Crude futures in Asia lower ahead of OPEC+ production cut talks

MOSCOW (MRC) -- Crude oil futures were lower in mid-morning trade in Asia July 13 ahead of mid-week deliberations by OPEC+ over whether to maintain its current supply cut for another month, and as several countries reported a sharp rise in coronavirus infections, reported S&P Global.

At 11:04 am Singapore time (0304 GMT), ICE Brent September crude futures were down 44 cents/b (1.02%) from the July 10 settle at USD42.80/b, while the NYMEX August light sweet crude contract was 43 cents/b (1.06%) lower at USD40.12/b.

"The record high inventories in the US and a second wave contagion around the globe have added speculation that OPEC+ might yet throw a surprise decision this week by extending the 9.6 million b/d output cuts by a further month, but we think that is unlikely given how prices have almost doubled from lows in April," OCBC analysts said in a note July 13. "In the short term, we expect oil prices to remain within its consolidation phase," they added.

The OPEC+ Joint Ministerial Monitoring Committee will decide July 15 whether to extend 9.7 million b/d production cuts that expire end July by another month.

With major economies showing signs of recovery, sources familiar with the negotiations are indicating that an extension is unlikely, which will see OPEC+ moving ahead as planned to a 7.7 million b/d cut in August.

However, the US has reported more than 60,000 new coronavirus infections a day for the past four days, taking its total number of cases above 3.3 million, according to media reports. Brazil, India and South Africa have also reported an increase in cases, according to the World Health Organization.

The surging number of infections was likely to continue weighing on market sentiment as governments weigh the feasibility of further movement restrictions, clouding the near-term demand outlook.

Elsewhere, Libya, which holds Africa's largest crude reserves, lifted a force majeure on oil loadings July 10, but the Libyan National Army a day later vowed to maintain a blockade until its demands are met.

Crude production in Libya has been reduced to around 70, 000-100,000 b/d in recent months from more than 1.1 million b/d before the blockade was imposed in January. Any short term increase in crude exports from Libya is likely to "add another unwanted level of supply-side uncertainty at an extremely critical point in the oil price recovery phase," AxiCorp chief global markets analyst Stephen Innes said in a note July 13.

As MRC informed before, 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 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

PP imports to Russia grow by 21% in H1 2020

MOSCOW (MRC) -- Polypropylene (PP) imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports, according to MRC's DataScope report.

In June, Russian companies significantly raised their purchasing of PP in foreign markets partially because of a major increase in demand, imports were 20,000 tonnes versus 14,200 tonnes a month earlier. Thus, overall PP imports to Russia reached 105,300 tonnes in January-June 2020, compared to 86,800 tonnes a year earlier. Purchasing of all grades of propylene polymers in foreign markets increased, with homopolymer PP imports accounting for the most noticeable rise.

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


June imports of homopolymer PP were 9,600 tonnes versus 4,900 tonnes a month earlier, PP shipments from Turkmenistan increased significantly. Thus, overall imports of homopolymer PP into the country totalled 43,600 tonnes in the first six months of 2020, compared to 28,600 tonnes a year earlier.

Last month's imports of propylene block-copolymers (PP block copolymers) were 5,200 tonnes versus 3,500 tonnes in May, demand for pipe grade PP increased from Russian companies. Imports of PP block copolymers into Russia reached 28,800 tonnes in January-June 2020, compared to 25,600 tonnes a year earlier.

June imports of statistical copolymers of propylene (PP random copolymer) dropped to 2,800 tonnes from 3,800 tonnes a month earlier, with pipes producers accounting for the main reduction in shipments due to higher prices in Europe. Overall imports of this grade of propylene copolymers were 17,400 tonnes in January-June 2020, compared to 15,100 tonnes a year earlier.

Imports of other propylene polymers totalled 15,500 tonnes over the stated period versus 17,400 tonnes a year earlier.

MRC

PP imports to Ukraine decreased by 8% in H1 2020

MOSCOW (MRC) -- Ukraine's polypropylene (PP) imports totalled about 61,100 tonnes in January-June of this year, down 8% year on year.
All PP grades accounted for the decrease in shipments, according to a MRC's DataScope report.

June imports rose to 13,400 tonnes against 8,700 tonnes a month earlier under the pressure of the seasonal factor and the relaxation of quarantine restrictions. Overall imports of propylene polymers reached 61,100 tonnes in January-June 2020, compared to 66,800 tonnes a year earlier. Demand for all grades of propylene polymers decreased, but propylene block copolymers (PP block copolymers) accounted for the largest reduction.

The structure of PP imports by grades looked the following way over the stated period.
June imports of homopolymers of propylene to the Ukrainian market grew to 10,900 tonnes from 6,600 tonnes a month earlier, local companies increased purchasing of homopolymer PP raffia in Russia and Azerbaijan. Total homopolymer PP imports were 47,900 tonnes in January-June, compared to 52,200 tonnes a year earlier.

June imports of PP block copolymers into the country amounted to a little more than 1,500 tonnes compared to 700 tonnes in May, local companies increased the volume of purchases of injection moulding polypropylene. Over the reporting period, about 5,700 tonnes of propylene block copolymers were imported against 6,400 tonnes for the same period in 2019.

June PP random copolymers imports decreased to 700 tonnes from 1,200 tonnes a month earlier, local companies decreased their purchasing of pipe and injection moulding PP random copolymers. Overall PP random copolymers imports reached 6,500 tonnes in January-June 2020, compared to 7,300 tonnes a year earlier.

Overall imports of other propylene copolymers totalled slightly over 900 tonnes over the stated period.

MRC

PE imports to Russia down by 7% in H1 2020

MOSCOW (MRC) -- Imports of polyethylene (PE) into Russia decreased by 7% year on year to 328,000 tonnes in January-June. High density polyethylene (HDPE) accounted for the main decrease in imports, according to MRC ScanPlast report.

June imports of polyethylene rose to 53,500 tonnes against 49,100 tonnes a month earlier, the supply of low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) increased. Overall PE imports totalled 328,000 tonnes in the first six months of 2020, compared to 350,900 tonnes a year earlier. Only the supply of LDPE increased, while for other types of ethylene polymers there was a decrease in imports.

The structure of HDPE imports by grades looked the following way over the stated period.

June HDPE imports decreased to 19,300 tonnes from 22,100 tonnes a month earlier, on weaker shipments from Uzbekistan and Europe. Overall external supply of HDPE in the country decreased to 147,400 tonnes in the first six months of 2020, down 14% year on year. The largest decrease in supplies was due to film and pipe HDPE.

Last month's imports of low density polyethylene (LDPE) exceeded 10,600 tonnes, compared to 8,500 tonnes in June, shipments of film grade PE from Europe and Belarus increased. Total imports of blow moulding HDPE in the country reached 51,400 tonnes in January -June 2020, up 9% year on year.


June LLDPE imports into Russia increased to about 15,600 tonnes against 11,400 tonnes a month earlier, local converters increased their purchases of film PE. Overall LLDPE imports totalled 83,200 tonnes in the first six months of the year, down 5% year on year.

Last month, external deliveries of other ethylene polymers, including ethylene vinyl acetate (EVA), amounted to 7,300 tonnes against 6,200 tonnes in May. The overall imports of other ethylene polymers exceeded 46,100 tonnes over the stated period versus 45,200 tonnes a year earlier.

MRC

Fuel demand shock threatens future of Australian oil refineries

MOSCOW (MRC) -- A coronavirus-driven collapse in fuel demand is threatening Australia’s oil refining industry, just as supply chain disruptions wrought by the pandemic have focused the government on the need to shore up fuel security, reported Reuters.

Already dependent on imports for more than half its fuel needs after the closure of four refineries since 2003, industry and analysts say at least one of the country’s four remaining refineries could close unless the government steps in.

Pandemic lockdowns decimated demand for gasoline, jet fuel, diesel and shipping fuel, hitting refiners that only recently enjoyed a return to profitability after years in the red.

“When the global margin environment weakens and gets tougher, the threat of closure definitely increases,” said Sushant Gupta, head of Asia Pacific downstream oil and gas research at consultants Wood Mackenzie.

Seeing an existential threat facing the four refineries - owned by global majors BP Plc and Exxon Mobil Corp, and Australian-listed Ampol Ltd and Viva Energy - the government stepped in last month.

As well as seeking proposals to build fuel storage, Energy Minister Angus Taylor launched talks with the industry on how to shore up the refineries, aiming to “protect Australia’s national sovereignty”.

“I’m sure the government is very keen to make sure the country doesn’t lose the majority of them,” said Mark Samter, an analyst at MST Marquee.

It’s already tough for Australia’s four ageing plants to compete with Asia’s newer, mega refineries.

Combined, the four refineries have a capacity of just 464,000 barrels per day (bpd), compared with Asia’s biggest refinery, the 1.24 million bpd Jamnagar plant in India.

There is also some uncertainty over the majors’ long-term commitment to refining in Australia, with Exxon having put long-held local oil and gas assets up for sale and BP’s energy priorities shifting.

Critically, the pandemic has smashed earnings just as the refiners face decisions on whether to invest a total of A$1 billion (USD690 million) to upgrade their plants to produce gasoline with lower sulfur content from 2027. Work would have to begin in 2022 to meet the deadline.

“Whilst we support the investment and support the outcomes it will deliver, it is an investment that’s not going to deliver any extra return for the refinery, therefore it’s a difficult one to make, and it’s obviously a sizable one,” Viva Energy Chief Executive Scott Wyatt told Reuters.

Exxon Mobil Australia Chairman Nathan Fay noted the “challenges” in competing with Asia’s big refiners at an energy conference last month.

Options to help the industry could include direct subsidies for plant upgrades, a government-underwritten minimum refining margin, or fuel excise relief, Samter said.

Viva’s Wyatt said the government could also provide incentives for refiners to produce higher quality gasoline earlier than 2027.

Another option could be to skip the expensive refinery upgrades and instead run at lower rates locally while importing higher quality fuel as there will likely be a global gasoline surplus, said WoodMac’s Gupta.

If any refineries close, the most likely would be Exxon’s Altona facility in Victoria state, the oldest, and Ampol’s Lytton plant in Queensland, which has already been shut for extended maintenance, said Samter.

Ampol sees no problem with relying on imports.

“We remain of the view that there is no issue with security of supply, and we have very secure supply chains,” Ampol Chief Executive Matt Halliday told Reuters.

“But we also understand that the government is looking at supply security through a slightly different lens at the moment.”

As MRC informed before, boiler work at the ExxonMobil-operated 830,000-metric tons/year ethylene plant at Mossmorran, UK, was scheduled for completion in June, 2020. Two of the three boilers at the plant exploded in August 2019, resulting in the plant being taken offline until the end of February. OPIS sources said in May that the plant was currently able to operate at full capacity with two boilers in operation but that the third boiler would be working by June.

We remind that in September 2019, ExxonMobil announced plans to spend GBP140 million over the next two years in an additional investment program at its Fife ethylene plant, which has a capacity of more than 800,000 t/y.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC