Crude oil futures stronger on hopes of pandemic easing, improved fundamentals

MOSCOW (MRC) -- Crude oil futures continued on an upward trajectory during mid-morning trade in Asia Feb. 4, as the abatement of the pandemic situation and simmering hopes over a US stimulus package provided a boost to oil markets already invigorated by an uptick in demand and the start of Saudi Arabia's output cut, reported S&P Global.

At 11:11 am Singapore time (0311 GMT), the ICE Brent April contract was up 44 cents/b (0.74%) from the Feb. 4 settle to USD59.28/b, while the March NYMEX light sweet crude contract was up 40 cents/b (0.71%) to USD56.63/b.

The bullish step in the oil market comes amid signs that the pandemic is starting to ease globally, with expectations of a colossal US stimulus package also inspiring confidence among investors that the economic climate will soon improve.

"There are a number of factors behind crude's rise, but head and shoulders above all of them is the observation that the coronavirus might finally be retreating. It is a natural abatement for most part, but it is also being helped by increased vaccine coverage," Vandana Hari, CEO of Vanda Insights, told S&P Global Platts Feb. 5.

"Investors are confident that this is the beginning of the end for the pandemic as it can be seen that infection, hospitalization and fatality numbers have steadily been dropping in the past two to three weeks globally," Hari added.

Analysts added that the demand outlook for oil has improved significantly as the pandemic situation has alleviated.

In a Feb. 5 note, Stephen Innes, chief global market strategist at Axi brought to attention that two VLCCs were scheduled to deliver North Sea oil to China in late March, adding this "confirms that real demand is driving the front end of the curve."

Analysts also said that investors viewed Saudi Aramco's release of the official selling prices with a bullish hue. OSPs for Saudi Aramco's crude into Asia remained unchanged for March, while OSPs for buyers in Europe and the US were raised.

The release of Saudi Aramco's OSPs follows the start of Saudi Arabia's 1 million b/d output cut, which began on Feb. 1, and has curtailed supply in the market.

"The Saudis had a very different view of demand when they announced their output cuts but, being hawkish, they will likely persist with them regardless of the strong demand. This could see Brent hurtling past the USD60/b mark," Hari concluded.

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 ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, exluding producers' inventories as of 1 January, 2020).
MRC

MOSCOW (MRC) -- Yanbu National Petrochemical Company (Yansab), part of Saudi Basic Industries Corporation (Sabic), is planning to shut its polypropylene (PP) and linear low density polyethylene (LLDPE) plant today (5 February 2021) for a planned turnaround, reported CommoPlast with reference to market sources.

Based in Yanbu, Saudi Arabia, the company has PP and LLDPE plant with production capacity of 400,000 tons/year each.

Both plants are expected to remain off-stream for 10-15 days.

As MRC informed earlier, Yansab shut its high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) units for maintenance in early February, 2018. The planned outage lasted for around 6-7 weeks. Located in Yanbu, Saudi Arabia the HDPE and LLDPE units have a production capacity of 400,000 mt/year each.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).

Yansab is the most recent SABIC, (Saudi Basic Industries Corp), affiliate in Saudi Arabia, and will be the largest Sabic petrochemical complex. It will have an annual capacity exceeding 4 million metric tons (MT) of petrochemical products including: 1.3 million MT (metric-tons) of ethylene; 400,000 MT of propylene; 900,000 MT of polyethylene; 400,000 MT of polypropylene; 700,000 MT of ethylene glycol; 250,000 MT of benzene, xylene and toluene, and 100,000 MT of butene-1 and butene-2.

Saudi Basic Industries Corporation (Sabic) ranks among the world's top petrochemical companies. The company is among the world's market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.
MRC

MOSCOW (MRC) -- Stolt Tankers, the chemical tankers subsidiary of Stolt-Nielsen, has announced the appointment of Emile Hoekstra as CFO, effective as of 15 February 2021, reported Chemweek.

His appointment is “an important step in preparing Stolt Tankers for its IPO,” says Stolt Tankers president Lucas Vos.

Hoekstra was most recently a member of the executive board and CFO at Royal Zeelandia Group.

As MRC informed earlier, in late January 2021, Stolt-Nielsen subsidiary Stolt Tankers said it had been commissioned by BASF to help design and build a new inland chemicals vessel able to operate during periods of extreme low-water levels on the Rhine river to increase security of supply for BASF's chemicals site at Ludwigshafen, Germany.

We remind that BASF said in late January, 2021, that its 420,000-metric ton/year steam cracker in Ludwigshafen, Germany was running normally and had not caused any interruption of supply to its customers. Earlier, several media outlets reported that unscheduled flaring started on 13 January at the northern part of the Ludwigshafen site and was expected to last until 17 January and that an unspecified unit was shut, which "was not the case", as per the company's letter received by MRC.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).
MRC

MOSCOW (MRC) -- Karpatneftekhim (Kalush, Ivano-Frankivsk region), Ukraine's largest petrochemical plant, raised its high density polyethylene (HDPE) prices by USD90/tonne on 3 February for shipments to the domestic market, according to ICIS-MRC Price report.

The plant's customers said on Wednesday, the Ukrainian producer increased its HDPE prices for shipments to the domestic market by USD90/tonne from previous week. Prices started from USD1,270-1,280/tonne FCA, excluding VAT, for end-users. The price rise was primarily caused by higher feedstocks prices.

High prices in foreign markets also put a major pressure on prices in the county. Thus, European producers raised their February export prices by EUR150-220/tonne from January.

Karpatneftekhim is one of the largest enterprises of Ukraine's petrochemical complex. Currently, the plant can produce annually 300,000 tonnes of PVC, 200,000 tonnes of caustic soda, about 180,000 tonnes of chlorine, as well as 250,000 tonnes of ethylene and 100,000 tonnes of polyethylene.
MRC

MOSCOW (MRC) -- Corteva reports earnings of USD43 million for the seasonally weak fourth quarter, up from a loss of USD18 million in the year-ago quarter, on early seed sales in North America, reported Chemweek.

Adjusted earnings of USD0.04 cents per share were down 43% year-on-year (YOY) but beat the analysts’ consensus estimate for a loss of USD0.03/share, as reported by Zachs Investment Research. Net sales increased 7.5% YOY, to USD3.2 billion, as volumes increased 10% on adoption of new and differentiated crop protection products. Organic sales grew by double digits in North America, Latin America, and Asia Pacific. Early season sales in seed North America helped to offset currency impacts in Latin America.

“Our new and differentiated products contributed to solid top-line growth,” says Jim Collins, CEO. “We delivered progress in 2020 on key innovations and investments, such as the accelerated ramp-up of our Enlist™ system, which exceeded our initial expectations on US soybean acres in 2020. At the same time, we grew our position in key markets and regions during the year, and further strengthened our multi-channel, multi-brand strategy, including the launch of Brevant™ in the U.S. retail channel.”

Crop protection sales increased 13% YOY, to USD2.0 billion. Segment operating EBITDA was USD327 million, up from USD277 million in the fourth quarter of 2019. Favorable mix, volume gains and ongoing cost and productivity actions more than offset the negative impact of currency.

Seed sales were flat YOY, t USD1.2 billion. Volume increased 9%, but was offset by unfavorable currency impacts, particularly in Brazil. Segment operating EBITDA was a seasonal loss of USD47 million, compared to a loss of USD26 million in the fourth quarter of 2019.

Looking ahead, the company expects net sales of USD14.4-USD14.6 billion for full year 2021, which at the midpoint is 2% higher than 2020. Operating EBITDA is expected to be in the range of USD2.4 billion to USD2.5 billion, an increase of 15-20% compared 2020.

As MRC informed earlier, in late January 2020, DuPont de Nemours, Inc., Corteva, Inc. and The Chemours Company announced that they ha entered into a binding memorandum of understanding containing a settlement to resolve legal disputes originating from the 2015 spin-off of Chemours from E. I. du Pont de Nemours and Company (EID). Cmpanies aimed to establish a cost sharing arrangement and an escrow account to be used to support and manage potential future legacy per- and polyfluoroalkyl substances (PFAS) liabilities arising from events prior to 1 July 2015, the day the spin-off was completed.

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, Russia's HDPE production totalled about 1,824,800 tonnes in 2020, up 90% year on year. ZapSibNeftekhim accounted for the main increase in the output,.
MRC