venture with the Mexican group Idesa had reached an important milestone with the import of its first ethane from the US, which will be used as feedstock to at the Coatzacoalcos, Mexico, petrochemical complex. Braskem Idesa has spent USD4 million on logistics infrastructure and will be able to import up to 12,800 b/d of ethane to the feed the complex. This quantity represents 19% of the company’s 1.05-million metric tons/year steam cracker’s ethane needs.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 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, excluding producers" inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Braskem S.A. produces petrochemicals and generates electricity. The Company produces ethylene, propylene, benzene, toluene, xylenes, butadiene, butene, isoprene, dicyclopentediene, MTBE, caprolactam, ammonium sulfate, cyclohexene, polyethylene theraphtalat, polyethylene, and polyvinyl chloride (PVC).
MRC

MOSCOW (MRC) -- The 380,000-metric tons/year steam cracker at Porvoo, Finland, operated by Borealis is expected to restart operations in early December after the company declared force majeure following a technical failure on 11 November, reported Chemweek with reference to a company spokesperson's statement to OPIS on Friday.

"Start-up is currently foreseen for early December 2020," the spokesperson said.

The cracker was shut down to allow necessary repair works, according to Borealis. Cumene and phenol operations at Porvoo have not been disrupted by the cracker outage, as Borealis has been able to source feedstocks to maintain production, according to IHS Markit analysts. Borealis produces

150,000 metric tons/year of benzene, 245,000 metric tons/year of cumene, and 190,000 metric tons/year of phenol at Porvoo, IHS Markit data show.

OPIS is an IHS Markit company.

As MRC informed earlier, Borealis announces that its new naphtha cavern in Porvoo, Finland has now been safely commissioned as of October 2020. Having invested around EUR25 million in the construction of this 80,000 m3 facility, Borealis can now source and store naphtha for its Porvoo operations from the global market in a more flexible, cost-efficient, and secure way. The cavern can also accommodate renewable naphtha, making it possible for Borealis customers in future to draw on certified renewable polypropylene (PP) and polyethylene (PE), as well as renewable base chemicals, ethylene, propylene and phenol.

We remind that the light-feed 625,000-metric tons/year Borealis steam cracker at Stenungsund, Sweden, is expected to restart operations in the fourth quarter this year after a fire broke out at the plant in May, 2020. The cracker has been under force majeure ever since after the blaze at the plant on 10 May, which was subsequently brought under control the following day.

Ethylene and propylene are feedstocks for producing PE and PP.

According 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, excluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Borealis is a leading provider of innovative solutions in the fields of polyolefins, base chemicals and fertilizers. With headquarters in Vienna, Austria, Borealis currently employs around 6,500 and operates in over 120 countries.
MRC

MOSCOW (MRC) -- TechnipFMC has successfully completed the remaining conditions required to enable work to commence on the EPC contract with Assiut National Oil Processing Company (ANOPC) for the construction of a new hydrocracking complex for the Assiut refinery in Egypt, according to Hydrocarbonprocessing.

As previously announced, this major EPC contract covers new process units such as a vacuum distillation unit, a diesel hydrocracking unit, a delayed coker unit, a distillate hydrotreating unit as well as a hydrogen production facility unit using TechnipFMC’s steam reforming proprietary technology. The project also includes other process units, interconnecting, offsites and utilities.

The project supports the Egyptian government’s Energy Transition strategy and will reinforce the economic growth of rural areas while minimizing environmental emissions as well as reducing the government export bill. The complex will transform lower-value petroleum products from Assiut Oil Refining Company’s (ASORC) nearby refinery into approximately 2.8 million tons per year of cleaner products, such as Euro V diesel.

The contract award will be included in the Company’s fourth quarter 2020 inbound orders.

As MRC reported earlier, Saad Helal, the Chairman of Egyptian Petrochemicals Holding Company (ECHEM), stated in September 2020 that his company is rapidly working on implementing a number of seven new projects to the national plan for the period of 2020-2035. He said that these projects include one by Wood Technology Company for producing medium-density fibreboard (MDF) wood which is being installed and implemented by Petrojet, a methanol derivative production project which produce a capacity of 140 tons per year and is worth USD117 million, and a project by the Egyptian Ethylene and Derivatives Company (Ethydco) for producing rubber polybutadiene at a capacity of 36,000 tons per year with costs USD183 million.

Butadiene is the main feedstock for the production of acrylonitrile-butadiene-styrene (ABS).

According to MRC's ScanPlast report, Russia's estimated consumption of polystyrene (PS) and styrene plastics totalled 362,820 tonnes in the first nine months of 2020, down by 1% year on year. Consumption of material in the Russian ABS segment decreased in January-September 2020 by 8% year on year, totalling 32,240 tonnes.
MRC

MOSCOW (MRC) -- In North America, according to Scotiabank’s latest Global Auto Report, Canadian auto sales similarly continued to stabilize in October with a modest -0.6% month-over-month (m/m) (sa) deceleration, sitting 2.5% down year-over-year, said Canplastics.

"October’s selling rate at 1.85 million saar units is only 5% below 2019 annual sales, mirroring the broader economic recovery where gains are largely moderating following impressive rebounds in the immediate aftermath of lockdowns,” the report said. “Second waves across Canada will likely moderate auto sales heading into the end of the year.” In fact, preliminary figures for Ontario and, to a lesser extent Quebec, already showed slowing auto sales in October as those economies entered second waves earlier than other parts of the country, Scotiabank said. “But these are not expected to destroy demand as much as dampen demand in the near term with some deferral in sales into the new year," the report said.

In the U.S., auto sales continued to normalize in October with a modest pullback of -0.5% m/m (0.9% y/y). October’s selling rate of 16.2 million units is less than 5% below last year’s annual sales, while a broad range of economic indicators similarly continues to hold up against second (or third) waves of the pandemic, the report said. “With some deterioration in auto purchase sentiment noted by the Conference Board, sales may be dampened over the remainder of the year, but reduced election uncertainty and the possibility of some form of fiscal support in the near term will likely put a floor under auto sales activity,” the report said.

Mexican auto sales modestly improved again in October (by 2.9% m/m) but still sit steeply in negative territory relative to last October (-21.3%). “Trend improvements are expected, albeit at a slower pace in line with a softer recovery in private consumption and economic output more generally, along with more limited fiscal capacity to accelerate the recovery,” Scotiabank said.

European auto sales continued to trend in the right direction in October but with considerable volatility and variability across markets, largely a function of outbreaks. “Western European sales, for example, slowed by -6.3% m/m for the month but this masked a 6.5% m/m improvement in Germany against a -4.5% m/m retrenchment in French auto sales, mirroring a difference in the path of the pandemic,” the report said. “Italy and Spain similarly saw October sales pull back modestly, while UK sales picked up modestly (1% m/m) despite escalating cases in October."

With COVID-19 cases decreasing in November (or at least plateauing), auto sales in the region should continue to normalize over the remainder of the year, Scotiabank said. South American auto sales showed signs of further recovery in October with an overall 2% m/m increase in activity. “This is the second month of solid rebounds across most of the region as it emerged from prolonged first waves that extended through the summer for the most part," Scotiabank said.

Brazil continues to underperform, driving headline numbers as the largest auto market, with sales retreating by -4% m/m (-15% y/y). Chile, followed by Peru, showed what Scotiabank called “tremendous rebounds” of 35% m/m (29% y/y) and 9% m/m (7% y/y), respectively. “With political turmoil erupting in November, this could introduce further volatility in the trend recovery for Peruvian auto sales,” Scotiabank said. “Colombian auto sales improved by 9% m/m, but were still down relative to last year (-12% y/y)."

Momentum in global auto sales continues to be driven largely by China, Scotiabank said. “October Chinese purchases retreated only modestly (-0.2% m/m), but posted a hefty 9.4% y/y improvement,” the report said. “Reportedly, 6% of October sales were electric vehicles as the country aggressively strives to meet a 25% EV sales target by 2025. As the pandemic remains at bay, Chinese auto sales are expected to continue to improve over the remainder of the year."

Japanese auto sales, meanwhile, posted a strong sales month in October with a 6.1% m/m improvement as the country was enjoying a brief lull in COVID-19 cases. "Massive year-over-year improvements (29.2% y/y) speak more to the substantial sales declines last October when the sales tax was increased by 2 ppts,” Scotiabank said. “With cases escalating rapidly towards the end of the month, sales will likely be weaker for the remainder of the year, albeit with some offsets from base effects from last fall’s tax."

And while it’s a smaller market, South Korea is on track to be the least-impacted auto sales market amidst the pandemic with year-to-date sales currently only -2% y/y. “October sales pulled back by -15.5% m/m, but are still modestly positive on a year-over-year basis (0.3% y/y),” Scotiabank said.

Rounding out the rest of the region, divergences in auto sales largely continue to track COVID-19 outbreaks, Scotiabank noted. “Australia posted another month of strongly accelerating sales (20.9% m/m; -1.5% y/y) as it has so far avoided major second waves,” the report said. “India experienced a further improvement in sales in October (11.7% m/m; 12.3% y/y) as a persistent first wave is largely under control, while Indonesian sales continue to contract (-10.7% m/m; -47.1% y/y) against rising COVID-19 cases."

As per MRC, Ministry of Industry and Trade of the Russian Federation predicts a 10% drop in car sales in Russia by the end of 2020. Thus, the ministry improved its previous forecast - before the announcement of the September results, the ministry had expected sales to fall by 25-30% per year.

As MRC reported, the Russian car market in 2019 amounted to 1 million 759 thousand cars, which is 2.3% lower than the same indicator a year earlier, according to the Association of European Businesses (AEB). Sales of passenger cars and light commercial vehicles in Russia in December increased by 2.3% to 179 thousand vehicles. As predicted by the AEB, sales of passenger and light commercial vehicles in Russia will continue to fall in 2020, amounting to 1.72 million units, that is, 2.1% less than last year.
MRC