COVID-19 - News digest as of 29.06.2021

1. Low demand for fuels to cap European crude refinery runs

MOSCOW (MRC) -- A recovery in European jet fuel demand to pre-pandemic levels is years away, forcing regional refiners to continue blending the aviation fuel into diesel, and keeping a lid on their crude runs, consultancy FGE Energy said, as per Hydrocarbonprocessing. FGE sees jet/kerosene demand in Europe at the end of 2022 reaching 75% of 2018-2019 levels only, meaning European refiners will continue to blend a large volume of jet into diesel to soak up the surplus. "Such blending tends to limit overall refinery crude throughput because maximum distillate hydrotreating capacity is reached at lower crude throughputs," FGE says.

MRC

MOSCOW (MRC) -- Crude oil futures ticked lower during mid-morning trade in Asia June 29, extending the overnight downtrend, as the spread of the delta variant of the coronavirus raised concerns over renewed mobility restrictions, reported S&P Global.

At 10:55 am Singapore time (0255 GMT), the ICE August Brent futures contract was down 34 cents/b (0.46%) from the previous close at USD74.34/b, while the NYMEX August light sweet crude contract was down 28 cents/b (0.38%) at USD72.63/b. This downtrend continues from overnight when front month Brent and NYMEX light sweet crude markers closed 1.97% and 1.54% lower at USD74.68/b and USD72.91/b, respectively.

Analysts said the market is pricing the possibility of tighter mobility restrictions after an increase in COVID-19 infections across much of Europe and Asia.

Despite its high vaccination rate, the UK has seen a surge in COVID-19 infections since January, reporting 22,868 COVID-19 infections on June 28, the highest since late January. This uptrend has been driven by the more transmissible delta variant of the coronavirus.

"Every time we see a rise in COVID-19 cases, the first thing that comes to traders' minds is that governments may rush to renew lockdown restrictions and tighten border controls, decimating oil demand. This is reflected in the prices we are currently seeing," David Lennox, resource analyst at Fat Prophets told S&P Global June 29.

To Lennox's point, Hong Kong, Spain and Portugal, among other countries, have moved to place new restrictions on travelers from the UK. Furthermore, German Chancellor Angela Merkel on June 28, proposed a total ban on UK arrivals across the EU, but Merkel's plans have yet to gain traction.

Analysts said the elevated numbers in the UK have led to fears that other countries, where vaccination has thus far driven down infection rates, may also succumb to the delta variant of the virus.

The spread of the delta variant of the virus was cited by analysts as one of the reasons why the OPEC+ coalition will take a cautious approach to rolling back its production quotas. The producer group has met with several calls to raise oil production to prevent a supply shortfall, and to ensure affordable energy prices that are conducive to a global economic recovery.

OPEC+ is currently holding crude production at 6.2 million b/d below October 2018 levels and intends to taper this output cut to 5.76 million b/d in July.

We remind that as MRC informed earlier, Indian refiners, anticipating a lifting of US sanctions, plan to make space for the resumption of Iranian imports by reducing spot crude oil purchases in the second half of the year. The world"s third-largest oil consumer and importer halted imports from Tehran in 2019 after former US President Donald Trump withdrew from a 2015 accord and re-imposed sanctions on the OPEC producer over its disputed nuclear programme.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.
MRC

MOSCOW (MRC) -- Nan Ya Plastics, Formosa's sister company, intends to resume production at the new monoethylene glycol (MEG) plant in Point Comfort, Texas, USA, in the near future, reported S&P Global with reference to sources familiar with Nan Ya's operations.

The company shut its 800,000 mt/year MEG plant at the Point Comfort site when Formosa shut the cracker, the largest of three at the complex, on a lack of sufficient ethylene feedstock.

At the same time, Nan Ya's smaller 370,000 mt/year MEG unit at Point Comfort had already been shut for a lengthy turnaround, but the Formosa cracker shutdown delayed its restart as well.

The MEG plants were slated to resume operations once Formosa ramps up the cracker, a source said.

A second source said that while there was not a huge amount of merchant ethylene available, there is enough that Formosa could have supplied the MEG plants with feedstock during the outage, had they been so inclined.

Nan Ya did not respond to a request for comment.

As MRC informed earlier, the mew MEG plant's start-up was push back to early 2021 from H1 2020 on coronavirus pandemic-related concerns to ensure worker safety and social distancing.

MEG is one of the main feedstocks for the production of polyethylene terephthalate (PET).

According to MRC's ScanPlast report, Russia's estimated PET consumption grew to 263,660 tonnes in the first four months in 2021, up by 13% year of year. Bottle grade PET accounted for 78.3% of the increase in consumption due to the virtual absence of exports and higher imports.
MRC

MOSCOW (MRC) -- Saudi Arabia’s Rabigh Refining and Petrochemical Co (PetroRabigh) has no overhaul schedule for its polypropylene (PP) plant at the moment, according to CommoPlast with reference to market sources.

The company operates two lines at this plant, which can produce 350,000 mt/year of PP each.

As MRC wrote previously, the company conducted a 55-day scheduled turnaround at its PP units in Rabigh since end-February 2020.

Besides, the company has a 300,000 mt/year high density polyethylene (HDPE) unit, a 160,000 mt/year low density polyethylene (LDPE) unit and a 600,000 mt/year linear low density polyethylene (LLDPE) plant at the same site.

According to MRC's ScanPlast report, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.

PetroRabigh, a joint venture between Saudi Aramco and Japan's Sumitomo Chemical, has an annual output capacity of 18 million tonnes of refined products and 2.4 million tonnes of petrochemicals. Thus, the complex currently has a cracker to produce 1.6-million t/y of ethylene, as well as downstream production of polyethylene, polypropylene, propylene oxide, ethylene glycol and butene-1.
MRC

MOSCOW (MRC) -- Russia's overall production of high density polyethylene (HDPE) totalled 831,100 tonnes in the first five months of 2021, up by 7% year on year. At the same time, only one Russian producer increased its HDPE output, according to MRC's ScanPlast report.

May total HDPE production in Russia grew to 177,600 tonnes, whereas this figure was at 147,700 tonnes a month earlier, all producers raised their capacity utilisation. Thus, overall HDPE output reached 831,100 tonnes in January-May 2021, compared to 778,400 tonnes a year earlier. Only ZapSibNeftekhim's production increased, whereas three others reduced their output.

The structure of polyethylene (PE) production by plants looked the following way over the stated period.

ZapSibNeftekhim's May total HDPE production reached 101,300 tonnes versus 81,600 tonnes a month earlier. The Tobolsk plant's overall HDPE output reached 473,000 tonnes in the first five month of 2021, up by 31% year on year.

Kazanorgsintez's total HDPE production grew to 38,600 tonnes last month from 29,000 tonnes in April, the increase in the output was due to lower linear low density polyethylene (LLDPE) production. Thus, overall HDPE output totalled 174,900 tonnes over the stated period, down by 23% year on year.

Stavrolen produced 26,300 tonnes of HDPE in May versus 26,900 tonnes a month earlier. Overall output of this PE grade exceeded 134,300 tonnes in the first five months of 2021, down by 1% year on year.

Gazprom neftekhim Salavat's total HDPE production reached 11,400 tonnes last month, compared to 10,200 tonnes in April. Thus, the Salavat plant's overall production of this PE grade totalled 48,900 tonnes in January-May 2021, down by 8% year on year.

MRC