COVID-19 - News digest as of 10.03.2021

1. Global diesel margins leave refiners under pressure

MOSCOW (MRC) -- Global refiners are making more money for producing middle distillates such as gas oil and diesel now excess inventories accumulated during the first wave of the coronavirus epidemic have largely been absorbed, reported Reuters. Despite the improvement, however, margins remain low in comparison with the last two decades, pressured by the continuing downturn in demand for jet fuel, which comes from a similar part of the refining process. And margins are likely to remain depressed for several more months to keep capacity offline and restrict combined output of distillates and jet fuel, until travel restrictions are eased and international passenger aviation resumes.




MRC

Crude extends fall as OPEC+ optimism fades, US inventories rise

MOSCOW (MRC) -- Crude oil futures fell during the mid-morning trade in Asia March 10 as bullishness over OPEC+ rolling over production quotas faded and the American Petroleum Institute reported a large build in US crude stocks, reported S&P Global.

At 11:23 am Singapore time (0323 GMT), the ICE Brent May contract was down by 37 cents/b (0.55%) from the March 9 settle at USD67.15/b, while the April NYMEX light sweet crude contract was 25 cents/b (0.39%) lower at USD63.76/b.

The markers have fallen 2.65% and 3.15%, respectively to date this week as crude oil markets try to find balance after the OPEC+ coalition's surprise decision last week to keep its production steady in April sent prices surging.

"The declines in oil benchmarks this week indicate that the optimism following last week's OPEC+ surprise had been overstretched and the pullback in oil prices was likely warranted based on technical factors, with the 14-day RSI easing away from overbought territory," Han Tan, market analyst at FXTM, told S&P Global Platts on March 10.

"Heightened expectations for the recovery in US oil production, fueled by the (Energy Information Administration's) upward revisions to output levels for this year and next, may also dampen the upside for oil prices," Tan added.

The EIA has revised up its outlook for 2021 production by 100,000 b/d to 11.1 million b/d, and for 2022 production by 500,000 b/d to 12 million b/d, Platts reported earlier.

API data released late March 9 showed a 12.8 million-barrel build in US crude inventories in the week ending March 5. The market reacted in early March 10 trade by pushing oil prices down.

"Oil prices slid further on a build in crude oil inventories of 12.792 million barrels for the week ending March 5," said Stephen Innes, chief global market strategist at Axi, in a March 10 note.

Innes however cautioned against putting too much weight on the API data: "I think it best to interpret the API data with a pinch of salt as it is unclear whether the reported stock build is a laggard effect of (EIA's) large build printed last week, or whether we will see another large build from the EIA (in its report due later March 10)."

The markets took solace in the much more bullish product data from the API, which showed 8.5 million-barrel and 4.8 million-barrel draws in US gasoline and distillate inventories, respectively. These movements in product inventories could be indicative of improved downstream fundamentals, which bodes well for the entire oil complex.

The demand outlook for the oil complex remained bright, and could receive a further boost later March 10 when the US House of Representatives is expected to vote on a Senate-approved USD1.9 trillion stimulus package.

"The build in crude inventories is set to be mitigated by the sustained demand recovery, especially as more US fiscal stimulus rolls out this month and virus-curbing measures are eased," Tan 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

Indian Oil plans USD4.4-billion refinery expansion, PP plant at Panipat, India

MOSCOW (MRC) -- Indian Oil has announced plans to expand the capacity of its refinery at Panipat, India, from 15 million metric tons/year (MMt/y), to 25 MMt/y, reported Chemweek.

The company will also build a polypropylene (PP) unit and a catalytic dewaxing unit at the site. The cost of the project is 329.46 billion Indian rupees (USD4.45 billion). The plan is the latest in a series of projects approved by Indian Oil to improve integration with petrochemicals at the company's refinery sites. The capacity of the planned PP facility has not been disclosed.

The new refining capacity and PP unit are expected to be commissioned by September 2024. Indian Oil says the expansion will improve the operational flexibility of the refinery to meet domestic energy demand and enhance the site's petrochemicals intensity. Increasing production of petchems and specialty products will improve margins and de-risk the company's conventional fuels business, it adds.

The company already operates a PP plant at Panipat with a capacity of 600,000 metric tons/year, according to IHS Markit data.

Indian Oil entered the petchems business more than a decade ago and the strategy has yielded positive results, says Utpal Sheth, executive director/polyolefins at IHS Markit. Sheth notes that the company also built PP plants at its recently constructed refinery and petchem complex at Paradip, India. “Now they plan to expand their existing refineries and build residue fluid catalytic cracker (RFCC)/PP plants at Panipat,” he says. Indian Oil's management has approved similar plans to build PP plants at refineries in Gujarat and Assam States, adds Sheth.

Indian Oil with its affiliate Chennai Petroleum (Chennai, India) decided in June 2020 to build a 9-MMt/y refinery complex at Nagapattinam, India. The companies will also build a PP plant. The cost of this project is Rs289.8 billion. According to Premasish Das, executive director/energy at IHS Markit, the project at Nagapattinam will not be online before 2027–28.

IHS Markit expects Indian Oil to build about 1.5 MMt/y of PP capacity in total at Panipat, Baroda, and Chennai, and in Assam before the end of this decade. The plans will more than double the company's PP capacity. Sheth says these new PP capacities, together with additions planned by other public and private companies, will ensure India has high self-sufficiency in PP.

IHS Markit says that over the last five years, India has increased its PP capacity at an average of about 6.1%/year and that this is expected to continue at a healthy rate, to reach about 6.8 MMt/y by 2024, including hypothetical capacity.

Demand for PP, the fastest-growing polymer, is likely to grow at high single-digit rates in India in the near- to medium term, Sheth says. Refinery-linked PP production is cost competitive compared with other technologies used worldwide, he adds. “The relative incremental capital investment is moderate. Thus, building downstream PP plants makes a perfect strategy for Indian Oil,” Sheth says.

Refinery-petchem integration will become a more critical issue with COVID-19 and beyond in view of rising petchem demand versus slowing fuel consumption, according to Stephen Jew, director at IHS Markit.

Sheth says that multinational oil and gas companies are integrating downstream to add value to their business. He notes that the Indian government introduced recently a policy to scrap personal vehicles after eight years of use, to increase vehicles' fuel efficiency.

As MRC informed before, India’s Chemicals and Fertilisers Minister D V Sadananda Gowda said in mid-December, 2020, the demand for chemicals and petrochemicals is expected to rise 9% annually, and the size of the industry is likely to grow to USD300 billion by 2025.

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). Supply of exclusively PP random copolymer increased.

Indian Oil Corporation Limited, or IndianOil, is an Indian state-owned oil and gas corporation with its headquarters in New Delhi, India.
MRC

BP to shut oil refinery in Australia this month

MOSCOW (MRC) -- BP plc has stopped importing oil for its refinery in Western Australia, the country’s largest, and is on track to decommission the plant by the end of March, reported Reuters with reference to a spokesman's statement.

BP announced last October it would shut the loss-making Kwinana plant, capable of processing 146,000 barrels per day (bpd) of oil, and turn it into a fuel import terminal. It said at the time operations would wind down over six months.

“Crude imports have stopped, and all processing at the plant is in the shutdown phase which will be completed by the end of March 2021,” a BP spokesman said in an emailed comment.

The Kwinana refinery is the first of Australia’s remaining four refineries set to shut, despite offers of incentives from the government to keep refineries open for national security.

ExxonMobil Corp said in February, as MRC reported earlier, that it also plans to shut its 90,000-bpd Altona refinery, the country’s smallest plant.

Ampol Ltd, Australia’s top fuel supplier, is considering the future of its Lytton refinery in Queensland.

Viva Energy is the only company that has accepted short-term payments from the federal government to keep its Geelong refinery open and said it hopes the plant will stay open with the help of long-term incentives now under negotiation.

We remind that in early February, 2021, Rosneft Oil Company and BP signed a Strategic Collaboration Agreement focused on supporting carbon management and sustainability activities of both companies. The agreement builds on years of partnership between the two companies and formalises key elements of their collaboration on sustainability and work to identify carbon reduction activities and low carbon opportunities.

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.

BP is one of the world's largest oil and gas companies, serving millions of customers every day in around 80 countries, and employing around 85,000 people. BP’s business segments are Upstream (oil and gas exploration & production), and Downstream (refining & marketing). Through these activities, BP provides fuel for transportation; energy for heat and light; services for motorists; and petrochemicals products for plastics, textiles and food packaging. It has strong positions in many of the world's hydrocarbon basins and strong market positions in key economies.
MRC

Lanxess announces price hike for engineering plastics on rising costs

MOSCOW (MRC) -- Specialty chemicals company Lanxess has announced a price increase for engineering plastics in the EAME region with immediate effect or as contracts allow due to rising raw material, logistics, and energy costs, reported Chemweek.

The nominated rise in prices “is unavoidable as the costs for raw materials, logistics, and energy have once again raised significantly and - for the most part - exceed the levels that existed prior to the outbreak of the COVID-19 pandemic,” it says.

Prices for its Durethan brands of unreinforced nylon-6,6 and nylon-6 will rise by EUR0.80/kilogram (USD0.95/kg) and EUR0.50/kg, respectively, while its reinforced nylon-6,6 and nylon-6 products prices are nominated to increase by EUR0.70/kg and EUR0.40/kg, respectively. Unreinforced and reinforced polybutylene terephthalate and blends will rise by EUR0.80/kg and EUR0.70/kg, it says.

The announced increases are in addition to price adjustments announced in December 2020, and higher adjustments may be necessary for individual materials, it adds.

As MRC informed earlier, Lanxess is also raising its prices for 1,6-hexanediol (HDO) globally with immediate effect. The increase amounts for EUR 800 per metric ton. HDO is an important precursor for high performance coatings, fibers, adhesives, polyurethanes, polycarbonate (PC) diols, and as reactive diluent for epoxy resins.

According to MRC's ScanPlast report, Russia's overall consumption of PC granules (excluding exports from Belarus) totalled 8,100 tonnes in January 2021, up by 20% year on year (6,800 tonnes a year earlier).

Lanxess is a leading specialty chemicals concern, which employs approximately 15,400 people in 33 countries. Currently, the concern includes 60 manufacturing enterprises. Lanxess core business is the development, production and marketing of chemical intermediates, additives, specialty chemicals and plastics. The concern is included in the lists of the world's leading sustainability indices: the Dow Jones Sustainability Index (DJSI World and Europe) and FTSE4Good.
MRC