Crude oil futures edge higher on bullish US product data, market awaits OPEC+ decision

MOSCOW (MRC) -- Crude oil futures ticked higher during the mid-morning trade in Asia, with optimism over large draws in US product inventories trickling down into markets otherwise cautious ahead of the OPEC+ meeting, reported S&P Global.

At 10:32 am Singapore time (0232 GMT), the ICE Brent May contract was up by 19 cents/b (0.30%) from the March 3 settle to USD64.26/b, while the April NYMEX light sweet crude contract was up by 10 cents/b (0.16%) to USD61.38/b.

Data released from the Energy Information Administration spurred some optimism in the market as it showed massive declines in US product inventories.

According to the data, US gasoline inventories registered the largest-ever one-week draw reported by EIA in records dating back to January 1992, plummeting 13.62 million barrels to 243.47 million barrel during the week ended Feb. 26. Distillate inventories also recorded their largest draw since January 2003, plunging 9.72 million barrels to 143 million barrels last week.

The bullish data for downstream products took away some attention from the largest-ever one-week build in US commercial inventories, which rose 21.56 million barrels to 484.61 million barrels last week.

"Gasoline demand was the star of the show with a very welcome and colossal draw as the weather improved and road traffic picked up significantly," Stephen Innes, chief global market strategist at Axi, said in a March 4 note.

Meanwhile, the market eagerly awaited the March 4 OPEC+ meeting, after the March 3 OPEC+ Joint Ministerial Monitoring Committee meeting concluded with no recommendation on April crude output levels. Delegates to the meeting said that Saudi Arabia, citing the tenuous nature of oil's recovery, wants to limit any rise in production quotas, while other coalition members want to pump more crude in order to take advantage of oil's bull run.

While there has been speculation in the market that Saudi Arabia would choose not to continue with its unilateral 1 million b/d output cut, S&P Global Platts Analytics said in a recent note that strong OPEC+ quota compliance may convince Saudi Arabia to ease this extra cut in a more phased manner, thereby ensuring that the market remains supported by constrained supply.

"A more gradual rollback of Saudi Arabia's 1 million b/d cut remains a distinct possibility, which could result in tighter markets and signal higher prices as (April loadings) will be needed for increased summer refinery runs," Platts Analytics said.

ANZ research, in a March 3 report, said that while the crude oil futures market has rallied due to progress on the pandemic and US stimulus fronts, the sentiment in the physical markets remains lackluster, and that a full recovery for oil still looks some way off.

"We expect OPEC+ to increase output by 750kb/d in April. This assumes a 500kb/d increase across the group, coupled with a 250kb/d increase from Saudi Arabia," they said.

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). Supply of exclusively PP random copolymer increased.
MRC

Petchems demand, gasoline blending to buoy European naphtha in 2021

MOSCOW (MRC) -- Demand and supply growth for naphtha in European markets is likely to be moderate until at least the second quarter of 2021 as inventories are run down and deployment of a COVID-19 vaccine starts to make some headway in reviving oil products demand, according to Chemweek with reference to IHS Markit analysts.

Refinery margins in Europe are forecast to remain under pressure from stocks that have built up during the pandemic amid volumes flowing into the region from abroad. Despite low refinery run rates, European naphtha supplies will not be tight because of the imbalance in different refinery yields, says IHS Markit principal analyst Eleanor Budds.

“We are forecasting refinery run rates to remain at similar levels in 2021 to 2020, with a utilization rate of below 80% on annual average,” Budds says. “Naphtha supply will be impacted, but as jet demand will remain low until the second half 2021, and then climb back gradually, refiners will continue to produce naphtha and diesel over jet, thus a shortage is not predicted,” she adds.

Demand for naphtha will benefit from healthy Asian and European petrochemical sectors and an uptick in gasoline blending. Commencement of the vaccine program will allow the European naphtha market to tap into resurgent gasoline blend demand. IHS Markit forecasts an increase of over USD130/metric ton in the CIF Northwest European naphtha spot price by the second quarter of 2021 compared to the prior-year quarter.

“Demand from the petchem sector, both in Europe and in Asia, will be supported by ongoing cracker run rates,” Budds says. However, a source at a European oil major suggested that in the second half of 2021, the petchem sector will lose some of the packaging and home office boost seen in 2020.

For much of the fourth quarter of 2020 light-grade naphtha, predominantly as petchem feedstock, dominated the Asian region. A major Japanese market player said that there will be fewer steam cracker turnarounds in the first quarter of 2021 in Asia compared to 2020, supporting demand for the lighter grade as feedstock.

IHS Markit forecasts the combined Asian and Middle East regional net feedstocks shortfall will hit 2.9 million metric tons and 2.6 million metric tons in January and February, respectively.

In terms of import demand, naphtha is forecast to consolidate its position as the primary cracker feedstock in Asia, especially in early 2021, as demand for propane as a heating fuel during the colder months rises and strong petchems demand continues to support cracker margins.

Simultaneously, Middle East and Indian net export volumes are expected to ease due to restrained refinery run rates and increased domestic demand. Should long-range tanker freight rates continue rising from December into early 2021, coupled with narrow price differences between Europe and Asia, this could curb spot, as opposed to structural, arbitrage volumes sent east.

OPIS is an IHS Markit company.

As MRC informed earlier, 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). 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.

We remind that 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.

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.
MRC

Fluor announces company revamp, plans to sell Stork

MOSCOW (MRC) -- Fluor (Irving, Texas) has recently announced an organizational revamp that “better aligns its business with identified growth markets and company strategy” after conducting a strategic review, reported Chemweek with reference to the company's statement.

The company is initiating plans to sell its subsidiary Stork (Utrecht, Netherlands) as part of the revamp, it says.

Starting in the first quarter of 2021, Fluor will conduct its operations in three business segments - Energy Solutions, Urban Solutions, and Mission Solutions. The energy solutions business will be focused on energy transition, chemicals, and traditional oil and gas opportunities, according to Fluor.

“As a result of our strategic review, we have determined that maintenance services no longer fits within Fluor’s core service portfolio. Therefore, the company is initiating plans to sell Stork,” it says. Fluor acquired Stork in 2015 for $755 million. Stork is a provider of maintenance, modification, and asset integrity services for large industrial facilities in the chemicals, petrochemicals, oil and gas, industrial, and power markets.

Fluor’s urban solutions business will pursue opportunities in mining, metals, advanced technologies, manufacturing, life sciences, and infrastructure, while the mission solutions business will be focused primarily on delivering solutions to federal agencies across the US government and to select international opportunities. Fluor has also established two functional organizations for project execution and corporate development and sustainability.

As MRC wrote before, in early December 2019, Fluor bagged PMC contract to PKN Orlen to expand ethylene capacity in Plock.

Ethylene is the mainfeedstock for the production of polyethylene (PE).

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.
MRC

Flint Hills Resource: restarting its PDH unit in Houston

MOSCOW (MRC) -- American petrochemical major - Flint Hills Resources - has been resuming operations at its propane dehydrogenation (PDH) unit in Houston, USA, reported S&P Global.

Thus, the company began restarting its 658,000 mt/year PDH plant on 25 February, 2021.

It was shut down on 16 February because of severe winter weather in the region.

As MRC informed previously, in November 2019, Motiva Enterprises, the US refining arm of Saudi Aramco, acquired 100% of Flint Hills Resources chemical plant, adjacent to its Port Arthur, Texas, oil refinery. The Flint Hills plant operates a 1.57 billion-pound-per-year ethylene cracker, a unit producing nylon component cyclohexane, and a network of pipelines and storage caverns.

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.
MRC

Record U.S. crude stockbuild as refining plummets

MOSCOW (MRC) -- U.S. crude oil stockpiles surged by a record of more than 21 million barrels last week as refining plunged to an all-time low as plants remained shut due to the Texas freeze that knocked out power for millions, the Energy Information Administration said, said Hydrocarbonprocessing.

With refiners unable to process crude, gasoline and distillate inventories also dropped dramatically, especially in the Gulf Coast region where their declines set records. Oil prices jumped after the data, with U.S. crude futures climbing to USD61.41 a barrel, a 2.7% increase as of 10:49 a.m. ET (1549 GMT). Brent rose 2.3% to USD64.14 a barrel.

"The market is realizing this is probably a one-off. I think they're shaking it off already," said Phil Flynn, senior analyst at Price Futures Group. "I think everyone is looking at this as a snapshot in time. They expect these inventories to fall dramatically when the exports start moving again and the refiners start running."

Crude inventories rose by 21.6 million barrels, the largest one-week increase ever, in the week to Feb. 26 to 484.6 million barrels. Analysts had anticipated a 932,000-barrel drop. Refinery crude runs fell by 2.3 million barrels per day in the last week, and the overall refinery utilization rate plunged 12.6 percentage points to an all-time low at 56%, EIA said.

That was largely driven by the slump in U.S. Gulf Coast refining, which dropped to just over 40% of its overall capacity. The increase in stocks was also driven by a big jump in U.S. crude imports, which rose by a net 1.66 million barrels per day, EIA said.

U.S. gasoline stocks fell by 13.6 million barrels in the week, the most ever, to 243.5 million barrels, the EIA said, compared with analysts' expectations in a Reuters poll for a 2.3 million-barrel drop. Distillate stockpiles, which include diesel and heating oil, fell by 9.7 million barrels in the week to 143 million barrels, versus expectations for a 3 million-barrel drop, the EIA data showed. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 485,000 barrels in the last week, EIA said.

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.

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). Supply of exclusively PP random copolymer increased.
MRC