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Oil drops as investors gauge big chill impact on U.S. refineries

February 24/2021

MOSCOW (MRC) -- Oil prices slid as much as 2% in early trade on Friday, adding to overnight declines, on worries that refineries shut by a big freeze in the U.S. South will take some time to revive operations and dent crude demand, said Hydrocarbonprocessing.

U.S. West Texas Intermediate (WTI) crude futures fell USD1.21, or 2%, to USD59.31 a barrel at 0157 GMT, after declining 1% on Thursday. Brent crude futures dropped USD1.07, or 1.7%, to USD62.86 a barrel, after declining 0.6% on Thursday.

Both benchmark contracts rallied to 13-month highs on Thursday driven by the historic freeze in U.S. southern states. While analysts estimate the extreme cold has shut in as much as one-third of U.S. crude production, attention has now turned to the impact on refiners.

The market is concerned about the refinery outages in Texas, where arctic weather has caused power outages and frozen wells and pipes, ANZ Research said in a note. The lack of demand from refineries will likely lead to builds in crude stocks over coming weeks, even though around 3.5 million barrels per day (bpd) of U.S. oil output has been shut, ANZ said.

Citi analysts said in a note that some U.S. refineries might bring forward maintenance work normally scheduled for the spring, ahead of the summer driving season. Refinery outages could be deeper and longer lasting, especially ahead of the spring maintenance season, as some plants could decide to anticipate planned turnarounds of roughly 500-k b/d on aggregate over the next month, Citi analysts said.

U.S. crude stockpiles fell more than expected in the week to Feb. 12, before the freeze, with inventories down by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday.

As per MRC, a winter storm has brought unusually cold temperatures, snow, and freezing rain to Texas and western Louisiana, forcing a large share of US light olefins production offline. As of the evening of Tuesday, 16 February, IHS Markit had confirmed the shutdown of at least 61% of US ethylene capacity, 59% of US chemical- and polymer-grade propylene (CGP, PGP) capacity, and 22% of US fluid catalytic cracking (FCC) capacity. Many plants that remained online were running at reduced capacity.

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). Supply of exclusively PP random copolymer increased.


mrcplast.com
Author:Anna Larionova
Tags:petroleum products, PP, PE, neftegaz, petrochemistry.
Category:General News
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