COVID-19 - News digest as of 25.12.2020

1. Asia distillates-jet fuel cash discounts narrow, refining margins gain

MOSCOW (MRC) -- Asia's cash differentials for jet fuel inched higher, while refining margins for the aviation fuel climbed for a second consecutive session, buoyed by a steady increase in the number of scheduled flights in the region, said Reuters. Cash discounts for jet fuel narrowed by 2 cents to 11 cents per barrel to Singapore quotes, the smallest discounts since Dec. 8. Refining margins, or cracks, for jet fuel rose 17 cents to $4.71 per barrel over Dubai crude during Asian trading hours on Thursday. The cracks have gained 48% in the last month. The jet fuel market has been gradually improving in recent weeks after the COVID-19 pandemic brought air travel to a virtual halt this year, and market watchers believe passenger traffic would be steadily on the rise as vaccine roll-outs spur more international flights in 2021.


MRC

Demand for PVC is strong in USA in December

MOSCOW (MRC) -- The latest US housing starts data illustrates continued strong demand for polyvinyl chlorie (PVC) in the country, which has bucked the typical seasonal lull seen in colder winter months, reported S&P Global.

November housing starts rose 1.2% to 1.547 million units from October levels, and were 12.8% higher than 1.371 million units in November 2019, according to the data released Dec. 17.

Market sources said a continued push for new dwellings amid the coronavirus pandemic has fueled PVC demand, particularly for single-family housing with separate ventilation systems and more space for consumers working from home.

However, tight supply has supported higher prices. Producers have maintained reduced upstream chlor-alkali rates since April, when rates plunged to 68% from 90% in March amid the height of pandemic-related shutdowns and economic shocks.

Rates had since held in the low to mid-70s percent range until November, when they rose to 80%, according to the latest industry statistics. Rates remained lower year on year, as November 2019 rates were 85%, those statistics showed.

Market sources said high PVC prices may have prompted rates to inch up in November, but rates are not expected to rise significantly given continued weak caustic soda demand.

Chlorine produced in the chlor-alkali process is the first link in the PVC production chain. Caustic soda, a key feedstock for alumina and pulp and paper industries, is a byproduct of chlorine production.

Producers had been reluctant to raise chlor-alkali rates beyond the mid-70s percent range to keep caustic soda inventories in check, but record-high PVC prices may have softened that outlook, sources said.

As MRC informed earlier, as of 8 December, 2020, Westlake Polymers left in force the declared on Aug. 31 force majeure on its North American PVC and upstream vinyl chloride monomer (VCM) plants, after Hurricane Laura adversely impacted its Lake Charles, Louisiana, complex. Westlake's shutdown of its Lake Charles complex idled 38% of its US VCM production, resulting in two VCM plants with a combined capacity of 952,318 mt/year going offline. The complex also has three upstream chlor-alkali plants with a combined capacity of 1.27 million mt/year of chlorine and 1.36 million mt/year of caustic soda - 46% of the company's overall North American chlor-alkali capacity.

According to MRC's ScanPlast report, Russia's overall PVC production reached 891,200 tonnes in the first eleven months of 2020, down by 0.3% year on year. However, two producers managed to increase their PVC output.
MRC

Crude oil futures edge higher on bullish US stocks data, shrug off stimulus wrangling

MOSCOW (MRC) -- Crude oil futures edged higher during mid-morning trade in Asia Dec. 24 on positive crude stocks data from the US Energy Information Administration, and shrugging off uncertainty over the passing of a US stimulus package, reported S&P Global.

At 10:42 am Singapore time (0242 GMT), the ICE Brent February contract was up 14 cents/b (0.27%) from the Dec. 23 settle at USD50.34/b, while the February NYMEX light sweet crude contract was up 11 cents/b (0.23%) at USD48.23/b. The markers had risen 2.24% and 2.34% respectively on Dec. 23.

The uptrend continued into early trade in Asia Dec. 24, fueled by the release of EIA data showing that US crude inventories fell 570,000 barrels in the week ended Dec. 18 to 499.53 million barrels. Although this was short of analyst expectations of around a 4.7 million-barrel draw, it was more bullish than the American Petroleum Institute's Dec. 22 estimate of a 2.7 million-barrel build in the week.

The EIA report also suggested fundamentals in downstream markets had improved, with US gasoline stocks falling 1.13 million barrels to 237.75 million barrels and distillate stocks falling 2.33 million barrels to 148.93 million barrels in the week. Analysts in contrast had expected a 1.4 million-barrel rise in gasoline stocks and a 1.1 million-barrel fall in distillate stocks.

According to the EIA data, implied demand for gasoline rose 422,000 b/d in the week ended Dec. 18 to 7.9 million b/d, in line with seasonal norms and as Apple Mobility data showed that US driving activity was at a four-week high. Implied distillate demand rose 172,000 b/d to 4.17 million b/d.

"The EIA data is definitely providing some icing to the cake, and there are some other factors at play here as well, including some weakness in the dollar and a slight improvement in US jobless claims numbers " Jeffrey Halley, senior market analyst at OANDA, told S&P Global Platts on Dec. 24.

The political flip-flop over US fiscal relief measures was continuing after US President Donald Trump demanded changes to the Congress-approved stimulus package, including increasing the package's "ridiculously low USD600 direct payments.

However, analysts said oil market participants still expect a stimulus deal to eventually be squeezed out, and were largely ignoring the political wrangling.

"The market seems to have largely overlooked President Donald Trump's rejection of the stimulus package as, despite all the to and fro, the expectation is that a stimulus deal will still emerge and there is a possibility that this deal could be even bigger," Halley 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

Sudan to rely on imported petroleum during 70-day refinery maintenance

MOSCOW (MRC) - Petrol stations across Sudan will rely exclusively on imported fuel while the country's main oil refinery begins routine maintenance, said Reuters.

Sudan has operated a two-tier price system since October, in an attempt to decrease reliance on subsidies, whereby imported gasoline and diesel is sold at more than double the price of locally-produced fuel.

However, with the 70-day maintenance of the Khartoum refinery, only imported gasoline and diesel will be available to consumers. Any fuel produced locally during this period will be directed towards the agriculture, electricity, public transportation, and security sectors, the statement said.

Fuel shortages and long queues at stations are common in Sudan as the government struggles to come up with foreign currency for imports, which were opened up to the private sector in April.

A ministry spokesman said a policy for prices after the maintenance is completed has not yet been determined.

As mRC informed earlier, Sudan and South Sudan have begun negotiating with a Russian company to build a refinery on the Red Sea for both countries’ benefit.

We remind that in July 2020, Eni and NextChem, the Maire Tecnimont Group’s subsidiary for green chemistry, strengthened their partnership one year after their first agreement. This partnership will conduct research for a new project to be developed in Taranto, in addition to ongoing engineering studies for a waste-to-hydrogen production plant at the Eni bio refinery in Venice, Porto Marghera, and for a waste-to-methanol production plant at the Eni refinery in Livorno.

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

NE US states low-carbon fuel program draws industry ire

MOSCOW (MRC) -- US governors from Massachusetts and Connecticut announced their commitment to a low-carbon transportation program on Monday, but gasoline-related trade groups say it has flaws that will harm, rather than promote, use of fuels that produce fewer pollutants, according to Hydrocarbonprocessing.

Some oil refiners and energy trade groups have been more supportive this year of low-carbon fuel programs nationwide because the incentives can prove profitable for their industries.

The Transportation and Climate Initiative Program, or TCI-P, favored by the states would require large gasoline and diesel suppliers to purchase auctionable "allowances" for the pollution caused by combustion of fuels they sell in participating areas.

Trade groups, including the National Association of Truckstop Operators (NATSO) and the National Association of Convenience Stores (NACS), argue that TCI-P fails to effectively encourage investment in alternative fuels, and instead only penalizes fuel retailers that sell traditional fuel, according to a letter seen by Reuters addressed to a Massachusetts state official.

Another incentive program, California's Low Carbon Fuel Standard, allows refiners to generate tradable credits with production of lower carbon-intensive fuels.

"Market-oriented incentive policies have proven to drive private sector investment in clean fuels, but TCI's centralized, punitive structure will make businesses reluctant to embrace alternative fuels," said David Fialkov, counsel to NATSO.

Kathleen Theoharides, secretary for the executive office of energy and environmental affairs in Massachusetts, said that through the program, the market would encourage investment.

"This is certainly going to send a market signal that if they make investments in renewable blends, they can pass on a cheaper cost to consumers and outcompete their competitors," Theoharides said.

As MRC reported previously, earlier this month, NextChem, Maire Tecnimont Group’s subsidiary for the development of projects and technologies for energy transition, and JFE Engineering Corporation, engineering and operative company of Japan Group JFE, have signed a commercial agreement which strengthens the cooperation between the companies. The agreement aims at developing in cooperation the model which considers waste as a resource to produce advanced fuels, hydrogen, fertilizers and low carbon chemical products.

We remind that in July 2020, Eni and NextChem, the Maire Tecnimont Group’s subsidiary for green chemistry, strengthened their partnership one year after their first agreement. This partnership will conduct research for a new project to be developed in Taranto, in addition to ongoing engineering studies for a waste-to-hydrogen production plant at the Eni bio refinery in Venice, Porto Marghera, and for a waste-to-methanol production plant at the Eni refinery in Livorno.

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