Russian President discusses oil market with Saudi crown prince, stresses coordination

MOSCOW (MRC) -- Russian President Vladimir Putin discussed the oil market with Saudi Arabia's Crown Prince Mohammed bin Salman on Wednesday and agreed the need for "close coordination" between their respective energy ministers ahead of OPEC talks next month, reported S&P Global with reference to a Kremlin statement.

"Both sides noted the importance of joint efforts in achieving OPEC+ agreements in April to limit oil production," said the statement. "They agreed that further close coordination on this issue should take place between energy ministers."

The group is due to meet between June 8-10 to discuss oil market conditions, its current production agreement, and potential future steps. In April, the 23 members of the so called OPEC+ alliance agreed to reduce output by an unprecedented 9.7 million b/d in May and June in response to plummeting demand caused by the coronavirus pandemic.

Since then, Saudi Arabia has said it will voluntarily cut a further 1 million b/d in June. The UAE and Kuwait said they will cut an additional 100,000 b/d and 80,000 b/d, respectively.

The current agreement also includes a cut of 7.7 million b/d in the second half of the year, and 5.8 million b/d cut from January 2021 to the end of April 2022.

Dated Brent has more than doubled in value since hitting a 21-year low in April. Prices have recovered as major consuming nations begin to ease lockdowns and producers reduce supplies.

As MRC informed previously, China's crude oil imports from Russia rose 17.7% year on year to 7.2 million mt or 1.76 million b/d in April, resulting in Russia overtaking Saudi Arabia to become the country's top supplier in the month, latest data from China's General Administration of Customs showed.

We also remind that LyondellBasell, the world’s largest licensor of polyolefin technologies, has announced that Advanced Global Investment Company (AGIC) has selected LyondellBasell’s PP technology for a new world-scale facility in Jubail Industrial City, Saudi Arabia. AGIC’s proposed project includes two polypropyelene (PP) plants with capacity of 400,000 tons/year each.

According to MRC's ScanPlast report, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

Crude recedes from 10-week highs as US-China tensions weigh

MOSCOW (MRC) -- Crude oil futures traded lower in mid-morning trade in Asia Wednesday, stepping back from a 10-week high hit overnight, on growing geopolitical tensions between the US and China, reported S&P Global.

At 10:10 am Singapore time (0210 GMT), ICE Brent July crude futures fell 36 cents/b (1%) from Tuesday's settle at $35.81/b, while the NYMEX July light sweet crude contract was 46 cents/b (1.34%) lower at USD33.89/b.

"Optimism nestled within the markets at the start of the week, carried by reopening hopes, though fresh aggravating news on US-China relations appears to be changing the mood going into midweek," IG market strategist Pan Jingyi said in a note Wednesday.

Crude futures hit 10-week high Tuesday, amid hopes the continued reopening of economies could bring balance to oversupplied oil markets in coming weeks.

Nonetheless, oil pared gains amid growing tensions between the US and China over the origins of coronavirus.

Earlier in the week, US President Donald Trump warned that Washington was considering sanctions on China for its crackdown on Hong Kong, according to media reports.

This came after China's announcement at its National People's Congress in Beijing, saying it would pass a national security law on Hong Kong this summer.

"The fact of the matter is that it could remain a bumpy ride in the sessions ahead as the situation evolve," Pan said with regards to Asian markets.

Meanwhile, analysts surveyed by S&P Global Platts are expecting total commercial crude inventories to decline 1.2 million barrels during the week ended May 22 to around 525.3 million barrels.

While this seemed like a third straight week of falling inventory levels, the nationwide surplus to the five-year average is still expected to increase to around 10.7% from 10.1% the week prior, Platts reported.

As MRC wrote earlier, the heads of the world's largest oil and gas producers pledged Tuesday to maintain a strategic focus on producing cleaner energy and helping to mitigate climate change despite reeling from the impact of the coronavirus pandemic on oil and gas prices.

We remind that global oil consumption cut by up to a third in Q1 2020. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

We remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

Philippines Petron suspends refinery as pandemic bites

MOSCOW (MRC) -- Petron Corp, the Philippines’ largest oil refiner and retailer, said it has temporarily shut down its 180,000-barrel-per-day Bataan refinery on the main island of Luzon, as the coronavirus lockdown pummelled global oil demand, according to Hydrocarbonprocessing.

“Since May 5, Petron’s Bataan Refinery has been on a scheduled turnaround to give way to maintenance activities on major process units,” the company said in a statement after posting its quarterly results.

The plant shutdown will also mitigate the impact of lean fuel demand and poor refining margins, Petron said, without giving details on when the refinery would resume operations.

Petron, a unit of conglomerate San Miguel Corp, provides nearly 30% of the Southeast Asian country’s petroleum requirements, with 30 terminals and more than 2,400 stations nationwide.

“Demand recovery will depend upon the lifting of quarantine measures and ultimately, finding a vaccine to fully restore mobility,” Petron President and Chief Executive Officer Ramon Ang said in a statement.

The oil refiner said it has enough fuel inventory to supply domestic market requirements that will be replenished through importation of finished products.

Earlier this month, Philippines President Rodrigo Duterte had temporarily increased tariffs on imported crude oil and refined petroleum products to fund measures aimed at mitigating the economic impact of the outbreak.

Pilipinas Shell Petroleum Corp has also shut down its 110,000-barrel-per-day Tabangao refinery in the Philippines, for one month starting the middle of this month.

Petron suffered a net loss of 4.9 billion pesos ($97 million) in the first quarter, compared with a net income of 1.3 billion pesos in a year-ago period, as fuel prices collapsed due to demand contraction in both local and international markets.

We also remind that Shell Singapore restarted its naphtha cracker in Bukom Island this week following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 tons/year of propylene.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

OPEC+ must plan exit strategy

MOSCOW (MRC) -- Saudi Arabia and its allies in the expanded OPEC+ group of oil-exporting nations have only just started to implement output cuts, so it might seem premature to start talking about the need for an exit strategy, said Hydrocarbonprocessing.

But an important part of being a successful market manager is about knowing when to increase production and capacity to forestall excessive investment by rivals and potential rivals. OPEC’s biggest problem has always been increasing output in a timely manner after a price slump – rather than continuing to withhold supply in the hope of even higher prices.

Following output reductions in 2009, 2017 and 2019, Saudi Arabia and its allies restrained production too long and allowed prices to rise too high.

The result was a sharp increase in output from rival producers, especially the U.S. shale sector, which ultimately seized market share, contributed to a new price slump, and put OPEC back at square one.

The cycle of overproduction, price slump, OPEC cuts, inventory draws, unsustainable price rises, surging shale output and renewed oversupply has created enormous volatility.

If Saudi Arabia and its OPEC+ allies want to moderate the cycle this time they need to react to price increases as quickly and aggressively as price slumps.

In particular, Saudi Arabia needs to see inventory draws and rising prices as a signal to increase its own output before shale producers fill the gap.

Ethylene and propylene are feedstocks for producing PE and 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

Saint-Gobain to sell entire Sika stake to institutional investors

MOSCOW (MRC) -- French building materials group Saint-Gobain (Paris, France), through its subsidiary Schenker-Winkler Holding AG (SWH), has started to dispose of its entire 10.75% stake in the Swiss construction chemicals company Sika (Baar, Switzerland) through a private placement to institutional investors, said Chemweek.

The placement will start immediately and the outcome and final terms will be announced by the end of today. At yesterday’s Sika share price, the transaction, involving approximately 15.2 million Sika shares, would be valued at 2.65 billion Swiss francs (USD2.73 billion). Sika has chosen not to exercise its right of first offer for the Saint-Gobain holding.

The move brings to an end a long-running saga that began in 2014 when Saint-Gobain offered CHF2.75 billion to buy control of Sika from the Burkhard family, descendants of the company’s founder. The family holding company, SWH, owned only 16% of the share capital but enjoyed 53% of the voting rights. Sika’s management objected, supported by public and institutional shareholders, and argued their case through the Swiss courts.

In May 2018 Sika and Saint-Gobain agreed to end their almost four-year legal battle. Under the settlement, Saint-Gobain acquired a 10.75% interest in Sika indirectly through the acquisition of 100% of SWH shares from the family, as part of a comprehensive agreement between Saint-Gobain, the family and Sika, at a cost of CHF3.22 billion. Following expiry of the two-year lock-up period set out in the agreement, Saint-Gobain and SWH decided to dispose of the Sika shareholding.

Citigroup is acting as sole global coordinator on the private placement. Citigroup and Lazard are acting as financial advisers to Saint-Gobain.

As MRC informed earlier, Sika is starting operations at a plant in Doha, Qatar, for the production of concrete admixtures. The country on the east coast of the Arabian peninsula is an attractive market thanks to large-scale infrastructure investment and a number of mega projects.

According to MRC's ScanPlast report, March 2020 estimated consumption of PS and styrene plastics dropped by 2% year on year, totalling 42,130 tonnes. The estimated consumption totalled 121,880 tonnes in the first three months of 2020, down by 2% year on year. Overall, Russian plants produced 42,790 tonnes in March 2020. Overall output of high impact polystyrene (HIPS) and general purpose polystyrene (GPPS) totalled 32,100 tonnes in March 2020. 98,390 tonnes of HIPS and GPPS were produced in January-March 2020. The decrease in Russian plants' output was 3%.

Sika, a specialist in sealants and adhesives with origins dating back to 1910, employs some 25,000 people and has more than 300 plants worldwide. The group reported sales of CHF8.1 billion in the financial year 2019.
MRC