Crude oil lacks direction amid US inventory draw, pandemic demand concerns

MOSCOW (MRC) -- Crude prices lack direction Jan. 27 as the market weighed a bullish US crude draw against pandemic-dimmed demand outlooks, reported S&P Global.

NYMEX March WTI settled up 24 cents at USD52.85/b, and ICE March Brent was down 10 cents at USD55.71/b.
US commercial crude inventories declined 9.91 million barrels during the week ended Jan. 22 to a 10-month low of 476.65 million barrels, according to US Energy Information Administration data released Jan. 27. 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 draw far-exceeded American Petroleum Institute data released late Jan. 26 showing a 5.3 million-barrel crude draw over the same period.

The US crude draw sent oil futures higher midday, but the market later gave up these gains amid weakened economic outlooks.

"Oil has been rangebound for the past few weeks and it seems like nothing will change unless something major happens on the COVID front," OANDA senior market analyst Edward Moya said in a note. "Crude prices could surge higher if Europe gets their vaccine rollouts heading in the right direction or tank if virus variants shutdown China and other countries that have been successfully reopening."

NYMEX February RBOB settled down 36 points at USD1.5771/gal, while February ULSD finished up 1.05 cents at USD1.6089/gal.

The number of daily COVID-19 deaths in the US climbed to a new high of 4,205 on Jan. 26, according to New York Times data, but as the number of new cases steadily declines, states have begun easing lockdown restrictions.

New York governor Andrew Cuomo on Jan. 27 announced restrictions on nonessential businesses and indoor dining would be lifted across much of the state. The move comes on the heels of California on Jan. 25 lifting a regional stay-at-home order that affected the vast majority of state residents.

Outside of the US, however, the pandemic situation remained grim. In Europe, countries are considering greater restrictions to curb the spread of the virus, whereas in Asia, demand-side concerns remain heightened following an outbreak in China.

Already, authorities in China have called upon citizens to not travel during the Lunar New Year Holiday, souring sentiment in the oil markets.

"While the general upward direction of travel in the market makes sense, it's difficult for oil traders to make a definitive near-term shift to the next price level higher given the very uncertain near-term demand outlook," surmised Stephen Innes, chief global markets strategist at Axi, in a Jan. 27 note.

US gasoline cracks weakened as stockpiles rose amid an unexpected dip in demand. The ICE New York Harbor RBOB crack against Brent edged down 7 cents to around USD10.16/b in afternoon trading.

Total gasoline inventories climbed 2.47 million barrels to 247.69 million barrels in the week ended Jan. 22, EIA data showed, as implied demand slipped 3.4% to 7.83 million b/d. The counter-seasonal decline left demand nearly 12% behind the five-year average, in line with levels seen earlier this month.

Notably, Apple Mobility data shows that US driving activity was higher for a third straight week last week, climbing nearly 2% from the week prior and up nearly 3% from a late-December nadir. This discrepancy suggests a possible disconnect between actual end user demand and the EIA figures, which are a proxy based on product disappearing from primary sources..

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

Dow tops estimates as volumes return to pre-pandemic levels

MOSCOW (MRC) -- Dow Inc. topped analyst consensus with volume reaching pre-pandemic levels in all operating segments. The company reported fourth-quarter net income of USD1.3 billion compared with a year-ago loss of USD2.3 billion; year-ago results reflected the impact of a USD2.9 billion restructuring charge, reported Chemweek.

Operating EBIT was USD1.1 billion, up 2% year-on-year (YOY). Net sales of USD10.7 billion were up 5% YOY. Reported adjusted operating earnings were 81 cts/share, 17% above analyst consensus estimates as reported by Zacks.

"The big driver was strong volume and price," said Dow president and CFO Howard Ungerleider. "Year-on-year (Dow volumes) returned to pre-pandemic levels and there was also really strong momentum sequentially." Dow says sales increased 10% sequentially versus the third quarter as global economic recovery continued. Packaging and specialty plastics as well as industrial intermediates and infrastructure drove the growth, Ungerleider says. "Basically, volumes are back to where they were last year. And margins are pretty close. Not back for every business on margin, but at the enterprise level margins are back." The business areas that have lagged are on home and personal care, which has been "just a little bit of a drag on our performance materials business," Ungerleider said.

Overall volume increased 1% YOY led by demand growth in the packaging & specialty plastics as well as performance materials & coatings segments. Volume increased 2% sequentially driven by strong supply and demand fundamentals.

Packaging & specialty plastics segment net sales were USD5.1 billion, up 6% YOY. Operating EBIT was USD780 million, up 20% YOY on strong pricing. Volume increased 2%, primarily driven by olefin end-market demand, Dow said. Improved supply/demand fundamentals in polyethylene, was partly offset by lower ethylene and hydrocarbon co-product prices, Dow said. On a sequential basis, the segment recorded a 12% net sales improvement and a 4% volume gain, primarily driven by continued strong pricing momentum.

Industrial intermediates & infrastructure net sales were USD3.5 billion, up 8% YOY. Operating EBIT was USD296 million, up 34% YOY due to strong supply and demand fundamentals in polyurethanes & construction chemicals and at Sadara. Strong construction and manufacturing demand were offset by downward pressure from supply limitations, Dow said. Sales were up 14% sequentially and volume up 2% with significant price improvement in polyurethanes and robust demand in Industrial solutions.

Performance materials & coatings net sales were USD2 billion, approximately flat with the year-ago period. Operating EBIT was USD50 million, down 79% as volume growth in silicones and coatings applications, more than offset by price and volume declines in siloxanes. Segment sales were up 1% sequentially and volume down 2% on strong demand for silicones and acrylic monomers pricing momentum, more than offset by coatings seasonal demand declines.

“Dow enters 2021 with sequential momentum and is well-positioned for continued profitable growth in the ongoing economic recovery and improving industry cycle,” said Dow CEO James Fitterling. “As the market recovery broadens, we anticipate increasing margins as differentiated parts of our portfolio see improving demand."

Dow expects capital expenditures of USD1.6 billion in 2021, up about USD350 million. Dow also announced that it would accelerate digital investment programs, spending roughly USD400 million in 2021 and 2022. The company expects digital investment to provide more than USD300 million/year in EBITDA benefit by 2025.

As MRC wrote before, Dow will spend approximately USD294 to install and operate air pollution control and monitoring technology at 4 US chemical facilities as part of a settlement with The Department of Justice (DOJ), the US Environmental Protection Agency (EPA), and the Louisiana Department of Environmental Quality (LDEQ), according to a statement by the DOJ.

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.

The Dow Chemical Company is an American multinational chemical corporation. Dow is a large producer of plastics, including polystyrene, polyurethane, polyethylene, polypropylene, and synthetic rubber.
MRC

Cenovus closes transaction to combine with Husky

MOSCOW (MRC) -- Cenovus Energy Inc. is pleased to announce that its strategic combination with Husky Energy Inc. has closed, according to Hydrocarbonprocessing.

With the close of the transaction, Husky has become a wholly owned subsidiary of Cenovus and will remain as such until completion of a planned amalgamation among the two entities. Upon amalgamation, Cenovus will become the obligor under Husky’s existing long-term notes and other direct obligations. The combined company will continue to be headquartered in Calgary.

“This is an exciting day for Cenovus as we become a leaner, stronger, more fully integrated oil and natural gas company that is exceptionally well-positioned to weather the current environment and be an energy leader in the years ahead,” said Alex Pourbaix, Cenovus President & Chief Executive Officer. “With the closing of this transaction, we will focus on safely and efficiently integrating the assets and teams of these two great companies while working to realize the USD1.2 billion in synergies we’ve identified. These cost and capital efficiencies, combined with our strong portfolio of well-matched upstream production, midstream and downstream assets as well as improved financial strength, are expected to generate strong value for our shareholders.”

The combination creates Canada’s third largest crude oil and natural gas producer, based on total company production, with about 750,000 barrels of oil equivalent per day of low-cost oil and natural gas production. Cenovus is also now the second largest Canadian-based refiner and upgrader, with total North American upgrading and refining capacity of approximately 660,000 barrels per day bpd. In addition, the company has access to about 265,000 bpd of current takeaway capacity from Alberta on existing major pipelines, 305,000 bpd of committed capacity on planned pipelines and 16 million barrels of crude oil storage capacity as well as strategic crude-by-rail assets that provide takeaway optionality.

The commitments both Cenovus and Husky have made to world-class safety performance and ESG leadership will remain core to the combined company. This includes an ongoing commitment to transparent performance reporting, an ambition to achieve net zero emissions by 2050 and a plan to set ambitious new ESG targets for the combined company later this year.

“I want to thank and congratulate everyone at Cenovus and Husky for their dedication and hard work in bringing this transaction to a successful conclusion,” Pourbaix said. “This is truly one of the most significant developments in the history of our two companies, and in the history of the Canadian energy industry, for that matter.”

Cenovus expects to provide additional details on its future plans with the release of its 2021 capital budget and updated corporate guidance in late January. Fourth quarter and year-end financial and operating results for both Cenovus and Husky Energy are scheduled for release in mid-February.

As MRC reported earlier, Canadian oil and gas producer Husky Energy resumed production at its catalytic reformeri n Lima, Ohio, USA, on 15 September, 2020, after an unplanned shutdown. The company shut its production with a capacity of 115,000 mt/year of benzene and 330,000 mt/year of of toluene on 14 September, 2020.

Benzene is a feedstock for the production of styrene monomer (SM), which, in its turn, is a feedstock for manufacturing polystyrene (PS).

According to MRC's ScanPlast report, Russia's estimated consumption of PS and styrene plastics totalled 520,630 tonnes in 2020, which corresponded to the same figure a year earlier. December estimated consumption of PS and styrene plastics in the country grew by 5% year on year to 47,490 tonnes.
MRC

PP imports into Russia up by 23% in 2020

MOSCOW (MRC) -- Polypropylene (PP) imports into Russia increased by 23% year on year to about 224,000 tonnes in 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports, according to MRC's DataScope report.

Last month, Russian companies actually kept the November volume of external PP purchases, imports amounted to 21,300 tonnes. Thus, overall PP imports into Russia reached 224,000 tonnes in January-December 2020, compared to 182,800 tonnes a year earlier. Purchasing of all grades of propylene polymers in foreign markets increased, with homopolymer PP imports accounting for the most noticeable rise.

The overall structure of PP imports by grades looked the following way over the stated period.

December imports of homopolymer PP were 7,600 tonnes versus 10,500 tonnes a month earlier, homopolymer PP shipments from Turkmenistan decreased significantly. Thus, overall imports of homopolymer PP totalled 93,000 tonnes in 2020, compared to 59,000 tonnes a year earlier.


December imports of propylene block-copolymers (PP block copolymers) were 6,500 tonnes versus 5,700 tonnes in November, demand for European injection moulding PP increased from Russian companies. Imports of PP block copolymers into Russia reached 60,300 tonnes in January-December 2020, compared to 54,700 tonnes a year earlier.

December imports of statistical copolymers of propylene (PP random copolymer) dropped to 3,400 tonnes from 1,700 tonnes a month earlier, with the main increase accounted on the producers of film and injection moulding products due to the lack of supply of domestic raw materials.
Overall imports of this propylene copolymers grade totalled 36,700 tonnes in 2020, compared to 33,800 tonnes a year earlier.

Imports of other propylene polymers totalled 34,100 tonnes over the stated period versus 35,300 tonnes a year earlier.

MRC

PE production in Russia grew 61% in 2020

MOSCOW (MRC) -- Russia's overall polyethylene (PE) production totalled 2,987,000 tonnes in 2020, up by 61% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output, according to MRC's ScanPlast report.

December PE production in Russia decreased to 265,100 tonnes, whereas this figure was at 272,800 tonnes a month earlier, as ZapSibNeftekhim decreased its capacity utilisation in the first month of calender winter. Thus, overall PE production reached 2,987,000 tonnes in 2020, compared to 1, 857,600 tonnes a year earlier. Production of all PE grades increased, with low density polyethylene (LDPE) being the exception.

The structure of PE output by grades looked the following way over the stated period.

December high density polyethylene (HDPE) production reached 160,400 tonnes versus 158,600 tonnes a month earlier, Kazanorgsintez and ZapSibNeftekhim raised their output. Russian plants' overall HDPE output reached 1,825,000 tonnes in January-December 2020, up by 90% year on year.

December low density polyethylene (LDPE) production grew to 60,200 tonnes from 55,500 tonnes in November, Kazanorgsintez and Tomskneftekhim increased their output. Thus, overall production of this PE grade totalled 634,800 tonnes over the stated period, down by 1% year on year.

December LLDPE production decreased to 44,500 tonnes from 58,700 tonnes a month earlier, Kazanorgsintez shut production, and ZapSibNeftekhim reduced capacity utilisation. Overall LLDPE production grew to 527,400 tonnes in 2020 from 254,600 tonnes a year earlier.


MRC