Crude oil futures steady to higher on a weaker US dollar

MOSCOW (MRC) -- Crude oil futures were steady to higher during mid-morning trade in Asia July 28 as a weaker US dollar boosted risk appetites and provide support for the global crude complex, as per S&P Global.

NYMEX September WTI settled up 31 cents at USD41.60/b, and ICE September Brent was up 7 cents on the day at USD43.41/b.

At 11:05 am Singapore time (0305 GMT), ICE Brent September crude futures was up 19 cents/b (0.44%) from the July 27 settle to USD43.60/b, while the NYMEX September light sweet crude contract was up by 6 cents/b (0.14%) at USD41.66/b. The US Dollar Index was at 93.64, down 0.02% from the close of the US trading session.

The weaker US dollar is trading below the 94.0 level, its lowest since May 2018, continuing to boost investor appetite for risk assets, such as crude oil.

With an upcoming Federal Open Market Committee meeting on July 28 and 29 where Federal Reserve chairman Jerome Powell is expected to express continued support for the Fed's dovish monetary policy, the decline in the US dollar is likely to continue, keeping oil prices buoyant.

"Oil markets are receiving support from expectations of the FOMC's firmer commitment in the upcoming policy meeting towards allowing above-target inflation to occur for some time, which should be viewed as incredibly positive for risk assets. And oil prices will continue to draw support from the Fed's dovish policy, which sees the US dollar move lower," Stephen Innes, chief global markets analyst at AxiCorp, said in a note July 28.

Meanwhile, the US' Senate Majority Leader McConnell had formally announced details of a newly proposed trillion-dollar fiscal stimulus package on July 27, which will provide most Americans with a one-time, $1,200 stimulus check and cut enhanced weekly unemployment benefits by two-thirds, from the current USD600 to about USD200 a week, according to media reports.

Negotiations over the final details of the fiscal stimulus package will ensue just as the weekly USD600 unemployment benefits from the USD2.2 trillion Coronavirus Aid, Relief and Economic Security Act expires.

However, rising geopolitical tensions between the US and China, amid an uncertain economic backdrop will continue to limit gains, keeping Brent crude futures trading within the familiar USD40-USD45/b range.

"For oil prices to break out higher, there must be a significant flattening of the US Sunbelt CV-19 case count curve at a minimum," Innes added.

While the number of daily new infections in US has come off considerably from a record high 77,300 on July 16 to 55,000 on July 26, according to the latest John Hopkins University data, the number remains significantly higher than the daily infection rates in other major economies, even as many US states paused or reversed reopening plans.

Market participants will look for fresh cues from the inventory reports by the American Petroleum Institute and the Energy Information Administration on July 28 and 29, respectively.

As MRC informed previously, 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.

And 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 DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, 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.

Eni boosts output, finds more oil in Egyptian Western Desert

MOSCOW (MRC) -- Eni has raised oil production from Egypt's South West Meleiha concession to over 12,000 b/d after bringing on stream a new exploration well on the block, reported S&P Global with reference the Italian oil major's statement July 28.

Exploration well SWM-A-6X - drilled in the Western Desert's Faghur basin - hit 130 feet of net oil pay after reaching a total depth of 15,800 feet. The well is already connected to the production network and pumping around 5,000 b/d, Eni said.

Eni said the well also discovered new oil resources but gave no estimate of the scale of the find or the block's estimated reserves.

Oil production from the South West Meleiha concession began in July 2019 and in just one year has ramped up to 12,000 b/d thanks to the contribution of new discoveries.

"Eni is successfully implementing its near-field exploration strategy in the Egyptian Western Desert through AGIBA, a joint venture with the Egyptian General Petroleum Corporation, quickly turning on production of the newly discovered resources," Eni said in a statement.

Present in Egypt since 1954, Eni is the country's largest oil and producer with equity production currently above 300,000 b/d of oil equivalent. The company expects further increases on the back of higher production from the Zohr deepwater gas field, in which it holds a 50% stake, and the start of production from the Baltim South West gas fields in the Nooros shallow-water area off the Nile Delta.

Eni's proved oil and gas reserves in Egypt stood at 1.23 billion boe at the end of last year, of which liquids amounted to 264 million barrels.

Separately, Eni said it had successfully tested its latest shallow-water Egyptian gas discovery, which is likely to be relatively easy to commercialize, as companies remain upbeat about demand for East Mediterranean gas.

Eni had announced in early July the discovery at the Bashrush prospect of the North El Hammad license, which lies offshore the Nile Delta, west of the producing Nooros and Baltim South West fields.

As MRC informed earlier, Italian oil major Eni is planning to create a division to focus on new energy solutions which could be headed by its CFO, as it steps up preparations for a decarbonised future.

We remind that none of the big oil companies currently meet U.N. targets to limit global warming despite the most ambitious targets set by Royal Dutch Shell and Eni.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, 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.

ADNOC USD20.7-bil gas deal seen helping finance self-sufficiency projects

MOSCOW (MRC) -- Abu Dhabi National Oil Co., the UAE's biggest energy producer, is expected to use proceeds from its USD20.7 billion gas pipeline deal to help finance projects aimed at boosting production to eventually reach gas self-sufficiency and even become a net exporter, reported S&P Global with reference to analysts.

ADNOC said on June 23 it had signed a deal worth more than USD10 billion with six investors to sell a 49% stake in its gas pipelines, valued at USD20.7 billion, a year after striking a similar transaction for its oil pipelines. The consortium includes Global Infrastructure Partners, Brookfield Asset Management, Singapore's sovereign wealth fund GIC, Ontario Teachers' Pension Plan Board, South Korea's NH Investment & Securities and Italy's Snam.
ADNOC, which currently produces around 10.5 Bcf/d, is undertaking multi-billion dollar projects with international oil companies to develop its costly sour and unconventional gas assets to ramp up production.

"The diversification of asset ownership in the Abu Dhabi midstream sector is an important element of ADNOC's new gas strategy," said Siamak Adibi, head of the Middle East gas team at consultancy FGE.

"Asset sales provide new source of funds for ADNOC and they can spend on development of gas resources."

It has sold stakes in its oil and gas concessions, in its drilling business, refining unit and pipelines to international oil companies as it seeks to monetize its assets and generate financing for its mega-projects.

Last year, it became the first Middle East national oil company to strike a deal with institutional investors for its midstream assets.

ADNOC clinched a USD5-billion deal, with a consortium that includes GIC, BlackRock, KKR and Abu Dhabi Retirement Pensions and Benefits Fund, to invest in select oil pipeline infrastructure and collectively hold a 49% stake in the assets.

"The funding will be important for the overall gas strategy -- it's an important source of capital, and we have to remember that ADNOC has a lot of costly ambitions such as downstream and petrochemicals, sour gas development and so on," said Ben Cahill, Senior Fellow, Energy Security and Climate Change Program at the Center for Strategic and International Studies. "It also allowed them to strike a new partnership with Snam, an experienced gas infrastructure player."

Last year, Abu Dhabi's Supreme Petroleum Council announced increases in hydrocarbon recoverable reserves of 7 billion stock tank barrels of oil and 58 Tcf of conventional gas, bringing the total to 105 billion STB of recoverable oil, 273 Tcf of conventional gas and 160 Tcf of unconventional gas resources.

With the help of Germany's Wintershall and Italy's Eni, ADNOC is developing the Ghasha ultra-sour gas concession, which is expected to produce over 1.5 Bcf/d by around 2025. In addition, it is also partnering with Dubai's gas supplier DUSUP to develop a new shallow gas reservoir with estimated reserves of 80 Tcf.

"Boosting gas self-sufficiency is critical, given the desire to wean the UAE off dependence on gas imports from Qatar via Dolphin Gas," Cahill said. "We still don't know how much it will cost to develop Jebel Ali, how many development wells will be required, and what the recovery rate is."

Qatar pipes 2 Bcf/d of gas to the UAE under an agreement that expires in 2032.

"Other Gulf states are also selling oil and gas assets and privatizing stakes as they search for funds, especially Oman, but the scale is a lot bigger in Abu Dhabi,"

"They are first movers in generating this much capital from the midstream segment, which is often overlooked relative to the upstream and downstream. And for ADNOC this strategy isn't unique to the midstream, they're looking to unlock capital and partnerships across the value chain."

However, ADNOC's gas ambitions may be stymied by the coronavirus.

ADNOC terminated USD1.65 billion worth of contracts awarded in February to a Petrofac-led group for the ultra-sour gas project Dalma Gas Development project, part of Ghasha project, the oil service company said in April.

Eni, which has a 25% stake in Ghasha, also plans to review its projects in the UAE with its partners due to the coronavirus outbreak and the oil price crash, executive vice-president for the Middle East at Eni, Fuad Krekshi, said in March.

"The depressed state of the energy-price complex does present serious challenges to the country's goal of becoming a net natural gas exporter, with major partners in UAE gas projects like Eni and Total cutting capital expenditure globally, a dynamic that will bring headwinds to Abu Dhabi's natural gas production growth goals," senior analyst at S&P Global Platts Analytics, Samer Mosis, said.

As MRC informed earlier, in late July 2019, ADNOC said its Ruwais refinery west cracker was offline for maintenance.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, 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.

Danish recycler Plastix set alliance with Titan Bioplastics

MOSCOW (MRC) -- Danish recycler Plastix (Lemvig) has entered into an alliance with US nanotechnology and biocomposite specialist Titan Bioplastics (Seattle, Washington) to expand the use of recycled plastics waste in products to comply with upcoming European legislation, said Plasteurope.

Plastix is dedicated to mechanically recycling used maritime fibres, such as abandoned fishing nets and ropes that would otherwise end up in the ocean or in landfill. It said its recycled product “OceanIX” is currently used in a range of applications.

Titan Bioplastics’ proprietary “Titan Nanofill” is a mineral additive supporting physical barrier properties in a variety of polymers that has been approved by the US Food and Drug Administration (FDA) for food contact. According to Plastix, small loading rates of Titan Nanofill can potentially provide a 100% increase in barrier properties as well as preventing leaching. When blended with plastics during recycling, the additive can also prevent other plastics from leaching.

The companies added that a barrier test using Titan Nanofill with Plastix recycled materials convinced them of the technology’s potential success and its benefits for a variety of plastics. “We see this as an advancement to many packaging solutions, as well as a serious technology contender supporting companies working to adapt production towards directives by the European Commission and the Extended Producer Responsibility Act,” said Tanya Hart, CEO of Titan Bioplastics.

The EU commission has set a collection target of 90% for plastic bottles by 2029. It has also mandated that plastic bottles should contain at least 25% recycled plastics by 2025 and 30% by 2030 (see of 28.03.2019). It is worth noting that recycled plastics and additives can only be used in food and drinks packaging in the European Union after review by the European Food Safety Authority (EFSA, Parma / Italy).

As MRC informed earlier, Russia's output of chemical products rose in June 2020 by 2.6% year on year. However, production of basic chemicals increased year on year by 4.9% in the first six months of 2020. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-June. Production of benzene was 106,000 tonnes in June 2020, compared to 110,000 tonnes a month earlier. Overall output of this product reached 721,000 tonnes over the stated period, up by 3.9% year on year.

COVID-19 - News digest as of 30.07.2020

1. Axalta posts Q2 sales decline

MOSCOW (MRC) -- Axalta Coating Systems Q2 sales fell 43.6% year on year as demand declined because of impact of the coronavirus, said the company. The company swung to a Q2 net loss, driven primarily by volume decline impacts. Sequentially, sales improved month on month, following a bottom in April. June net sales were 82% higher than in April. In the current Q3, Axalta continues to be impacted by the coronavirus pandemic across its business, although impacts on customer demand related to the virus continues to gradually improve month-to-month, it said.