US crude exports jump despite Europe, Asia arbitrage pressure

MOSCOW (MRC) -- Weekly US crude exports jumped 1.1 million b/d to 3.36 million b/d over the week ended on Jan. 22, reported S&P Global with reference to data from the US Energy Information Administration Jan. 27, despite difficult arbitrage economics.

The rise took exports to their highest average weekly export level since the week ended on Jan. 1, and kept the four-week moving-average above 3 million b/d.

The arbitrage for WTI MEH crude into Rotterdam against local Forties crude fell to a minus 34 cents/b incentive on Jan. 26 and has averaged just a 4 cents/b incentive through the first 26 days on January, according to the S&P Global Platts Crude Arbflow calculator. Through December, by comparison, the arbitrage incentive averaged 57 cents/b, according to Platts Arbflow.

Refinery runs and margins are expected to remain weak through 1Q21 in Europe as demand recovery remains slow and product stocks are generally high, according to S&P Global Platts Analytics.

Furthermore, Europe could already be facing a "double-dip" recession following the tightening of COVID-19 restrictions. The early release of the euro area composite Purchasing Managers Index was reported at 47.5 for January, implying a more negative outlook from the previous month. Indeed, the euro area composite PMI averaged just 48.1 in 4Q20, showing the depressed outlook held at the end of 2020 was continuing into January 2021.

Platts Analytics expects European oil demand to fall 5-6 million b/d lower during January and February of 2021 compared to the same time in 2019. Some recovery, however, is expected after mid-year.

The arbitrage for WTI MEH crude into Northeast Asia against local ESPO crude has also come under pressure in recent days, however, values for ESPO crude have fallen significantly amid a larger monthly supply of ESPO in the market and limited demand amid recent lockdowns in China.

WTI MEH against ESPO in Japan fell to minus 74 cents/b on Jan. 26, down from a minus 26 cents/b incentive just the day prior. Through the first 26 days of January, the arbitrage incentive averaged 60 cents/b, and in December, the incentive averaged USD1.02/b. ESPO has weakened significantly in recent weeks to a 75 cents/b premium to Dubai on Jan. 27, down from plus USD2.70/b on Jan. 7.

US crude exports in 2021 face further pressure from falling US crude production and recovering refinery runs, which would leave fewer barrels available for export. Despite these headwinds, Platts Analytics expects US crude exports to average more than 2 million b/d in 2021.

As MRC informed before, global oil demand is expected to rise by nearly 7% this year, boosted by quicker vaccine distribution and a better economic outlook, according to consultancy Wood Mackenzie's statement. Total liquids demand is expected to average 96.7 million barrels per day (bpd) in 2021, 6.3 million bpd higher than last year when the Covid-19 pandemic caused an unprecedented oil demand shock. Refineries under the threat of closure could repurpose the facilities to produce liquid renewables instead of converting into a terminal, which could help oil companies’ aim of achieving carbon neutrality.

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

Polish refiner pushing towards renewables

MOSCOW (MRC) -- Poland's state-run oil refiner PKN Orlen has partnered with Canada's Northland Power to jointly develop a 1.2 gigawatt offshore wind farm in the Baltic Sea, according to Hydrocarbonprocessing.

Poland is pushing development of offshore wind in its future energy mix, complemented by solar and nuclear energy, with the European Union pressing it to cut carbon emissions.

The Polish Baltic Sea region has been attracting foreign investors as local companies seek international expertise and experience. Private energy firm Polenergia is working with Equinor, while state-run PGE is in talks with Orsted on a joint project.

PKN Orlen said the joint venture agreement was signed between its Baltic Power company and Northland Power's unit registered in Amsterdam. Northland Power will ultimately reach a 49% stake in Baltic Power.

Construction will start in 2023 and it is expected to come into operation in 2026. Based on the agreement, in 2021 Northland Power will invest around 290 million zlotys (USD77.94 million) in Baltic Power.

"The combination of our local experience... and Northland Power's global know-how, will allow us to quickly and efficiently implement the next stages of the investment," PKN Orlen Chief Executive Daniel Obajtek said in a statement.

Poland expects to have its first offshore wind farm in 2025 and sees total wind capacity in the Baltic Sea at around 10 gigawatts (GW) by 2040.

As MRC reported earlier, in December 2020, PKN Orlen (Plock, Poland) announce that the company will invest an average of 4.4 billion zloty (USD1.2 billion) per year between 2021 and 2030 on a major expansion of its integrated petrochemicals business and the creation of a plastics recycling division as part of an enhanced strategic focus on petchems and renewables over the next 10 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.
MRC

IFF, DuPont N&B to complete merger today

MOSCOW (MRC) -- IFF (New York) announced that it will complete its merger with DuPont’s Nutrition & Biosciences (N&B) business today, reported Chemweek.

The deal creates a global ingredients and solutions leader serving consumer-oriented food and beverage, home and personal care and health and wellness end markets with proforma 2020 revenue of more than USD11 billion and EBITDA of approximately USD2.5 billion. The combined company will continue to operate under the name IFF. Shares of the combined company’s common stock will trade on the New York Stock Exchange under the symbol “IFF.”

The deal, which values N&B at USD26.2 billion, was first announced in December 2019. Under the terms of the deal, DuPont shareholders will own 55.4% of the shares of the combined company and existing IFF shareholders will own 44.6%. The deal will be structured as a Reverse Morris Trust transaction that will be tax-free to DuPont shareholders. Upon completion of the transaction, DuPont will also receive a one-time $7.3-billion special cash payment, subject to certain adjustments.

The complementary portfolios also give the company leadership positions within the Taste, Texture, Scent, Nutrition, Enzymes, Cultures, Soy Proteins and Probiotics ingredient categories.

The companies previously stated that the resulting organization will comprise four divisions. Taste, Food & Beverage will combine IFF’s Taste division and N&B’s Food & Beverage segment and represent approximately USD6.1 billion in pro forma 2019 net sales for the combined company. The Scent division will comprise IFF’s Scent division, which represents approximately $2 billion in pro forma 2019 net sales. Health & Biosciences, representing approximately $2.3 billion in pro forma 2019 net sales, will combine N&B’s current Health & Biosciences (H&B) business, with the exception of food protection, and IFF’s legacy Health Ingredients and parts of Natural Products Solutions. Pharma Solutions will comprise N&B’s current Pharma Solutions business, with approximately $800 million in pro forma 2019 net sales for the combined company.

The executive committee of the combined company will include Andreas Fibig as chairman and CEO. Rustom Jilla, IFF’s executive vice president and CFO, will remain in that role at the combined company. Matthias Haeni, who has led IFF’s flavors division since 2014, will be named president, Taste, Food & Beverage. Amy Byrick, who currently oversees N&B’s specialty food ingredients business, will become president, Taste, Food & Beverage. Nicolas Mirzayantz, who has led IFF’s fragrance business since 2006, will become president, Scent of the combined business. Simon Herriott, currently platform leader of N&B’s health and biosciences unit, will be president, Health & Biosciences of the combined business.

As MRC wrote previously, in January, 2021, Chilean oil refiner ENAP Refinerias S.A. selected BELCO scrubbing technology, licensed by DuPont Clean Technologies (DuPont), to improve emissions control from its 31,449 BPSD fluid catalytic cracking (FCC) unit at the Aconcagua refinery.

We remind that DuPont is investing USD400 million in the production capacity of Tyvek nonwoven fabric made from high density polyethylene (HDPE) at its site in Luxembourg. A new building and a third work line at the production site will be constructed. The launch of new facilities is scheduled for 2021.

According to MRC's ScanPlast report, November estimated HDPE consumption in Russia rose to 125,950 tonnes from 58,330 tonnes a month earlier. ZapSibNeftekhim reduced its export polyethylene (PE) sales. Overall HDPE shipments to the Russian market totalled 1,096,510 tonnes in the first eleven months of 2020, up by 5% year on year. Production and exports grew significantly, whereas imports fell by 31%.

The DuPont Corporation, founded in the USA in 1802, operates in more than 70 countries. The company produces specialty chemicals, offers goods and services for agriculture, food production, electronics, communications, security and protection, construction, transport and light industry. In Russia, DuPont has 100% control over the DuPont Khimprom plant since 2005, and in 2006 established a joint venture between DuPont - Russian Paints and Russian Paints.
MRC

LyondellBasell earnings surge YOY on polyolefin volumes and margins

MOSCOW (MRC) - LyondellBasell (Houston, Texas), one of the largest plastics, chemicals and refining companies in the world, reports fourth-quarter net income of USD855 million, up 40% year-over-year (YOY) from USD612 million on higher polyolefin volumes and margins, reported Chemweek.

A USD147 million non-cash, lower-of-cost-or-market (LCM) inventory valuation benefit increased net income by USD119 million, or USD0.36 per share. Sales totaled USD7.937 billion, down 3.0% YOY from USD8.179 billion. Adjusted earnings per share of USD2.19 increased 15% YOY from USD1.91 and beat the consensus of USD1.31 as compiled by Zacks Investment Research.

"During the fourth quarter, strong and persistent consumer-driven demand, industry supply constraints and continued recovery in durable goods markets reduced the impact of typical end-of-year slowdowns for our businesses,” says CEO Bob Patel. “During this period, we operated well and met robust demand for polyolefins used in consumer packaging and healthcare applications. Margins improved for olefins and polyolefins, propylene oxide & derivatives and intermediate chemicals businesses driven by higher demand and tight markets. Rebounding automotive manufacturing drove increased volumes for our advanced polymer solutions businesses. The refining and oxyfuels & related products businesses continued to face headwinds from low global mobility resulting in stagnant demand for transportation fuels."

Patel says improvement seen in late December have continued into the first quarter.

"Elevated export demand to China and Latin America, combined with tight markets, are supporting strong margins for our olefins and polyolefins businesses. Increased demand from automotive and construction markets has pushed the January order book for our advanced polymer solutions segment to higher levels than the fourth-quarter 2020 average. With wider deployment of coronavirus vaccines, we anticipate that increasing mobility and transportation fuel demand could provide significant upside for our oxyfuels and refining businesses during the latter half of this year."

The olefins & polyolefins (O&P) - Americas segment turned in EBITDA of USD722 million, up 45% YOY from $498 million. Revenue totaled USD2.21 billion, up 6.6% YOY. Olefins results increased USD65 million on higher ethylene volumes from increased demand, partially offset by lower margins. Polyolefin results increased USD140 million driven by increased demand. Margin improved due to an increase in the price of polyethylene and an increase in polyolefin volumes.

The O&P - Europe, Asia, International segment turned in EBITDA of USD304 million, up 591% YOY from USD44 million, on revenue of USD2.459 billion, up 14% YOY. Olefins results increased USD25 million driven primarily by increased margins and volumes. Margins were higher driven by lower feedstock prices partially offset by lower ethylene prices. Combined polyolefins results increased more than USD20 million on higher polyolefin volumes and polyethylene margin, partially offset by a lower polypropylene spread. Joint venture equity income increased USD65 million, driven by Bora.

The intermediates and derivatives segment turned in EBITDA of USD262 million, down 20% YOY from USD329 million, on revenue of USD1.804 billion, down 1.5% YOY. Results decreased approximately USD55 million YOY owing to LIFO inventory changes. Propylene oxide & derivatives results increased approximately USD40 million as margins and volumes increased on strong Asia demand and market tightness. Intermediate chemicals results increased about $50 million driven by improved volumes and higher margins, primarily in styrene. Volumes increased due to higher demand for most products. Oxyfuels & related products results decreased USD175 million as reduced gasoline prices and lower octane blend premiums cut into margins.

Advanced polymer solutions turned in EBITDA of USD152 million, up 181% YOY from USD54 million, on revenue of USD1.108 billion, up 3.8% YOY. Compounding & solutions results were relatively unchanged as higher volumes tied to automotive recovery were offset by lower margins. Advanced polymers results were flat.

Refining EBITDA came to a USD72 million loss, down from a gain of USD22 million in the year-ago period, on revenue of USD1.259 billion, down 39% YOY. Technology EBITDA totaled USD45 million, down 67% YOY, on revenue of USD167 million, down 18% YOY.

As MRC informed before, in late January, 2021, LyondellBasell and the China Petroleum & Chemical Corporation (Sinopec), one of the largest integrated energy companies in China, announced the signing of an agreement to form a 50:50 joint venture (JV) which will produce propylene oxide (PO) and styrene monomer (SM) in China's domestic market. First announced on December 23, 2019, the JV will operate under the name Ningbo ZRCC LyondellBasell New Material Company Limited.

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.

LyondellBasell is one of the largest plastics, chemicals and refining companies in the world. Driven by its employees around the globe, LyondellBasell produces materials and products that are key to advancing solutions to modern challenges, like enhancing food safety through lightweight and flexible packaging, protecting the purity of water supplies through stronger and more versatile pipes, improving the safety, comfort and fuel efficiency of many of the cars and trucks on the road, and ensuring the safe and effective functionality in electronics and appliances. LyondellBasell sells products into more than 100 countries and is the world's largest producer of polymer compounds and the largest licensor of polyolefin technologies. In 2020, LyondellBasell was named to Fortune Magazine's list of the "World's Most Admired Companies" for the third consecutive year.
MRC

Crude falls on fears vaccine shortages, uneven rollout may hinder global growth

MOSCOW (MRC) -- Crude oil futures declined in mid-morning trade in Asia Jan. 28, despite a fall in US inventories, as worries over global growth recovery came back to the fore after the International Monetary Fund warned on financial stability risk from vaccine shortages, reported S&P Global.

Now At 11:36 am Singapore time (0336 GMT), the ICE Brent March contract was down 27 cents/b (0.48%) from the Jan. 27 settle to USD55.54/b, while the March NYMEX light sweet crude contract dropped 22 cents/b (0.42%) to USD52.63/b.

The oil market participants grew concerned over slow vaccine distribution and vaccine shortages, which a report by the IMF warned could threaten financial stability. Fears of insufficient supply also exacerbated, as AstraZeneca's coronavirus vaccine shortage caused by production delays was met with insistence by the European Union to honor delivery commitments.

"Oil is down today as fears of the slow pace of vaccine distribution and a shortage in vaccines have exacerbated coronavirus concerns, and have cast a dark cloud over economic recovery," Vandana Hari, CEO of Vanda Insights, told S&P Global Platts on Jan. 28.

"The IMF financial stability report on Wednesday, warning of the risks posed by an inequitable distribution of vaccines, combined with escalating tensions between the EU and AstraZeneca over vaccine delays, has rattled the markets," Hari added.

Meanwhile, on Jan. 27, the Energy Information Administration reported a 9.91 million barrels draw in US crude inventories in the week ended Jan. 22. It was the largest one-week draw since the week ended July 24 and left inventories just 6% above the five-year average, the narrowest supply overhang since early April.

The EIA draw was about 90% larger than the draw reported by the American Petroleum Institute a day earlier and surpassed analyst expectations of a 1.7 million-barrel draw.

The US crude draw, however, failed to significantly lift market sentiment, as the EIA report was not all bullish, showing a 2.47 million-barrel build in US gasoline inventories, with distillate inventories also declining only by a meager 820,000 barrels.

To this, Hari said: "The EIA crude draw did not elicit a significant reaction from the market as it did not necessarily point to improved fundamentals in the market. Rather the draw seems to have partly been caused by a combination of an increase in US exports and a decrease in US imports."

According to data from the EIA, weekly US crude exports jumped 1.1 million b/d over the week ended Jan. 22, while imports declined 981,000 b/d.

Analysts, however, noted that despite uncertainties over the progression of the pandemic and vaccine distribution, the oil market showed remarkable resistance.

"I think 'risk markets' can thank their lucky stars that Saudi Arabia crystal ball outlook was clear as a whistle, and their proactive production cut measure buttressed investors from a more significant meltdown," Stephen Innes, chief global market strategist, said in a Jan. 28 note.

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