Oil prices fall as focus turns to OPEC+ consensus

MOSCOW (MRC) -- Crude futures fell Wednesday as the focus turned to a lack of consensus among OPEC+ members ahead of the group's next meeting on June 8-10, reported S&P Global.

NYMEX July crude settled at USD32.81/b, down USD1.54, while ICE July Brent settled at USD34.74/b, down USD1.43.

"Oil's rally stalled out after Russia signaled they want to unwind productions in July, a sign that the battle for market share will resume as crude demand improves," said OANDA analyst Edward Moya. "Russia's comments on easing cuts in July served as a reminder that higher prices and improved crude demand will likely see OPEC+ compliance go out the window."

While news that Russia's oil ministry said global oil markets would balance in June or July pulled prices lower, subsequent news Wednesday that Russia's President Vladimir Putin agreed with Saudi Arabian Crown Prince Mohammed bin Salman on the need for "close coordination" put a floor in futures.

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

The OPEC+ alliance agreed in April to reduce output by 9.7 million b/d in May and June in response to plummeting demand caused by the coronavirus pandemic. Saudi Arabia has since said it will cut a further 1 million b/d in June.

Crude futures remained in contango, but the curve has flattened, reflecting a tighter supply/demand balance. The market appears less concerned that inventories will reach storage capacity, notably at the Cushing, Oklahoma delivery point for NYMEX futures.

Producers in the US and Canada have announced output cuts totaling roughly 2.7 million b/d. The coronavirus has also hit oil production in Latin America.

The market is hardly bullish. But the cuts may present a risk to supply down the road, according to the International Energy Agency.

Global energy investment is expected to plunge by 20%, or almost USD400 billion, in 2020, the agency said Wednesday.

The US shale sector is set to be hit hardest, with investment in shale forecast to fall by 50% in 2020 as investor confidence and access to capital has now "dried up," the IEA said.

In refined products, NYMEX June RBOB settled at 99.33 cents/gal Wednesday, down 5.56 cents, while June ULSD settled 1.87 cents lower at 97.21 cents/gal.

Refined products demand is expected to increase in the near term as more countries ease lockdown restrictions.

In the US, restrictions on non-essential travel have been eased or lifted in all 50 states, though major metro areas, including Los Angeles and New York City, remain on lockdown.

Likewise, some Asian countries are starting to ease restrictions, boosting gasoline demand.

According to S&P Global Platts Analytics, Apple Mobility Index data suggests "a recovery in driving activity is now underway among Asian countries outside China, with Malaysia, Thailand and Vietnam improving the most."

RBOB crack spreads have weakened over the past two trading days, however, likely reflecting some demand optimism fading from the market.

The NYMEX July RBOB crack spread against ICE Brent ended Wednesday at around USD8.07/b, down from USD9.07b Friday.

While US refinery runs are expected to have risen, but unemployment remains high, and export demand sluggish, which is putting a cap on RBOB cracks.

Kpler vessel tracking software shows roughly 19.4 million barrels of clean products being exported from the US to Latin America so far in May, down from a total of 33.5 million barrels in April, and 67.2 million barrels in March.

As MRC informed previously, global oil consumption cut by up to a third. 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.

Kaustik Volgograd resumed PVC production

MOSCOW (MRC) -- Volgograd Kaustik, Russia's fourth largest polyvinyl chloride (PVC) producer, resumed its polyvinyl chloride (PVC) production capacities after a scheduled turnaround, according to ICIS-MRC Price report.

Representative of Kaustuk Volgograd said PVC production had been resumed by 27 May. The shutdown will be quite long and lasted until 1 May. The plant's PVC production capacity is 90,000 tonnes/year.

It is also worth noting that next shutdowns for maintenance at Russian PVC plants are scheduled in June - July.
SayanskKhimPlast and RusVinyl, which annual capacities are 350,000 tonnes and 330,000 tonnes, respectively, will take next off-stream their production capacities for maintenance. SayanskKhimPlast wiil stop from 2 July for one month.

PVC production at Volgograd Kaustik was launched in December 1972 with the assistance of the Japanese firm Kureh's specialists. Nikokhim Group is one of the leaders of the Russian chemical industry, the main production assets of which are located in the southern industrial hub of Volgograd.

The holding company includes: JSC Kaustik is the principal plant of the group, manufactures basic products - caustic soda, chloroparaffins, synthetic hydrochloric acid, chlorine trademark, polyvinyl chloride, sodium hypochlorite, etc .; CJSC NikoMag - production of anti-icing materials, magnesium chloride, magnesium oxide and hydroxide; Zirax, Ltd. - production of high-purity reagents for various industries and JSC Poligran - the production of plastic compounds and rigid PVC compounds.

PE production in Russia up by 62% in January-April 2020

MOSCOW (MRC) -- Russia's overall polyethylene (PE) production totalled 994,000 tonnes in the first four months of 2020, up by 62% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output, according to MRC's ScanPlast report.

April PE production in Russia rose to 259,400 tonnes, whereas this figure was 260,500 tonnes a month earlier, output of high density polyethylene (HDPE), while the output of other types of polyethylene decreased. Thus, overall PE production reached 994,000 tonnes in January-April 2020, compared to 613,300 tonnes a year earlier. Production of all PE grades rose, but LLDPE accounted for the greatest increase, which was provided by ZapSibNeftekhim.

The structure of PE output by grades looked the following way over the stated period.
April total HDPE production grew to 151,300 tonnes from 142,300 tonnes a month earlier. Russian plants' overall HDPE output reached 571,900 tonnes in January-April 2020, up by 79% year on year.

Last month's total low density polyethylene (LDPE) production decreased to 58,800 tonnes from 61,000 tonnes in April, Kazanorgsintez and Tomskneftekhim decreased their output. Thus, overall production of this PE grade totalled 231,900 tonnes over the stated period, up by 6% year on year.

April LLDPE production rose to 49,300 tonnes from 57,200 tonnes a month earlier, ZapSibNeftekhim and Kazanorgsintez decreased its capacity utilisation. Overall LLDPE output rose to 190,100 tonnes in the first four months of 2020 from 75,900 tonnes a year earlier.


COVID-19 - News digest as of 27.05.2020

1. Japanese refiners facing stagnant market may cut capacity

MOSCOW (MRC) -- Japanese refineries may be forced to shut down capacity once again unless they see a strong recovery from the coronavirus pandemic, reported Reuters. They’ve been hit by declining use for fuel at home, competition from newer refineries in China and South Korea dominating in other markets, as well. Idemitsu Kosan on Tuesday reported an annual loss, like its competitors have done in recent days.


Kazanorgsintez resumes LDPE production

MOSCOW (MRC) -- Kazanorgsintez (part of TAIF Group) has restarted some of its low density polyethylene (LDPE) production capacities after shutdown for a scheduled turnaround, according to ICIS-MRC Price report.

The plant's customers said Kazanorgsintez had completely resumed production at its third LDPE line after the annual scheduled maintenance. A gradual launch of production began a week earlier, and the outage started on 19 April.

The third line's production capacity is 140,000 tonnes/year.

It is also worth noting that next shutdowns for turnarounds at Russian LDPE plants are scheduled for late June-early July. Angarsk Polymers Plant will shut down its production capacities for a month from 22 June, whereas Gazprom neftekhim Salavat will take off-stream its production from 1 July.

PJSC "Kazanorgsintez" (part of TAIF Group) is one of Russia's largest plants. Kazanorgsintez produces 40% of overall Russian polyethylene (PE) and is the country's largest exporter. To date, the plant produces PE, polycarbonate (PC), PE pipes, phenol, acetone, bisphenol A. Kazanorgsintez is Russia's only PC producer. It manufactures a total of 170 items of products. Kazanorgsintez's annual output is 1.6 million tonnes. The plant is Russia's largest producer of high density polyethylene (HDPE). The plant's annual HDPE production capacity is 540,000 tonnes and its annual LDPE capacity is 225,000 tonnes.