LDPE supply fell in the Russian market due to issues at some plants

MOSCOW (MRC) -- Russian consumers faced a tight supply of low density polyethylene (LDPE) last week, with several producers simultaneously reducing their shipments. There has been no great rush in the market yet, but some sellers raised their prices, according to ICIS-MRC Price report.

Restrictions on shipments of some LDPE grades by a number of Russian producers began a week earlier, but this trend intensified last week. Negativity was added by the fact that restrictions were imposed on road freight transportation for movement on regional roads in a number of regions, which led to certain delivery problems and higher delivery costs. At the same time, there has been no big excitement in the LDPE market so far because of temporary tight supply. Sellers were trying to raise prices, but buyers resisted any growth.

Angarsk Polymers Plant restricted its LDPE shipments to the domestic market a week earlier. The plant's customers said supply restrictions were caused by export contracts, and an increase in supply of polyethylene (PE) for shipments to the domestic market can be expected not earlier than in the middle of this week.

Ufaorgsintez had problems at its ethylene unit last week, leading to lower capacity utilisation and reduction in shipments of 108 grade LDPE. The plant also shipped material for export. But the main problem was the fact that trucks had been loaded by no more than 10 tonnes per truck since 1 April. And this factor significantly reduced the rate of PE shipments to customers.

Gazprom neftekhim Salavat also had issues at its LDPE production this week, which caused a temporary decrease in supply of PE in the domestic market.

Kazanorgsintez, Russia's second largest LDPE producer, shut down some of its production capacities for a long turnaround on 10 April. 108 grade LDPE was also shipped to the domestic market, partially due to the fulfilment of export contracts.

Consumer activity has been low in the LDPE market since early April, but tight supply still affected prices. The price rise has been insignificant so far and in some cases, it did not exceed Rb1,000-1,500tonne in comparison with the level as of the second half of March. Even amid the shortage, buyers continued to resist any price increase.

PP imports in Russia decreased by 19% in Q1 2019

MOSCOW (MRC) -- Polypropylene (PP) imports into Russia slumped in the first three months of 2019 by 19% year on year to 37,100 tonnes. Propylene homopolymer (homopolymer PP) accounted for the greatest decrease, as per MRC's DataScope report.

Russian companies decreased volumes PP imports in March, which reached 13,900 tonnes against 15,200 tonnes in February; shipments of propylene homopolymers (homopolymer PP) and other copolymers of propylene decreased.
In general, total PP imports into the country decreased to about 37,100 tonnes in January - March compared with 45,000 tonnes year on year. The volume of external purchases for all grades of polymers of propylene decreased, while the most noticeably reduced imports of homopolymer PP.

Overall, the structure of PP imports by grades looked the following way over the stated period.

March imports of homopolymer PP decreased to 4,700 tonnes against 5,000 tonnes a month earlier, shipments of homopolymer PP from Azerbaijan decreased slightly. Thus, overall imports of homopolymer PP to Russia totalled about 11,700 tonnes in the first three months of 2019, compared to 15,500 tonnes a year earlier.

March imports of PP block copolymers in Russia were about 3,500 tonnes against 4,300 tonnes in February on decreased demand for pipe PP. Imports of PP block copolymers into Russia reached 9,900 tonnes in January-March 2019, compared to 11,200 tonnes a year earlier.

March imports of PP random copolymers were about 3,100 tonnes versus 2,800 tonnes a month earlier, on increased volumes of injection moulding PP purchases. Total imports of PP random copolymers in Russia were 7,400 tonnes in January - March 2019, compared with 7,700 tonnes year on year.

Imports of other propylene polymers for the reported period increased to about 8,100 tonnes compared with 10,600 tonnes in the same time a year earlier.MRC

Russia cashes in as European oil refiners pay for US sanctions

MOSCOW (MRC) -- European refiners are paying the price for US oil sanctions on Venezuela and Iran as they scramble to replace sour crude Washington has blocked from the global market with increasingly expensive Russian oil, reported Rueters with reference to trading sources.

Compounding the impact of sanctions, OPEC members have mainly cut sour crude output as part of their deal with allied producers to boost oil prices while a large, new refinery, designed to run on sour oil, has just started up in Turkey.

US output is soaring and exports are set to jump later this year as new infrastructure comes online but it is not an alternative, being mainly light and sweet.

As a result, European refiners have been left competing to secure as much medium, sour Russian Urals as they can, pushing the differential of that oil to levels not seen since 2013.

"Urals is anchored in a positive zone versus dated Brent and there is no indication it will fall to a discount any time soon," a trading source at a European oil major said.

In the Mediterranean, the differential for Urals typically trades at a discount of at least a dollar to benchmark dated Brent but since early November, the level has spiked and now stands at a premium of 70 cents a barrel.

For a 600,000-barrel cargo of Urals, that rise translates to an extra USD1.35 million cost.

Thanks to the higher premiums, Russia made an additional USD140 million in March from seaborne and pipeline deliveries versus October prior to the sanctions coming into effect.

Initially, Europeans gravitated to heavy, sour Venezuelan oil when sanctions on Iran hit in early November but then Washington also placed sanctions on the Latin American country in late January in a bid to oust President Nicolas Maduro.

Even though sanctions on Venezuelan crude will not come into effect until the end of April, the oil is effectively already untouchable as the US State Department has exerted direct pressure on foreign companies to stop all dealings.

The two sets of sanctions combined have taken at least 800,000 barrels per day (bpd) out of the market, which is as much as what the Organization of the Petroleum Exporting Countries agreed to cut.

The United States granted waivers on Iranian oil to six jurisdictions including three countries in the region - Italy, Greece and Turkey - but only Turkey was able to continue purchases. It remains unclear whether the current waivers will be extended in May.

The situation is set to worsen as European refiners emerge from their springtime maintenance just as Middle Eastern Gulf sour crude producers increasingly favor Asia, where refining capacity in the near term is set to jump.

Saudi Arabia, a major sour crude producer, is shouldering the bulk of the OPEC and non-OPEC cuts. Between October 2018 and March this year, the kingdom slashed its exports to Europe by nearly half, Refinitiv Eikon data shows.

Iraq reduced its contracted volumes for European refiners in 2019 and increasingly sells its oil to the highest bidder via tender.

Iraqi supplies to Europe fell by over 40 percent to 355,000 bpd in March compared with 615,000 bpd in October 2018, Refinitiv Eikon data showed.

Meanwhile, Azerbaijan’s 200,000-bpd STAR refinery in Turkey is slowly ramping up and will be a new competitor for dwindling sour oil.

Designed to run on sour grades such as Russian Urals and Iraqi Basra and Kirkuk, the refinery took 184,000 bpd of Urals in March, Refinitiv Eikon data showed.

"One expected STAR’s launch to be a serious jolt for the market, but little did we know it would make the sour shortage this bad ... refiners are rushing for sours," a European trader said.

As the supply-side structure has changed, the spread between sour and the historically far more expensive light, sweet crude has thinned and even flipped in some instances.

In the Mediterranean, the light grade Kazakh CPC Blend trades at a discount to Urals and Kurdish crude, which used to be one of the region’s cheapest oils.

The Urals price out of the Black Sea has also increasingly traded at a premium to Urals out of Baltic ports - previously a rare occurrence. The trend has prompted commodity price-reporting agency S&P Global Platts to start an industry consultation on changing how the Urals market is assessed.

"All refiners are looking for Urals or a Urals replacement," said a third trader in an international trading firm.

"And we see that it won’t be enough for everyone."

We remind that, as MRC wrote previously, in October 2018, SOCAR, the largest direct foreign investor in Turkey, launched its USD6.3-billion SOCAR Turkey Aegean Refinery - STAR Refinery, which will provide a large portion of oil products demand in the local market with 10 million tons of annual oil processing capacity.

Fire at Petronas RAPID oil refinery quickly tamed

MOSCOW (MRC) - A fire was brought under control early on Friday after an explosion at a Malaysian oil refinery being developed by state oil firm Petronas, which was testing its facilities ahead of planned commercial operations later this year, said Reuters.

RAPID, or Refinery and Petrochemical Integrated Development, will anchor the Pengerang Integrated Complex (PIC) and is Petronas’ biggest domestic investment, made in a 50-50 partnership with Saudi Arabia’s state-owned Saudi Aramco.

The explosion and fire occurred at about 1:25 a.m. on Friday (1725 GMT on Thursday) at the plant’s atmospheric residue desulphurisation unit (ARDS), which is in its commissioning stage, Petronas said in an updated statement.

Petronas said there were no fatalities caused by the explosion and fire. The fire was contained within 30 minutes, it had said earlier.

“We wish to assure members of the public that the situation is under control and there is no health related risk to this incident,” the company said in its latest statement.

Police said two people were given outpatient treatment following the incident, which was attended to by five fire trucks and 30 staff from the Petronas RAPID Pengerang emergency response team.

“Teams have been set up and are currently working closely with the relevant authorities to investigate the cause of the incident,” Petronas said.

Petronas started trial runs at the refinery in early 2019 and had planned to start offering some products in April.

The fire will likely set back plans for the refinery to reach commercial operations by October as several units will have to be shut for further inspection, Energy Aspects’ analyst Nevyn Nah said.

Petronas did not immediately respond to an email seeking information on how the fire would affect its start-up plans.

Fire engulfs kerosene unit at Mina Abdulla

MOSCOW (MRC) -- A fire shut down a kerosene unit in the refinery of Mina Abdulla, Kuwait state news agency KUNA said. Officials are investigating the cause of the fire, which was extinguished by early Wednesday, said Hydrocarbonprocessing.

The head of state-run Kuwait Petroleum Corp, Hashem Hashem, said the expected reason of the fire is a mechanical failure at one of the pumps.

There are no casualties, Hashem said.

The other Mina Abdulla refinery units are operating normally, he added.

Kuwait National Petroleum Company’s (KNPC) plans the retirement of existing processing facilities at Shuaiba and a major upgrade and expansion of the Mina Al Ahmadi and Mina Abdullah refineries to integrate the refining system into one complex with full conversion operation. The Fluor-led joint venture with Daewoo Engineering & Construction and Hyundai Heavy Industries is responsible for engineering, procurement and construction as well as associated pre-commissioning and testing support for the Mina Abdullah Package 2. After commissioning, both the Mina Abdullah and Mina Al Ahmadi refineries will have a capacity of 800,000 barrels-per-stream day to supply local and international demand for clean fuels meeting the most stringent environmental requirements.