European oil product margins spike in Harvey's wake

MOSCOW (MRC) -- Benchmark European gasoline refining margins spiked nearly 9% on Tuesday to their highest since April after more than 2 MMbpd of US refining capacity was knocked offline by Hurricane Harvey, said Hydrocarbonprocessing.

Margins, the profit from refining crude into gasoline, hit USD15.45/bbl in morning trade. Benchmark diesel margins also stood more than 16% above the low hit just a week ago, amid concerns about cargoes diverted away from Europe.

Harvey knocked out 13% of refining capacity in the US, the world's largest oil consumer, while the continuing rain and flooding threatened other units, including the country's largest refinery.

The shutdowns are expected to prompt a late-year spike in gasoline bookings from Europe to compensate for output losses. Buyers in the US and in Latin America, which has been reliant on US exports, could turn to Europe, traders said.

"Owners are being asked to provide transatlantic options on cargoes being shipped out of the Med or NWE with the view to diverting cargoes to the US or Latin America," said Andrew Wilson, head of energy research at shipping firm BRS Brokers.

US gasoline prices surged to two-year highs on Monday to USD1.7799 per gallon. By 1039 GMT on Tuesday, they were trading at USD1.7014.

Between Friday and Tuesday, at least eight vessels were booked to sail from Europe to the US, trade sources told Reuters, a slightly higher figure than normal and above the levels of recent weeks.

Freight rates on the route rose as a result of enquiries, hitting 150 on the World Scale on Tuesday, up from about 107 in the middle of last week.

Trading and shipping sources said other cargoes, including diesel and jet fuel booked for Europe, could be diverted to the US or Latin America to fill the gap left by refinery closures.

One vessel, the Hafnia Daisy, loaded with diesel in the US Gulf and bound for Europe, had turned around by Tuesday.

PVM Oil and Associates said Latin America typically imported about 1 million bpd of gasoline and diesel, so any buy who did not secure alternative supplies "especially Mexico, will find itself in the middle of a fuel shortage."
MRC

MOSCOW (Market Report) - Prices for low density polyethylene (LDPE) had dynamically declined in Russia since the second half of April. But situation in the market radically changed in August, and price growth has resumed, according to the ICIS-MRC Price Report.

The capacities of Angarsk Polymers Plant and Gazprom neftekhim Salavat were shut for scheduled maintenance works practically all July. Nevertheless, the long shutdowns of the two producers did not change the situation in the market. The turnaround at Gazprom neftekhim Salavat continued in August; Tomskneftekhim shut its capacities for a turnaround in August; Kazanorgsintez and Ufaorgsintez decreased capacity utilisation. Consequently LDPE supply tightened by mid August, leading to the price rise.

Supply of PE was more than sufficient in the market in the early August. At the same time, buying activity has increased significantly. The prices of 108 PE started from roubles (Rb) 74 000/tonne FCA, including VAT, and above; 158 PE was sold for Rb79,000/tonne FCA, including VAT, and more.

By the middle of the month, many traders selling LDPE by Ufaorgsintez production, said that they sold all their August PE volumes. Kazanorgsintez had begun to limit LDPE supply into the domestic market by the mid-August.
Supply of PE from Gazprom neftekhim Salavat was still absent in the market. The company planned to resume production by August 5, but due to problems with ethylene, the launch took place only by 29 August.

The dynamic decline in prices in the domestic market made some Russian producers to increase the export of LDPE in recent months. July PE exports from Russia exceeded 21,400 tonnes; PE exports over the 20 days of August made about 16,000 tonnes. At the same time, in the beginning of August, export prices for some LDPE grades equalled domestic prices.

Strong demand and limited supply of LDPE in the market began to put pressure on prices in the Russian market in the second half of August. In the last week of the month, the supply of polyethylene in the market was insignificant from traders, the prices reached the level of Rb84,000/tonne FCA, including VAT, for 108 LDPE and Rb86,500/tonne FCA, including VAT, for 158 PE. Market has waited for the settlement of the September level of contract prices for Russian PE.
MRC

MOSCOW (MRC) -- US gasoline futures jumped to two-year highs while an already weak dollar hit 16-month lows against a basket of currencies on Monday as Tropical Storm Harvey pummelled the heart of the US energy sector and raised concerns about the economy, said Reuters.

The dollar index, on the defensive since US Federal Reserve Chair Janet Yellen failed to mention monetary policy in a closely watched speech at Jackson Hole on Friday, extended its falls as the most powerful storm to hit Texas in more than 50 yr was seen as negative for economic growth.

Weakness in the US currency helped the euro to its highest in two and a half years at close to USD1.20, building on gains made on Friday after European Central Bank chief Mario Draghi refrained from talking down the strong currency.

Renewed euro strength pushed European stock markets to a two-week low, with German and French stock markets down around 0.3% each . Trade in general was subdued, with the London market closed for a public holiday.

"The strong euro is weighing on European stock markets," said London Capital Group analyst Ipek Ozkardeskaya. "Tapering talks could further demoralize stock traders in the run-up to the ECB verdict (next month). IT stocks are again on the chopping block."

Gasoline futures soared as much as 6.8% as the storm, which came ashore on Friday, continued to batter the state. They were last up 5 percent. US crude futures fell as the refinery shutdowns could reduce demand for American crude.

Brent futures also eased, but losses were capped as pipeline blockades in Libya slashed the OPEC country's production by nearly 400 Mbpd. Harvey is the most powerful hurricane to hit Texas in more than 50 yr, killing at least two people, causing large-scale flooding, and forcing the closure of Houston port as well as several refineries.

It has knocked out a quarter of oil production from the Gulf of Mexico, prompting fears it could overturn years of excess US oil capacity and low prices. "Although the full impact of the storm's damage is yet to be determined, the markets expect the impact will be felt globally and affect energy markets for many weeks," an analyst at FxPro said in a note.

US economic growth more than halved in the quarter after Hurricane Katrina mauled Louisiana in August 2005, but bounced back by early 2006 as reconstruction began and gasoline prices moderated. Asian stock markets including Japan's Nikkei index ended the session little changed, though shares in Japanese property and casualty insurers skidded as investors fretted about the broader impact of the U.S. storm. In contrast, China's major stock indexes rose to 20-month highs after a series of strong earnings .

Markets mostly dismissed North Korea's firing of three short-range missiles into the sea on Saturday.
MRC

MOSCOW (MRC) – Schneider Electric has signed a contract to provide comprehensive process automation systems, solutions and services to Dangote Oil Refinery Ltd., a subsidiary of African business conglomerate Dangote Group. Under the terms of the agreement, Schneider Electric will supply its EcoStruxure system architecture and platform, comprising its EcoStruxure Foxboro distributed control system, said Hydrocarbonprocessing.

EcoStruxure is Schneider Electric’s IoT-enabled, open and interoperable system architecture and platform that delivers Innovation At Every Level across connected products, edge control and apps, analytics, and services. The EcoStruxure architecture enables scalable design and operation of connected systems with best-in-class cybersecurity built in at every layer.

"While Nigeria is the world’s eighth largest producer and exporter of crude oil, we still import nearly 80% of our petroleum products,” said Devakumar V. G. Edwin, group executive director, strategy, capital projects and portfolio development, Dangote Industries Ltd. “Once completed in 2019, however, the Dangote Refinery will be the world’s largest single train refinery capable of producing 33 MMt of various liquid products, including gasoline, diesel, kerosene, aviation fuel and other petrochemicals every year. Not only is that enough to meet all of Nigeria’s consumption needs each and every day, we will have a surplus of each of these products for export."

Because it will be a single train facility, any interruption or shutdown in operations at the Dangote Refinery would decrease output from 650 Mbpd to zero. Recognizing the need to safeguard their continuous operations, Dangote Oil Refinery Ltd. chose Schneider Electric’s EcoStruxure Foxboro DCS and Triconex process safety solutions—which include emergency shutdown systems—to maximize the safety and efficiency of their operations and to improve the reliability of their equipment assets and asset sets. PIONIR process analyzers will improve process optimization, asset protection and compliance with environmental regulations. And advanced SimSci and Wonderware software will be implemented both to unify planning and scheduling and to improve real-time data collection and analysis, further optimizing operations and product blending. When combined, the integrated suite of systems and software solutions will help the Dangote Refinery gain better real-time control of all its business variables, including the safety, reliability, efficiency and profitability of its operations.
MRC

MOSCOW (MRC) - Oil markets were roiled on Monday after Tropical Storm Harvey wreaked havoc along the US Gulf Coast over the weekend, crippling Houston and its port, and knocking out several refineries as well as some crude production, said Reuters.

US gasoline prices hit two-year highs as massive floods caused by the storm forced refineries in the area to close. In turn, U.S. crude futures fell as the refinery shutdowns could reduce demand for American crude. Brent futures steadied as pipeline blockades in Libya slashed the OPEC state's output by nearly 400 Mbpd.

Harvey is the most powerful hurricane to hit Texas in more than 50 yr, killing at least two people, causing large-scale flooding, and forcing the closure of Houston port as well as several refineries. The US National Hurricane Center said Harvey was moving away from the coast but was expected to linger close to the shore through Tuesday. It said floods would spread from Texas eastward to Louisiana.

Texas is home to 5.6 MMbpd of refining capacity, and Louisiana has 3.3 MMbpd. Over 2 MMbpd of refining capacity was estimated to be offline as a result of the storm. Spot prices for U.S. gasoline futures surged 7 percent to a peak of $1.7799 per gallon, the highest level since late July 2015, before easing to USD1.7341 by 1341 GMT.

U.S. traders were seeking oil product cargoes from North Asia, several refining and shipping sources told Reuters, with transatlantic exports of motor fuel out of Europe expected to surge. "Global refining margins are going to stay very strong," said Olivier Jakob, managing director of Petromatrix. "If (U.S.) refineries shut down for more than a week, Asia will need to run at a higher level, because there's no spare capacity in Europe."

About 22%, or 379 Mbpd, of Gulf production was idled due to the storm as of Sunday afternoon, the US Bureau of Safety and Environmental Enforcement said.

There might also be around 300 Mbpd of onshore U.S. production shut in, trading sources said. Brent crude futures were up 2 cents at USD52.43 per barrel. US West Texas Intermediate (WTI) crude futures were down 50 cents at USD47.37.

The price moves pushed the WTI discount versus Brent to as much as USD5.24 per barrel, the widest in two years.
MRC