Traders expect Cushing builds as refinery issues add to swelling supply

MOSCOW (MRC) - U.S. crude traders are bracing for increasing supplies at Cushing, Oklahoma, the delivery point for benchmark crude futures, as unexpected refinery issues add to inventories that are already at the highest in more than a year, said Reuters.

Inventories at Cushing rose to 42.6 million barrels in the week to Feb. 1, the highest level since early January 2018, the U.S. Energy Information Administration said. Problems at a key Midwest refinery, along with upcoming seasonal maintenance, have traders believing supplies will rise more than expected at Cushing in coming weeks.

A fire at Phillips 66’s 330,000 barrel-per-day (bpd) joint-venture Wood River, Illinois, refinery and a unit closure at the Ponca City, Oklahoma, plant added to the bearish outlook for prices, traders said.

The discount for front-month U.S. crude for delivery in March and futures for delivery in April widened to as much as 39 cents a barrel on Monday, the most in nearly a year and a half, reflecting expectations of supply increases at the storage hub. Increased supply makes traders less inclined to pay higher prices for near-term oil.

The weakness in U.S. crude futures pushed the discount for U.S. West Texas Intermediate (WTI) versus international benchmark Brent to the widest level in nearly two months, at USD9.52 a barrel.

“The outages, whether they’re unplanned, or even more importantly the planned ones, are going to be mounting here, and that’s going to engender a significant rise at Cushing,” said John Kilduff, a partner at Again Capital Management in New York.

The second largest crude distillation unit (CDU) was shut by a fire on Sunday at Phillips 66’s joint-venture Wood River refinery, a source familiar with plant operations said. Phillips 66 also shut the second-largest CDU at its Ponca City refinery for a planned overhaul, a source said.

"It’s a perfect storm of bearish information this morning for WTI,” said Scott Shelton, a broker at ICAP in Durham. “Fears of tank tops will only worsen for the second quarter on this information."

U.S. refiners were estimated to have about 1.8 million bpd of capacity offline in the week ending Feb. 8, increasing offline capacity by 629,000 bpd from a week earlier, research company IIR Energy said on Friday. Moreover, traders said some barrels headed for Patoka, Illinois, have been diverted to Cushing following an outage on a section of TransCanada’s Keystone pipeline. "You’re getting some additional flow into Cushing. That’ll put pressure on WTI," one crude trader said.
MRC

SK Innovation expects refining margins to rebound on diesel demand

MOSCOW (MRC) -- SK Innovation, owner of South Korea’s top refiner SK Energy, said it sees a rebound in refining margins in 2019 supported by firm diesel demand in the second half of the year, reported Reuters.

SK Innovation posted an operating loss of 279 billion won (USD250.81 million) in the October-December period, dented by low refining margins, compared with an operating profit of 841 billion won a year earlier, the company said in a statement.

Weak gasoline margins have weighed on overall refining margins, profits of refining a barrel of crude into refined products, dragged down by increased global gasoline volumes. Asian gasoline cracks in Singapore are close to the lowest since 2011.

“Despite concerns about global refinery capacity addition and a global economic slowdown, favorable market conditions are expected in the second half of the year, supported by diesel (demand) ahead of sulfur regulations by the International Marine Organization from 2020,” Lee Myung-young, head of finance division, SK Innovation, said on a call with analysts.

S-Oil, South Korea’s third-biggest refiner, said on Monday refining margins were expected to improve, helped by rising diesel demand growth in the second half of the year ahead of the implementation of tougher sulfur cap for marine fuel from 2020.

Kim Ji-yong, head of corporate planning office at SK Energy, said gasoline margins are seen to recover in 2019 as Chinese export volumes are expected to be reduced on lower import quotas than last year.

For 2019, China issued its first batch of crude oil import quotas at 89.84 million tonnes, lower than for the same batch last year, reflecting slowing crude demand growth for the first half of 2019 in China, according to the documents and Reuters data.

As MRC reported earlier, South Korea’s leading LPG supplier SK Gas Ltd. (part of SK Corporation) will spend KRW 2.02 trillion (~ USD 1.8 billion) to build a combined-cycle power plant and polypropylene (PP) plant in the southeastern industrial city of Ulsan, South Korea.

SK Global Chemical is a pioneering petrochemical company in Korea, being the first in the country to build a naphtha cracking facility in 1972. Through continuous facility investment, R&D and technological improvement, the company has maintained its position as the leader of the petrochemical industry in Korea.
MRC

Pakistan, India hope to reap investment from Saudi prince's visit

MOSCOW (MRC) - Saudi Arabia’s Crown Prince Mohammed bin Salman is expected to announce investments in energy and infrastructure during a visit to India and Pakistan in coming days as part of his efforts to wean the Saudi economy off oil exports, said Reuters.

He is also expected to visit China, Malaysia and Indonesia during a tour that will be his first through the region since the storm over the murder of Jamal Khashoggi, a Washington Post columnist, at the Saudi consulate in Istanbul in October.

Prince Mohammed is expected to sign agreements, mostly linked to a refinery and the power sector, during the trip to Pakistan this weekend, Pakistani officials said.

The memorandums of understanding will include renewable energy projects and investments in petrochemicals and mineral resources, Saudi state news agency SPA said.

The prince is expected in New Delhi next week, along with leading Saudi businessmen, at the invitation of Prime Minister Narendra Modi, India’s foreign ministry said on Tuesday.

Pakistani Prime Minister Imran Khan was among a handful of leaders who attended an investment conference in Saudi Arabia in October, an event boycotted by many companies and world leaders in protest over Khashoggi’s killing.

India’s Modi met the prince in November when they were both in Argentina for a Group of 20 summit. Saudi Arabia is India’s top supplier of crude oil but the two countries have expanded ties beyond energy, and their governments have agreed to build a strategic partnership, the foreign ministry said.

In a statement, it cited cooperation in areas including energy security, trade and investment, infrastructure, defense and security.

India is expecting Prince Mohammed to announce an initial investment in its National Investment and Infrastructure Fund (NIIF), a quasi-sovereign wealth fund, to help accelerate the building of ports and highways, an Indian official said.

Saudi state media said Saudi officials will discuss investment in NIIF.
MRC

Marathon, Galveston Bay workers to resume contract talks

MOSCOW (MRC) -- Union workers at Marathon Petroleum Corp’s Galveston Bay Refinery are preparing to resume negotiations with the company after rejecting the last contract offer, a United Steelworkers (USW) official said, as per Hydrocarbonprocessing.

The Galveston Bay Refinery, located in Texas City, Texas, was the site of a bitter strike in 2015, which began over a breakdown in national contract talks but lasted almost five months because of disagreements on local terms.

On Monday, Marathon spokesman Sid Barth said: "Negotiations continue, operations continue."

No date has been set for the talks, said David Jankowski, vice president of USW Local 13-1, which represents workers at the refinery.

“We’re waiting on the company for dates and times,” Jankowski said.

The Galveston Bay workers rejected Marathon’s contract offer in voting last week.

One reason for the overwhelming vote against Marathon’s offer was a proposed change in leadership on the production units to salaried staff from hourly chief operators, Jankowski said.

Marathon is also seeking changes in time off and sick leave.

Negotiators for the USW International union reached agreement on Jan. 31 with Shell Oil Co, representing oil companies, on wages increases and benefits for 30,000 refinery, chemical plant, pipeline and terminal workers represented by the union, including the hourly employees at the Galveston Bay Refinery.

That agreement, which provides an 11 percent pay raise over its three-year length, will be paired with the agreement on local issues at Galveston Bay to make the contract for workers at the refinery.
MRC

Avery Dennison appoints Sam OKeefe vice president of R&D EMEA

MOSCOW (MRC) -- Avery Dennison Corporation is pleased to announce the appointment of Sam O’Keefe as vice president of research and development (R&D) for its Label and Graphic Materials group in Europe (LGM-EU), effective 7 February, 2019, as per the company's press release.

She will be based at Oegstgeest, reporting to Pascale Wautelet, vice president of global R&D. She will become part of the European leadership team of LGM and have a dotted reporting line to Jeroen Diderich, vice president and general manager of LGM-EU.

"In this role," said Pascale Wautelet, "Sam will provide vision and direction to the R&D organization in the EMEA region and lead new-product development, material re-engineering and adhesive development for Avery Dennison’s LGM business across Europe."

This appointment reinforces Avery Dennison’s continued focus on innovation and sustainability, which includes ongoing investments and external partnerships with suppliers, universities, other business partners and new ventures.

Sam brings more than 25 years of industrial experience and materials science with major international companies. She joins Avery Dennison from Sensient Technologies, where she worked as technical director - Industrial Colors. Prior to Sensient, she held technical and leadership roles with several companies, including Unilever, InterfaceFlor, Ashland and Saint-Gobain.

As MRC wrote before, the recent launch, by Avery Dennison, of a portfolio using recycled PET (rPET) liners has received another important boost, with four labelling constructions now available across Europe. Three CleanFlake materials are now available on a thin rPET23 liner. The 'switchable' CleanFlake adhesive is designed to separate cleanly from PET bottles during the recycling process so that contamination of PET flakes is avoided - an important factor in ensuring that recycled PET can be recycled rather than downcycled. A fourth material - a high clarity ClearCut PP50 TOP CLEAR-S7000-rPET23 construction - is considerably thinner than today’s market reference (PP60 with PET30), and offers high speed conversion and dispensing using the same thin rPET23 liner.
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