Crude oil futures rangebound amid improving fundamentals, overheating concerns

MOSCOW (MRC) -- Crude oil futures were rangebound in mid-morning trade in Asia Feb. 10 as improving fundamentals for crude oil were weighed against concerns of an overheated market, reported S&P Global.

At 10:34 am Singapore time (0234 GMT), the ICE Brent April contract was up 1 cent/b (0.02%) from the Feb. 9 settle at USD61.10/b, while the March NYMEX light sweet crude contract was down 7 cents/b (0.12%) at USD58.29/b.

Crude oil prices continued to receive support from strengthening current and future demand as the coronavirus pandemic receded amid vaccine rollouts, with hopes of a swift economic recovery boosted by an impending US stimulus package, analysts said.

"COVID infection numbers continue to fall, raising hope that fuel consumption will improve," ANZ analysts said in a Feb. 10 note, adding that demand recovery was already visible with Chinese fuel sales in significant growth mode and Indian demand returning to pre-pandemic levels as car usage increases.

Furthermore, the American Petroleum Institute's weekly inventory report released late Feb. 9 estimated US crude inventories fell by 3.5 million barrels in the week ended Feb. 5, above the 2.7 million-barrel decline estimated by analysts surveyed by S&P Global Platts, and at a level analysts considered bullish for the market.

The market will look to the US Energy Information Administration's weekly inventory report due later Feb. 10 for further clarity on price direction.

"The reported draw estimate from API was a surprise, and if EIA reports a similar figure later today, it may provide some support to the market," Warren Patterson, head of commodities strategy at ING, told S&P Global Platts Feb. 10.

On the supply side, the OPEC+ alliance's commitment to production quotas and Saudi Arabia's additional 1 million b/d supply curb that kicked in Feb. 1 continue to contribute to a tightening market.

However, concerns that the crude market may have overestimated the improving fundamentals persist, with some analysts perceiving oil to be in overbought territory.

The EIA's short term energy outlook released late Feb. 9 cast a shadow of doubt over the pace of demand recovery, with the expectation of a rise in global consumption of petroleum and liquid fuels by 5.4 million b/d in 2021 revised down 0.2 million b/d from the previous month's forecast.

"The EIA's short-term energy outlook showed the persistent levels of COVID uncertainty continue to weigh on the demand outlook for the rest of the year," said Edward Moya, senior market analyst at OANDA.

Concerns about how long the supply tightness would last were also weighing on optimistic sentiment.

The current strength in oil prices may incentivize OPEC+ to increase production at the March 4 meeting, easing some of the supply tightness in the market, said Stephen Innes, chief global strategist at Axi, in a Feb. 10 note.

Patterson echoed similar sentiment, saying: "The rally (in oil) is running out of steam and further upside is limited as current prices will induce producers in North America to increase drilling activity."

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, excluding producers' inventories as of 1 January, 2020).
MRC

MOSCOW (MRC) -- DuPont confirmed plans to update reporting segments following the 1 February divestiture of its nutrition and bioscience business to IFF, according to Chemweek.

The company will report in three segments starting with its first-quarter 2021 earnings report. The segments are electronics and industrial (2020 sales of USD4.7 billion, which will include industrial solutions interconnect solutions; and semiconductor technologies business); mobility and materials (2020 sales of USD4 billion, including advanced solutions, engineering polymers, and performance resins); and water and protection (2020 sales of USD5 billion, which will include safety solutions; shelter solutions; and water solutions.

DuPont will shift its Kalrez perfluoroelastomer, Vespel polyimide parts and shapes, Molykote, and healthcare silicones from the former transportation and industrial segment to electronics and industrial.

The company said that its Tedlar films, microcircuit materials and the DuPont Teijin Films joint venture, previously non-core businesses designated for sale, would become part of the mobility and materials segment. DuPont executive chair and CEO Edward Breen said on the company’s 9 February earnings call that a sale of the businesses in the current market would not generate sufficient shareholder return. The shift winds down DuPont's non-core segment. DuPont has divested nine businesses designated non-core since June 2019 with cash proceeds for more than USD2.2 billion.

Breen also indicated that DuPont would pursue targeted M&A in 2021 with as much as USD2.5 billion allocated for acquisitions.

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

MOSCOW (MRC) -- Clariant, a focused, sustainable and innovative specialty chemical company, has signed a cooperation agreement with ETH Zurich to support research in catalysis and sustainable chemistry with a significant financial contribution over an initial period of ten years, according to Hydrocarbonprocessing.

The goal of the partnership is, firstly, to advance the understanding of catalyst properties - from nano- to macroscale – and their performance. Secondly, together with the ETH Foundation, Clariant will sponsor and collaborate in fundamental chemical research projects, promoting talented ETH scientists and students.

Hans Bohnen, member of Clariant’s Executive Committee, commented, “We are honored to announce our research agreement with the prestigious ETH Zurich. The partnership, like those with other academic institutions, underscores our commitment to fostering innovation and R&D to develop groundbreaking products and solutions that add value to people, industries, and the environment.”

Marvin Estenfelder, Head of R&D at Clariant Catalysts, added “There is no better way to develop the next generation of products than through a continuous exchange of ideas with future generations of scientists. We look forward to realizing many successful projects with ETH Zurich.”

Detlef Guenther, Vice President for Research of ETH Zurich, stated, “The new research collaboration with Clariant opens great opportunities for our scientists and students to expand their knowledge in catalysis, and benefit from first-hand expertise in the industrial application of novel technologies.”

ETH (the Swiss Federal Institute of Technology in Zurich) is one of the world’s leading universities, currently recognized as the sixth best by QS World University Rankings. Founded in 1855, the university has a strong tradition in science and technology, which is reflected in its affiliation with 21 past Nobel Prize winners, including Albert Einstein. At the forefront of catalysis research, the cutting-edge methods and materials developed by ETH have provided deep insights into previously undiscovered aspects of catalysis.

Clariant’s research cooperation with ETH Zurich is another important milestone for the company, further expanding its partnerships with prominent global academic institutions, which already include the Technical University of Munich, Germany, and Tianjin University, China.

As MRC informed earlier, in October 2020, Clariant (Muttenz, Switzerland) announced the construction of a new state-of-the-art catalyst production site in China. This project represents a significant investment which further strengthens Clariant’s position in China and enhances its ability to support its customers in the country’s thriving petrochemicals industry.

The new facility will be primarily responsible for producing the Catofin catalyst for propane dehydrogenation, which is used in the production of olefins such as propylene. Thanks to its excellent reliability and productivity, Catofin delivers superior annual production output compared to alternative technologies, resulting in increased overall profitability for propylene producers, says the company. Construction at the Dushan Port Economic Development Zone in Jiaxing, Zhejiang Province was scheduled to commence in Q3 2020, and Clariant expects to be at full production capacity by 2022.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, 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).

Clariant AG is a Swiss chemical company and a world leader in the production of specialty chemicals for the textile, printing, mining and metallurgical industries. It is engaged in processing crude oil products in pigments, plastics and paints.
MRC

MOSCOW (MRC) -- PKN Orlen (Plock, Poland), the country’s largest petrochemicals producer, says higher margins and sales volumes boosted fourth-quarter EBITDA in its petchems business to 508 million zloty (USD137 million), up 187% year on year (YOY), reported Chemweek.

Improved petchem margins compared to the prior-year period were enhanced by sales volumes in the quarter that rose 17% YOY to 1.4 million metric tons, according to the refining and energy group. Sales volumes for polyolefins rose 47% YOY, polyvinyl chloride (PVC) volumes soared by 115%, purified terephthalic acid (PTA) rose 15%, and fertilizers increased 12%, while olefins sales were broadly flat, it says.

Sales in Poland rose 13% YOY on higher sales of ethylene, PTA, fertilizers, and PVC, while sales in the Czech Republic increased 22% YOY, driven by higher sales of polyethylene (PE) - following the startup of PKN’s new 270,000-metric tons/year PE3 production unit at Litvinov, Czech Republic - polypropylene (PP), and PVC. Sales at PKN’s subsidiary Orlen Lietuva (Mazeikiu, Lithuania) grew 200% YOY on higher volumes of propylene sold to external customers, it says.

PKN’s refining segment reported a net EBITDA loss of Zl145 million for the fourth quarter due to adverse macroeconomic conditions, contracting margins, and negative currency effects.

As MRC informed earlier, the only Czech refinery and major petrochemical producer Unipetrol was renamed Orlen Unipetrol from 1 January, 2021. Unipetrol is 100% owned by the Orlen Group.

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) -- France's Total posted better than expected earnings in the fourth quarter as oil prices stabilized, and said it would change its name as part of a push to diversify and grow renewable power and electricity production, reported Reuters.

The French oil and gas major, which like rivals suffered in 2020 as fuel consumption tumbled during the pandemic, said it would rebrand as TotalEnergies as it tries over the next decade to reduce oil products to a third of its sales from over half now.

The company plunged to a USD7.2 billion net loss for 2020 as a whole, hit by around USD10 billion of impairments as oil prices collapsed. But it had already recorded most of the charges, including some linked to write downs on its Canadian oil sands assets, in the first half of last year and on an adjusted basis, net income came in at USD4.06 billion for the year.

Earnings fell less sharply in the fourth quarter than in the previous three months. Adjusted net income, which strips out some one off items, was down 59% from the year earlier period to USD1.3 billion, beating analysts' expectations, and in contrast with some peers including Shell.

"Overall a rock steady performance in a tough quarter and year," analysts at Bernstein said in a note, adding that cash flow levels were strong.

Total shares were up 1.2% by 1055 GMT.

Chairman and Chief Executive Patrick Pouyanne said the company's rebranding reflected a bid to move as fast as possible as it tries to improve on its environmental goals.

"By proposing this name change to shareholders, we're also fundamentally asking them to approve this change in strategy," Pouyanne told reporters.

The group said it has already spent more than USD2 billion on acquisitions in the renewables sector this year, and planned to spend 20% of its investment budget for 2021 on this drive, up from around 15% in 2020.

Total will have some USD5 billion of investments to finance overall in the renewables segment this year, with a mixture of debt and capital, Pouyanne said, and some USD60 billion by 2030.

Total said the oil market outlook remained uncertain, and it would target another USD500 million in cost cuts in 2021, after saving USD1.1 billion last year.

It is targeting USD12 billion in net investments overall this year, down from USD13 billion last year.

Total forecast a 10% improvement in sales of liquefied natural gas this year, in part thanks to a ramp up of operations at the Cameron LNG export plant in the United States.

It also on Tuesday signed a fiscal stability agreement with Papua New Guinea which could pave the way for work to begin on a long-stalled LNG project in the country.

Total said it would propose a dividend payout of 0.66 euros per share for the October to December period, in line with previous quarters in 2020.

As MRC wrote earlier, within the framework of its net zero strategy, Total will convert its Grandpuits refinery (Seine-et-Marne) into a zero-crude platform and will invest more then EUR500 mln into this project. By 2024 the platform will focus on four new industrial activities: production of renewable diesel primarily intended for the aviation industry, production of bioplastics, plastics recycling and operation of two photovoltaic solar power plants.

We remind that in November 2019, Total disclosed that itis evaluating construction of a new gas cracker at its Deasan, South Korea, joint venture (JV) with Hanwha Chemical.

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).

Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
MRC