Crude falls as COVID-19 concerns take center stage after outbreak in China

MOSCOW (MRC) -- Crude oil futures tumbled during the mid-morning trade in Asia Jan. 18, as rising coronavirus cases in China raised fresh demand-side concerns, while the spread of mutated strains of the virus also weighed down sentiment in the market, reported S&P Global.

At 11:10 am Singapore time (0310 GMT), the ICE Brent March contract was down 45 cents/b (0.82%) from the Jan. 15 settle to USD54.65/b, while the February NYMEX light sweet crude contract was down 38 cents/b (0.73%) to $51.98/b. The Brent marker had fallen 1.59% in the week ended Jan. 15 to USD55.10/b, whereas the NYMEX light sweet crude marker had ticked up 0.23% to USD52.36/b.

The fall in oil futures comes as a jump in coronavirus cases in China threatened to derail crude's demand recovery.

Towards the end of the week to Jan. 16, several Chinese cities were placed under lockdown to curb the spread of the virus. Even though the lockdown is due to be lifted by Jan. 19, fears of further restrictions remain heightened after the country reported over a hundred COVID-19 infections during each day of the weekend, according to media reports.

"We are seeing a continuation of the downward momentum from last week. Oil's rally stalled in second half of last week after the market started to emerge from under the spell of the surprise Saudi production cut, and started paying attention to the worsening pandemic situation in the western hemisphere and the worrying outbreaks in China," Vandana Hari, CEO of Vanda Insights, told S&P Global Platts on Jan. 18.

Hari further added that, against the backdrop of the fresh outbreaks, the market took little solace from the reasonably strong Chinese economic growth data, which may have instead drawn more attention to China's current struggle with the pandemic.

"It is not just the outbreaks in China that have rattled the markets, it is also the spread of three different and more contagious coronavirus strains reported in the UK, South Africa and Brazil," Hari said.

Despite the escalation of the pandemic, analysts retained a largely bullish outlook in the medium-term, noting that oil remains supported by the 1 million b/d cuts from Saudi Arabia, the vaccine roll-outs and hopes of further stimulus in the US.

"Despite the pullback in prices last week, the market remains supported by Saudi Arabia's output cut. Assuming demand growth remains stable, this should see the drawdown on global inventories rise to 1.1mb/d in Q1," said ANZ analysts in a Jan. 18 note.

Hari agreed, saying: "Majority of the premium from the Saudi cuts remains intact as 1 million b/d over two months is a substantial reduction in supply. However with the resurgent pandemic, it remains a two step forward, one step back situation for now."

As MRC informed previously, oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, according to an official with International Energy Agency's (IEA) statement.

We remind that the COVID-19 outbreak has led to an unprecedented decline in demand affecting all sections of the Russian economy, which has impacted the demand for petrochemicals in the short-term. However, the pandemic triggered an increase in the demand for polymers in food packaging, and cleaning and hygiene products, according to GlobalData, a leading data and analytics company. With Russian petrochemical companies having the advantage of access to low-cost feedstock, and proximity to demand-rich Asian (primarily China) and European markets for the supply of petrochemical products, these companies appear to be well-positioned to derive full benefits from an improving market environment and global economy post-COVID-19, says GlobalData.

We also remind that in December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on potential investments in Uzbekistan including a major expansion of Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed construction of a new gas chemicals facility. The signed cooperation agreement for the projects includes “the creation of a gas chemical complex using methanol-to-olefins (MTO) technology, and the expansion of the production capacity of the Shurtan Gas Chemical Complex”.

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

MOSCOW (MRC) -- Ineos says it is rescheduling its EUR5-billion ($6 billion) olefins project at Antwerp, Belgium, and will build the planned complex’s ethane cracker before its propane dehydrogenation (PDH) plant, according to Chemweek.

When it announced the project in January 2019, Ineos said the PDH unit and cracker would be built at the same time with the PDH facility due onstream a year ahead of the cracker.

The decision reflects anticipated demand for ethylene relative to propylene, Ineos says. “There is a growing need for ethylene, and it makes more sense for us to build the cracker first and then the PDH unit,” the company says in a statement. “We are simply rephasing the project.” Ineos confirms that work on the planned complex, called Project One, is "continuing."

Ineos has not provided details of the revised schedule. The company updated CW in mid-2020 on the Antwerp project and said it was at the front-end engineering and design (FEED) phase with a final investment decision expected in 2021. The company awarded a FEED contract to SK Engineering & Construction for the 750,000-metric tons/year PDH unit, which will use Lummus Catofin technology.

Land preparation at the Antwerp site was due to begin in mid-2021 with construction scheduled to start later in the year, Ineos said. Completion of the project was expected in 2025.

The planned ethane cracker will have the capacity to produce 1.25 million metric tons/year of ethylene. It will be the first ethylene plant to be constructed in Europe for more than 20 years.

Other companies are planning PDH units in Europe including Borealis, which is also building a 750,000-metric tons/year plant at Antwerp. The Borealis PDH plant was originally due online by the end of 2022, but Borealis told CW last year the schedule was likely to slip because of COVID-19.

As MRC informed earlier, in June, 2019, Ineos announced Antwerp as the location for its new petrochemical investment. The EUR3 billion investment will be the biggest ever made by Ienos and is first cracker to be built in Europe in 20 years.

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

Ineos Group Limited is a privately owned multinational chemicals company consisting of 15 standalone business units, headquartered in Rolle, Switzerland and with its registered office in Lyndhurst, United Kingdom. It is the fourth largest chemicals company in the world measured by revenues (after BASF, Dow Chemical and LyondellBasell) and the largest privately owned company in the United Kingdom.
MRC

MOSCOW (MRC) -- U.S. crude oil production was down more than 2 million barrels per day (bpd) in October from earlier this year, as weak prices and tepid demand due to the coronavirus pandemic weighed on output, a government report showed, said Hydrocarbonprocessing.

The report suggested that crude demand in the world’s largest economy remained below the highs of earlier this year, and production was largely flat since cuts began in the spring. Total U.S. oil demand in October was down by 2.15 million bpd, or more than 10% below the same month a year earlier. The decline was sharper than the 9.5% seen in September.

Output has fallen from a record-high monthly average of 12.86 million bpd in November, 2019. Production dropped sharply in May as low demand and prices forced widespread drilling cuts. Oil output dropped by 442,000 barrels per day to 10.42 million bpd in October, the latest month for which data was available. The losses were led by declines in the offshore U.S. Gulf of Mexico, according to the Energy Information Administration report.

Storms that month caused offshore production shut-ins, contributing to the losses. Still, even without the Gulf declines, production remained below pre-pandemic levels. Top onshore producers Texas and North Dakota reported modest gains in the month as some producers brought into production wells that had been shut, as prices improved.

Meanwhile, U.S. natural gas production for October was 99,568 million cubic feet a day, down from 100,221 in September.

As MRC reported earlier, oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, according to an official with International Energy Agency's (IEA) statement.

We remind that the COVID-19 outbreak has led to an unprecedented decline in demand affecting all sections of the Russian economy, which has impacted the demand for petrochemicals in the short-term. However, the pandemic triggered an increase in the demand for polymers in food packaging, and cleaning and hygiene products, according to GlobalData, a leading data and analytics company. With Russian petrochemical companies having the advantage of access to low-cost feedstock, and proximity to demand-rich Asian (primarily China) and European markets for the supply of petrochemical products, these companies appear to be well-positioned to derive full benefits from an improving market environment and global economy post-COVID-19, says GlobalData.

We also remind that in December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on potential investments in Uzbekistan including a major expansion of Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed construction of a new gas chemicals facility. The signed cooperation agreement for the projects includes “the creation of a gas chemical complex using methanol-to-olefins (MTO) technology, and the expansion of the production capacity of the Shurtan Gas Chemical Complex”.

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

MOSCOW (MRC) -- Kuraray’s Elastomers Business Unit will raise the transaction prices of following elastomer products in all regions effective 1 February 2021 or as existing supply agreements allo, reported GV.

All Septon, Hybrar and TU-Polymer prices will rise by USD 0.22 per kilogram (USD 0.10 per pound).

The company said that in response to increasing feedstock prices, utility and logistics costs, the transaction prices of these specialty high performance materials have been raised in the end of last year. However, such costs have been much higher than estimated. This time, it is necessary again to recover a portion of these increases to ensure ongoing supply and new product innovation, the compnay said in a statement from 12 January 2021.

As MRC wrote before, in June, 2020, Kuraray Co., Ltd. announced its decision to modify the production item lineup of its meltblown nonwoven fabric production facility, which is located on the premises of the Okayama Factory, a facility run by nonwoven fabric production and sales subsidiary Kuraray Kuraflex Co., Ltd. that was undergoing expansion at that time. This move will result in the production of face mask filters at the said facility and is aimed at meeting surging demand for nonwoven fabrics for use as mask filters.

We remind that in October 2019, Kuraray took off-stream its vinyl acetate monomer (VAM) production in Okayama, Japan) for a scheduled maintenance. This production with a capacity of 160,000 mt/year was shut for about one month.

VAM is the main feedstock for the production of ethylene-vynil-acetate (EVA).

According to MRC's DataScope report, Novemberl EVA imports to Russia rose by 6,6% year on year to 3,650 tonnes from 3,420 tonnes a year earlier, whereas overall imports of this grade of ethylene copolymer into the Russian Federation dropped in January-November 2020 by 3,44% year on year to 34,680 tonnes (35,920 tonnes a year earlier).
MRC

MOSCOW (MRC) -- BASF says it has shut down an unspecified unit at its 420,000-metric ton/year steam cracker site in Ludwigshafen, Germany, due to a technical defect, reporte Chemweek with reference to OPIS.

Unscheduled flaring started on 13 January at the northern part of the Ludwigshafen site and is expected to last until 17 January, it says. “At around 4pm [local time] there was an outage at a unit at the northern part due to a technical defect. The unit will be partially shut down to repair the defect,” it says.

BASF did not comment on the exact part of the site or what products might be affected, but confirmed the shutdown had no impact on production. The company operates the world’s largest integrated chemical complex at Ludwigshafen, which employs more than one-third of its global workforce, according to its website.

“Only a part of the plant is shut down, the production at the Ludwigshafen site is not affected,” a BASF spokesperson says. “We do not provide any information about the plant.”

BASF operates a second steam cracker at the northern part of Ludwigshafen, according to IHS Markit analysts and data, with a capacity of 240,000 metric tons/year. Crackers I and II mostly function independently of each other, “which means that when repair work is being carried out in one facility the other can continue operating as normal,” according to BASF on its website. The two crackers process around 2 million metric tons/year of feedstock naphtha.

OPIS is an IHS Markit company.

As MRC informed earlier, BASF has restarted its No. 1 steam cracker following a maintenance turnaorund. Thus, the company resumed operations at the plant on September 30, 2019. The plant was shut for maintenance in mid-August, 2019. Located at Ludwigshafen in Germany, the No. 1 cracker has an ethylene production capacity of 235,000 mt/year and a propylene production capacity of 125,000 mt/year.

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.

BASF is the leading chemical company. It produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases, basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries.
MRC