Australian Caltex to extend planned shutdown for oil refinery amid pandemic

MOSCOW (MRC) -- Takeover target Caltex Australia Ltd said it would bring forward and extend the planned shutdown of its sole oil refinery Lytton refinery to ward off the expected hit to refining amid the pressures on demand from the coronavirus pandemic, reported Reuters.

The company said that operations at the refinery will restart once margin conditions recover.

As MRC wrote before, Italian energy group Eni said most of its oil refineries in Italy were working at around 60% of their capacity as the coronavirus emergency continues. The pandemic has shut down large parts of economies across the globe and prompted many governments to slap tough restrictions on travel, triggering a steep fall in the demand for refined oil products. In emailed comments, Eni said its biggest refinery Sannazzaro, in northern Italy, was running at around 50% of its capacity since it was also impacted by planned maintenance work.

We also remind that operations at Italian petrochemical producer Versalis (part of Eni) werenot affected by emergency quarantine measures in the country imposed in March 2020. Italian Prime Minister Giuseppe Conte extended its emergency coronavirus measures on 8 March and announced the closure of "non-essential" commercial businesses. This follows the announcement of a nationwide lockdown on 6 March, limiting movement for around 60 million people. Under these measures people are only allowed to leave their homes for work or health reasons. Versalis has three steam crackers in Italy, capable of producing 1.675 million mt of ethylene, 750,000 of propylene and 285,000 mt of butadiene a year.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC

MOSCOW (MRC) -- The global crisis caused by the coronavirus pandemic will be felt throughout oil’s global supply chains and ripple into other parts of the energy sector, the International Energy Agency (IEA) said in a report, said Reuters.

Oil prices crumbled as the pandemic slashed global fuel consumption, with further pressure from a supply shock due to the end of production cuts from OPEC producers and Russia. Crude oil prices ended a volatile quarter with their biggest losses in history, and declined about 55% in March, the most on record. Prices also plunged to their lowest level since 2002 on Monday.

About 5 million barrels of oil extracted worldwide every day are not attracting high enough premiums to offset the costs of extracting it out of the field, according to the Paris-based IEA agency. Prices available to producers in Western Canada have dropped to single digits, and instances of negative prices have also emerged in parts of North America for other grades, IEA said in the report.

Oil producers have responded by implementing major reductions to their spending on new production, with the initial cuts in the 20%-35% range relative to what was previously planned for 2020, the report said.

IEA had earlier estimated 50%-85% drops in net income for selected producer countries in 2020, compared with 2019, but these declines could be even greater depending on the extent of demand shock.

Many oil majors will re-evaluate their existing portfolios, possibly leading to another wave of refinery closures.

The agency also warned against the implications of oil price collapse on other energy sectors, adding a sustained period of low oil prices would affect the prospects for clean energy transitions such as natural gas.

“Oil at USD25 a barrel would leave some international gas suppliers struggling to cover their operating costs, and the depressed spot market for gas would not provide any relief."

As MRC wrote before, Taiwan’s Formosa Petrochemical Corp plans to operate its refinery at a reduced rate after completing maintenance at some units later this month amid weak margins. The company is expected to restart one of its three crude distillation units (CDUs), its residue fluid catalytic cracker (RFCC) and one of its two residue desulphurizers (RDS) around April 20 after more than a month’s shutdown for scheduled maintenance. After the unit’s restart, Formosa plans to be processing 480,000 barrels per day (bpd) of crude, spokesman KY Lin told Reuters, about 10% below the refinery’s nameplate capacity of 540,000 bpd.

As MRC wrote before, Formosa Plastics' new 1.5 million mt/year cracker in Point Comfort, Texas, came online in H1 2020 and was seen ramping up through January.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC

MOSCOW (MRC) -- Crude oil’s rollercoaster ride resumed on Monday, with both Brent and West Texas Intermediate (WTI) futures falling sharply amid news of a delay to a meeting of oil producers, reported Reuters.

While news headlines are driving the short-term volatility in crude prices, it’s perhaps a worthwhile exercise to take a stand back look at what is actually happening, what is likely to happen and what’s unlikely.

Brent crude fell as much as 12% in early Asian trade on Monday, dropping as low as USD30.03 a barrel before recovering to trade around USD31.85, while WTI dropped as much as 11% to a low of USD25.28.

The decline was driven by a decision to delay from Monday to Thursday a meeting between the Organization of the Petroleum Exporting Countries (OPEC) and Russia.

The talks aim to discuss re-imposing output cuts to help deal with the massive supply overhang created by the loss of around 25 million barrels per day (bpd) of demand due to the new coronavirus locking down much of the world’s economy.

Monday’s slump in crude benchmarks came after a strong surge on April 2 and 3, with Brent gaining 38% and WTI 39.5% over the two days as the market reacted to U.S. President Donald Trump’s tweets that a deal to cut output was imminent.

It appears the mercurial U.S. leader may have been jumping the gun somewhat, although it also appears that some efforts are underway.

So, what exactly is known and what is still unknown?

Known: There are behind-the-scenes machinations to get crude producers to agree to some form of output cut.

Unknown: How far advanced are these discussions, who will be doing the cutting, will it be just OPEC and its former allies, including Russia, in the group known as OPEC+? Or will other producers such as the United States, Brazil, Canada and Norway be expected to participate?

Unknown: Will countries that produce oil, but not enough to meet domestic needs and therefore still import, such as China and Britain, also be expected to cut output?

Unknown: What will be the size of the production cut, assuming one can be agreed?

As can be seen from the above, what is known is very little, what is unknown is vastly greater, although there are plenty of analysts and commentators prepared to speculate on a whole range of possible outcomes and their ramifications.

Perhaps the most important thing to speculate on is how big any output cut will be, assumed one can be reached.

Most of the speculation has centred around 10 to 15 million bpd, raising the question as to whether that would be enough.

It certainly won’t be enough to wipe out the current supply glut, but it may be enough to slow the rate at which available storage fills, and thereby bring some stability back to the market.

This brings us back to a few more knowns and unknowns.

Known: The new coronavirus has spread rapidly across the world and has led to a near collapse of airline and other travel, and the shutting down of large parts of the world economy.

Unknown: There is a wide range of forecasts as to how big the hit to crude demand is going to be, and if there is a consensus, it’s that the shock will be between 20 and 30 million bpd, or between 20% and 30% of total demand.

Unknown: The assumption is that this will be a sharp, but also short, demand shock and the world economy will be open for business quickly once the coronavirus is contained. The risk is that much of the global economy remains in some form of hibernation for longer than expected, and that the recovery is uneven as some countries emerge faster than others.

Another factor at times of high volatility in crude markets is to try to separate the news that actually matters from the noise.

President Trump is a great example of an important figure who sometimes delivers news that matters, but also thought bubbles that capture attention, but are of limited value.

The tweets on the output deal may have overstated the actual closeness of a deal, but they did focus the market attention on the manoeuvres underway.

However, Trump’s comments on Sunday that he was prepared to do “very substantial tariffs” if the oil price stays depressed are perhaps less helpful.

It’s unlikely that the U.S. government would impose tariffs, given the complexity of oil supply chains and refinery operations.

The United States needs to import heavier grades of crude as the mainly light oil it currently produces would be unable to meet refinery needs, and would furthermore result in too much gasoline and not enough middle distillates such as diesel being produced.

While a challenge, perhaps the best tactic to follow in the current crude oil market is to focus on actual, real developments.

As MRC reported earlier, South Africa’s largest refinery SAPREF will “minimize” maintenance to critical activities, a spokeswoman said, as a national lockdown looms to contain the spread of coronavirus. SAPREF, situated near Durban along the east coast, is a 50/50 joint venture between BP and Shell with a refining capacity of around 8.5 million tons a year. It accounts for 35% of the refining capacity in Africa’s most advanced economy, which is a net importer of petroleum products.

We also remind that the COVID-19 outbreak has led Shell Chemical to temporarily suspend construction on the massive plastics and petrochemicals site it's building in Monaca, Pa, USA.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC

1. Eni says production at its Italian refineries has slowed, most at 60% capacity

MOSCOW (MRC) -- Italian energy group Eni said most of its oil refineries in Italy were working at around 60% of their capacity as the coronavirus emergency continues, reported Reuters. The pandemic has shut down large parts of economies across the globe and prompted many governments to slap tough restrictions on travel, triggering a steep fall in the demand for refined oil products.



MRC

MOSCOW (MRC) -- Trinseo, a global materials company and manufacturer of plastics, latex binders and synthetic rubber, and its affiliate companies in Europe has announced a price decrease for all polystyrene (PS) grades in Europe, said the producer on its site.

Effective April 1, 2020, or as existing contract terms allow, the contract and spot prices for the products listed below went down as follows:

-- STYRON general purpose polystyrene grades (GPPS) -- by EUR180 per metric ton;
-- STYRON and STYRON A-Tech and STYRON X- Tech high impact polystyrene grades (HIPS) - by EUR180 per metric ton.

As MRC informed before, Trinseo last reduced its prices for all PS grades on 1 March 2020, as stated below:

- STYRON GPPS grades - by EUR100 per metric ton;
- STYRON and STYRON A-Tech HIPS grades - by EUR100 per metric ton.

According to ICIS-MRC Price report, in Russia, Nizhnekamskneftekhim reduced its April selling PS prices by Rb10,000/tonne. GPPS for injection moulding and extrusion was offered at Rb86,000-90,000/tonne CPT Moscow, including VAT, whereas HIPS - at Rb90,000-94,000/tonne CPT Moscow, including VAT. Penoplex reduced its GPPS prices by Rb10,000/tonne. Demand for the Kirishi plant's material remained quite good. And Gazprom neftekhim Salavat reduced its indicative prices by Rb8,000/tonne, and its GPPS prices for small- and medium-sized buyers have not been settled yet.

Trinseo is a global materials company and manufacturer of plastics, latex and rubber. Trinseo's technology is used by customers in industries such as home appliances, automotive, building & construction, carpet, consumer electronics, consumer goods, electrical & lighting, medical, packaging, paper & paperboard, rubber goods and tires. Formerly known as Styron, Trinseo completed its renaming process in 1Q 2015. Trinseo had approximately USD4.6 billion in net sales in 2018, with 16 manufacturing sites around the world, and approximately 2,500 employees.
MRC