Crude oil futures fall on surprise US stock build, stimulus uncertainty

MOSCOW (MRC) -- Crude oil futures fell further in mid-morning trade in Asia Dec. 23 as bearish data from the American Petroleum Institute took the market by surprise, and as US President Donald Trump rejected a Congress-approved USD900 billion stimulus bill, reported S&P Global.

At 10:49 am Singapore time (0249 GMT), the ICE Brent February contract was down 78 cents/b (1.56%) from the Dec. 22 settle at US49.30/b, while the February NYMEX light sweet crude contract was down 75 cents/b (1.60%) at USD46.27/b. The markers closed down 1.63% and 1.98% respectively on Dec. 22.

The latest fall in crude prices came as the API reported an unexpected 2.7 million-barrel build in US crude inventories for the week to Dec. 18. Analysts surveyed by S&P Global Platts had been expecting a 4.7 million-barrel decline.

The API data also indicated little improvement in fundamentals in downstream oil product markets, showing a modest draw of 224,000 barrels in gasoline inventories and a 1.03 million-barrel build in distillate inventories.

"Even though traders are used to seeing such API numbers by now, I think that they are still being a little cautious going into the Christmas weekend by locking their profits," David Lennox, resource analyst at Fat Prophets, told S&P Global Platts Dec. 23.

Meanwhile, the political flip-flop over US fiscal relief measures continued as Trump called a US900 billion stimulus package passed by both the Senate and the House of Representatives a "disgrace".

In a video message posted to twitter, Trump said that he would ask the "Congress to amend this bill and increase the ridiculously low USD600 (direct payment) to USD2,000, or US4,000 for a couple".

"I'm also asking Congress to immediately get rid of the wasteful and unnecessary items from this legislation and just send me a suitable bill," he added.

Trump's statements have revived uncertainty over fiscal relief, and analysts expect any delay in the ratification of the package to weigh on oil demand and prices.

"Sentiment took a hit after President Trump asked Congress to amend the COVID-19 relief-funding package, leading crude oil prices lower ... a further delay in the arrival of stimulus funds may hinder a fragile economic recovery and thus dampen the energy demand outlook," DailyFX strategist Margaret Yang told Platts Dec. 23.

Lennox said the refusal of Trump to sign off on the bill has "put some fear back into the markets as without fiscal relief, the US economic climate will deteriorate and oil demand will not improve."

Other bearish developments putting pressure on prices include renewed travel restrictions to the UK after the emergence of a new strain of coronavirus, a stronger US dollar and a slowdown in Asian demand.

"A slowdown of purchases in the physical oil market may hint at a further price pullback as Asian oil refiners have almost fulfilled their needs for spot cargoes to be loaded in January and February, while the virus threat and a stronger US dollar also continue to weigh on prices," Yang said.

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% 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 DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

Versalis names Dow executive as next CEO

MOSCOW (MRC) -- Adriano Alfani, senior global business director at Dow, has been named new CEO of Versalis, effective 1 January, reported Chemweek.

Daniele Ferrari, who has served as Versalis CEO since February 2011, will leave the company at the end of the year.

Alfani started his career at Versalis predecessor EniChem and has been with Dow since 2001.

"We would sincerely like to thank Daniele for these 10 years of passionate enthusiasm and intense activity and for having believed in and led our company on a path towards and increasingly sustainable and circular chemical industry, transforming Versalis’ business model and placing it among the leaders of the chemical industry at an international level," Versalis said.

As MRC informed before, Versalis, the chemicals subsidiary of Eni (Rome, Italy), has reduced production at its 65,000-metric tons/year acrylonitrile-butadiene-styrene (ABS) plant at Mantova, Italy, to 50% until at least February 2021 due to one of its suppliers declaring force majeure.

We remind that in 2019, Versalis unveiled plans to increase production capacity for ABS at its Mantua, Italy, facility. The project will boost ABS capacity at its existing unit by 30,000 t/y. The engineering phase ha already begun, and production was scheduled to start in 2020.

According to MRC's ScanPlast report, October ABS shipments to the Russian market virtually remained at the previous month's level, totalling 5,060 tonnes. Overall consumption of material in Russia was 37,120 tonnes in the first ten months of 2020, down by 6% year on year.

Eni is an Italian multinational oil and gas company headquartered in Rome. It has operations in in 79 countries, and is currently Italy's largest industrial company. The Italian government owns a 30.3% golden share in the company, 3.93% held through the state Treasury and 26.37% held through the Cassa depositi e prestiti. Another 39.40% of the shares are held by BNP Paribas.
MRC

US weekly propane/propylene stocks draw in line with expections

MOSCOW (MRC) -- US combined propane and propylene stocks slid 2.3 million barrels (bbl) in the week ended 18 December to 81.6 million bbl, according to Chemweek with reference to the Energy Information Administration's report Wednesday.

An OPIS survey of traders and analysts published on 22 December produced an average forecast of a propane drop of 2.375 million bbl with a range of 1.5 million to minus 3.25 million bbl, all draws.

Products supplied for propane and propylene fell 379,000 b/d on the week to 1.292 million b/d. Exports climbed 145,000 b/d to 1.5 million b/d. The four-week average for exports advanced 271,000 b/d to 1.43 million b/d. Propane imports for the week retreated 27,000 b/d to 148,000 b/d.

The Gulf Coast (PADD3) region inventories slid 1.5 million bbl to 44.3 million bbl in the latest week. The Midwest (PADD2) region stocks slipped 1 million bbl to 23.1 million bbl. PADD 1 inventories added 200,000 bbl to 8.5 million bbl while PADDs 4 and 5 stocks were unchanged at 5.7 million bbl.

Mont Belvieu TET propane remained at 69.5 cents/gal from before the report. Non-TET propane was at 69.125 cents/gal. Conway propane showed moved higher to 66.25 cents/gal.

As MRC wrote before, 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 (PDH 2) plant currently under construction at EPP’s operations in Mont Belvieu, Tex., for supply to global customers. Concluded on June 16, the PGP offtake agreement is part of a long-term collaboration between EPP and Marubeni that also includes the export of liquefied ethylene, the first 25-million lb vessel of which loaded and sailed from EPP and Navigator Holdings Ltd.’s 50-50 joint venture marine terminal at Morgan’s Point, Tex., in early January, EPP and Marubeni said on June 30.

We remind that in July, 2020, Enterprise Products conducted maintenance at its propane dehydrogenation (PDH) unit in Mont Belvieu, Texas. This PDH unit has the capacity of 750,000 mt/y of propylene.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's DataScope report, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

Italy enlists Eni, Snam and CDP to help drive energy transition

MOSCOW (MRC) - Energy companies Eni and Snam are joining forces with Italian state-lender CDP to work on energy transition projects aimed at cutting carbon emissions, said Reuters.

The three groups said in a joint statement on Wednesday that they would team up to produce, transport and market green hydrogen as well as to use the gas for rail transport.

Italy is targeting investments of around EUR10 B (USD12.2 B) in hydrogen by 2030 as part of its strategy to decarbonize the economy as it moves to phase out fossil fuels. Cassa Depositi e Prestiti (CDP), controlled by the Italian Treasury, is the main shareholder of oil and gas major Eni and gas infrastructure group Snam.

The three groups said they would be working together to roll out hydrogen, natural gas and LNG (liquefied natural gas) refueling stations as well as build infrastructure to supply LNG nationally for transport. They will also develop carbon capture and storage units (CCUS) to produce hydrogen to cut emissions in sectors that are hard to decarbonize, such as refineries. The deal is part of a broader commitment to help reach European targets for cutting carbon emissions by 55% by 2030.

"Collaboration between companies is essential for achieving national and European decarbonization objectives," Snam CEO Marco Alvera said.

Snam, which makes most of its revenue from gas transport in Italy, has pledged to spend more on new green business lines. Eni, which has pledged to slash its greenhouse gas emissions by 80%, is betting on large-scale CCUS investments to help clean up the gas in its portfolio as oil is wound down after 2025.

Abu Dhabi National Oil Co, the UAE's biggest energy producer, has awarded Italy's Eni and Thailand's PTTEP an exploration concession amid plans to boost oil production capacity by 25% to 5 million b/d by 2030.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,760,950 tonnes in the first ten months of 2020, up by 3% year on year. Only high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased. At the same time, PP shipments to the Russian market reached 978,870 tonnes in January-October 2020 (calculated using the formula: production minus exports plus imports minus producers' inventories as of 1 January, 2020). Supply of exclusively of PP random copolymer increased.
MRC

Venezuela resumes direct oil shipments to China despite U.S. sanctions

MOSCOW (MRC) - Venezuela has resumed direct shipments of oil to China after U.S. sanctions sent the trade underground for more than a year, according to Refinitiv Eikon vessel-tracking data and internal documents from state company Petroleos de Venezuela (PDVSA), said Reuters.

Chinese state companies China National Petroleum Corp (CNPC) and its listed subsidiary PetroChina - long among PDVSA's top customers - stopped loading crude and fuel at Venezuelan ports in August 2019 after Washington extended its sanctions on PDVSA to include any companies trading with the Venezuelan state firm.

The imposition of the sanctions was part of a push by the Trump administration to oust Venezuelan President Nicolas Maduro, but they failed to completely halt the South American nation's oil exports or to loosen Maduro's grip on power.

PDVSA's customers instead boosted shipments to Malaysia, where transfers of cargoes between vessels at sea have allowed most of Venezuela's crude to continue flowing to China after changing hands and using trade intermediaries.

PDVSA and Venezuela's oil ministry did not reply to requests for comment.

We remind that PetroChina has nearly doubled the amount of Russian crude being processed at its refinery in Dalian, the company's biggest, since January 2018, as a new supply agreement had come into effect. The Dalian Petrochemical Corp, located in the northeast port city of Dalian, was expected to process 13 million tonnes, or 260,000 bpd of Russian pipeline crude in 2018, up by about 85 to 90 percent from the previous year's level. Dalian has the capacity to process about 410,000 bpd of crude. The increase follows an agreement worked out between the Russian and Chinese governments under which Russia's top oil producer Rosneft was to supply 30 million tonnes of ESPO Blend crude to PetroChina in 2018, or about 600,000 bpd. That would have represented an increase of 50 percent over 2017 volumes.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,760,950 tonnes in the first ten months of 2020, up by 3% year on year. Only high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased. At the same time, PP shipments to the Russian market reached 978,870 tonnes in January-October 2020 (calculated using the formula: production minus exports plus imports minus producers' inventories as of 1 January, 2020). Supply of exclusively of PP random copolymer increased.
MRC