Oil buying fades as risks shift to downside

MOSCOW (MRC) -- Hedge funds purchased petroleum derivatives for the 11th consecutive week, but the buying impulse that started with the announcement of successful coronavirus vaccines appears to be fading, said Hydrocarbonprocessing.

Hedge funds and other money managers bought the equivalent of 17 million barrels in the six most important petroleum futures and options contracts in the week to Jan. 19, according to data from regulators and exchanges.

Since early November, portfolio managers have purchased a total of 466 million barrels, taking their net holding to 822 million, the highest for a year.

In the latest week, there were small purchases of NYMEX and ICE WTI (+7 million), European gas oil (+6 million), U.S. diesel (+6 million) and U.S. gasoline (+1 million) but small sales of Brent (-3 million).

None of these changes was significant, except the focus on buying gas oil and diesel, which reversed the bias towards crude and gasoline in previous weeks, and suggested some opportunistic relative value-seeking.

The combined net long position across the six contracts is in the 78th percentile for all weeks since the start of 2013 while the ratio of long to short positions is in the 76th percentile. Fund positions therefore appear stretched on the long side, though not yet excessively so, implying there is still room for position building, but risks are now concentrated on the downside.

Bullish positions are most lopsided in gasoline and crude. Positioning remains neutral in diesel and gas oil, which likely explains some of the recent buying interest in those two fuels.

As per MRC, top oil exporter Saudi Arabia has cut supplies of February-loading crude for some Asian buyer by up to a quarter while meeting requirements of at least four others. This comes after Saudi Arabia pledged additional voluntary output cuts of 1 million barrels per day (bpd) in February and March under a deal between the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.

As MRC wrote previously, Formosa Petrochemical Corporation (FPCC) was running its crackers in Taiwan at 100% capacity utilisation in end-December, 2020. The company"s crackers have combined ethylene production capacity of 2.935 million metric tons/year. Meanwhile, FPCC is planning overhaul of the smallest cracker in mid-2021.

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) -- Avient Corporation, formerly PolyOne, has recently announced the official opening of its new CycleWorks facility in Pogliano, Italy, according to GV.

The new lab and plant will conduct chemistry testing and evaluations to help customers meet the challenge of plastics recycling and advance the goal of a circular economy. The demonstration plant mimics real-world recycling conditions in a research environment, said Avient.

Avient has opened its CycleWorks Innovation Center in Pogliano, Italy. (Source: Avient)Avient has opened its CycleWorks Innovation Center in Pogliano, Italy.

“We have established CycleWorks to study and meet the challenges of plastic recycling while furthering its viability. This high-tech facility will allow our dedicated team to understand the chemistry of polymers in the mechanical recycling process, and to see how and where problems occur. For example, why and where are polymer chains degrading? What role do colour and additives play in recyclability? It is our goal to find answers to these questions and to understand the science behind recycling,” said Dr. Jan Sultemeyer, global head of innovation & sustainability at Avient.

CycleWorks has already started producing useful data. The company will use this data to develop masterbatch formulations with proven science behind how they perform during recycling processes, offering customers a portfolio that’s essentially field-tested for recycling. Avient expects to introduce solutions throughout 2021 as new data is generated.

Walter Ripple, vice president of sustainability at Avient, said: “As one of the founding members of the Alliance to End Plastic Waste (AEPW), Avient is committed to doing our part in advancing a circular economy through partnerships and innovation. CycleWorks further strengthens our recycling focus and ability to enable our partners’ recyclability goals.”

To facilitate industry partnerships, CycleWorks includes a collaboration platform to ensure input from across the plastics value chain. Avient said it expects this to improve the ability of new technologies to be implemented in recycling processes and to assist brand owners in raising the sustainability of their products.

On 1 July 2020, PolyOne and Clariant Masterbatches joined together as Avient, a company focused on specialised and sustainable material solutions with projected 2020 pro forma revenues of approximately USD 3.7 billion. Avient has approximately 9,100 employees and is certified ACC Responsible Care and a founding member of the AEPW.

As MRC reported earlier, in December 2019, Clariant (Muttenz, Switzerland) agreed to sell its entire Masterbatches business to PolyOne Corp. (Avon Lake, Ohio). The transaction values the Masterbatches business at USD1,560 million, representing about 12.2 times the last twelve months reported EBITDA (ending September 2019) on a cash and debt free basis.

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) -- Braskem has signed an agreement for the purchase of wind power from Casa dos Ventos, one of the pioneers and largest investors in the development of wind power projects in Brazil, as per Braskem's press release.

The corporate power purchase agreement (PPA) is linked to the construction of a new wind power plant and provides for the supply of renewable energy for 20 years, with emissions avoided in the period estimated at around 700,000 tons of CO2. Casa dos Ventos will be responsible for directing the investment in building the new wind farm.

"This is our fourth long-term agreement for the acquisition of renewable energy and involves the largest volume acquired to date. With it, we will help build another power generation farm and strengthen our strategy of ensuring an energy matrix with a growing share of renewable energy in our operations and in the operations of the petrochemical chain, reaffirming our commitment to sustainable development. We are working hard to become a carbon neutral company by 2050, with the target of reducing by 15% our emissions by 2030, and this is just another step on this journey," said Gustavo Checcucci, Energy Director at Braskem.

In addition to acquiring energy, Braskem will have the option to acquire, subject to approval by government authorities, an ownership interest in the wind farms, creating the possibility for implementing a self-production model. "We created a custom model in which we are responsible for building and operating the wind farms, but we offer the possibility for our partners to become shareholders in these projects in the future. This is a win-win model, especially for the country, since it encourages an energy transition model for large consumers," explained Lucas Araripe, new business director at Casa dos Ventos.

In 2020, Braskem announced two other major agreements for the acquisition of renewable energy. The first agreement, announced in March, with the France-based multinational Voltalia , will enable the expansion of the Serra do Mel Solar Complex located in the state of Rio Grande do Norte, with generation capacity of 270 MW. The second agreement, announced in June, is a partnership with Canadian Solar that enables the construction of a solar plant in northern Minas Gerais state, with installed capacity of 152 MWp, which is sufficient to supply a city of 430,000 people.

In late 2018, the company signed an agreement with EDF Renewable for the purchase of wind power for 20 years. Through these four agreements, with Casa dos Ventos, Voltalia, Canadian and EDF Renewable, Braskem estimates that it will avoid around 1.5 million tons of CO2 emissions.

Braskem announced a public commitment to expand its efforts to become a carbon neutral company by 2050. To achieve this target, the company's strategy includes initiatives for carbon reduction, offsetting and capture, expansion of the I'm greenT portfolio, which comprises products focusing on the circular economy, as well as engagement over the next ten years to reach the proper disposal of 1.5 million tons of plastic waste.

Both Braskem and Casa dos Ventos are formal signatories to the Global Compact and to the 17 Sustainable Development Goals of the United Nations. The partnership, combined with Braskem's initiatives for the following decades, is aligned with the UN 2030 Agenda and the Paris Agreement for controlling the impacts from climate change.

As MRC wrote before, Brazil’s state-run oil company Petrobras is seeking 800 million reais (USD152 million) in compensation from engineering group Odebrecht in arbitration proceedings over its alleged violation of the shareholders agreement in petrochemical company Braskem. Odebrecht is seeking to sell its 38.3% stake in Braskem SA, while Petrobras aims to offload its 36.1% stake.

We remind that Braskem is no longer pursuing a petrochemical project, which would have included an ethane cracker, in West Virginia. And the company is seeking to sell the land that would have housed the cracker. The project, announced in 2013, had been on Braskem's back burner for several 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.

Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm. Petrobras' activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks as well as refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.
MRC

MOSCOW (MRC) -- U.S. refiners are girding for a painful slate of fourth-quarter earnings, reflecting the pressure of rising crude prices, weak demand due to renewed COVID-19 travel restrictions, and higher costs of associated with blending of renewable fuels into their products, said Hydrocarbonprocessing.

Seven U.S. independent refiners are projected to post an average earnings-per-share loss of USD1.51, down from a loss of USD1.06 in the third quarter of 2020, according to IBES data from Refinitiv. Both Credit Suisse and Tudor Pickering Holt cut lowered the price estimates of every U.S. independent refiner for the fourth quarter.

In the fourth quarter, independent refiners including Marathon Petroleum, Valero Energy and Phillips 66 coped with uneven demand due to a resurgence of coronavirus cases worldwide. Consumption of liquid fuels globally is estimated to have fallen by 9 million barrels per day in 2020, according to the U.S. Energy Information Administration.

Crude oil benchmarks rallied more than 20% in the quarter, which squeezed U.S. refining margins to less than USD10 a barrel on average - the threshold for which most refiners make money - for the majority of the fourth quarter. Meanwhile, tougher restrictions on socializing and businesses clamped down on traffic in states like California, the most populous U.S. state and one of the largest driving markets in the world. Travel on U.S. roads fell by 11% in November from the year-ago period, after a 9% drop in October, according to the U.S. Transportation Department.

Lockdowns in various European countries suppressed international flights and jet fuel demand in the quarter. Delta Airlines' refinery in Trainer, Pennsylvania, in early January posted a USD102 million refining segment loss in the fourth quarter, and a USD441 million loss on third party fuel sales.

In the fourth quarter, refiners also had to pay more for U.S. renewable fuel credits, which reached a three-year high earlier this month. The cost for Renewable Identification Numbers - the credits used for compliance with U.S. biofuels blending laws - increased by 47 cents per barrel from the third quarter due to rising ethanol and biodiesel prices.

Refiners are required, by law, to blend biofuels into their gasoline pool, or pay up so others can do the same. The pandemic has reduced blending activity generally, and as a result, fewer credits have been issued, increasing their costs. Credit Suisse analyst Manav Gupta said Phillips 66 will lose USD1.16 per share in the quarter. He had originally anticipated a 30-cent loss, but changed that due to lower refining earnings in the Gulf Coast, West Coast and Midwest markets.

"Sales will also see earnings down as crude price rose sharply quarter over quarter and lockdowns impacted volumes," said Gupta in a note. U.S. refining margins started to improve around the holiday season, and were around USD12.50 per barrel. Refining rates rose last week to their highest since March, government data showed. However, at about 80% of capacity, refiners are producing approximately 2 million fewer barrels than at the same time last year.

"While refiners may be getting paid the same amount for gasoline as last year, it's on much lower production," said Bob Yawger, director for energy market futures at Mizuho.

As per MRC, top oil exporter Saudi Arabia has cut supplies of February-loading crude for some Asian buyer by up to a quarter while meeting requirements of at least four others. This comes after Saudi Arabia pledged additional voluntary output cuts of 1 million barrels per day (bpd) in February and March under a deal between the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.

As MRC wrote previously, Formosa Petrochemical Corporation (FPCC) was running its crackers in Taiwan at 100% capacity utilisation in end-December, 2020. The company"s crackers have combined ethylene production capacity of 2.935 million metric tons/year. Meanwhile, FPCC is planning overhaul of the smallest cracker in mid-2021.

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) -- Oil and gas producer Hess Corp forecast a small drop in output and set a USD1.9 billion budget for 2021, most of which will go to Guyana, touted as one of the most important new oil and gas discoveries in the last decade, said Hydrocarbonprocessing.

The company has been relying on its investment in offshore Guyana, one of the world's most important oil and gas blocks in the last decade, which is being developed by a consortium led by oil major Exxon Mobil Corp. Hess has allotted USD780 million, or 41% of its budget, to development activities in offshore Guyana.

"We also will continue to invest in an active exploration and appraisal program, with 12-15 wells planned on the Stabroek Block (offshore Guyana)," said Chief Operating Officer Greg Hill. Hess forecast net production to average about 310,000 barrels of oil equivalent per day (boepd) in 2021, excluding Libya, compared with 2020 estimate of 325,000 boepd.

For 2020, the New York-based energy company had estimated to spend USD1.8 billion. The company will also add a rig in the first quarter in North Dakota's Bakken shale play, adding to a single rig there since May. There were six rigs in the Bakken at the start of last year before the company slashed production to cope with a oil price crash.

Bakken net production is estimated to average about 170,000 boepd in 2021, which despite the addition of a rig, would be below 2020's estimated 190,000 boepd, partly hit by a planned 45-day turnaround activity at the Tioga Gas Plant in the third quarter cutting output by about 7,500 boepd in 2021.

As per MRC, top oil exporter Saudi Arabia has cut supplies of February-loading crude for some Asian buyer by up to a quarter while meeting requirements of at least four others. This comes after Saudi Arabia pledged additional voluntary output cuts of 1 million barrels per day (bpd) in February and March under a deal between the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.

As MRC wrote previously, Formosa Petrochemical Corporation (FPCC) was running its crackers in Taiwan at 100% capacity utilisation in end-December, 2020. The company"s crackers have combined ethylene production capacity of 2.935 million metric tons/year. Meanwhile, FPCC is planning overhaul of the smallest cracker in mid-2021.

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.


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