Crude oil futures rangebound amid US inventory drawdown, global growth concerns

MOSCOW (MRC) -- Crude oil futures were steady to higher in mid-morning trade in Asia July 29 after an unexpected draw in US crude stocks provided some support to the global crude complex amid an uncertain demand outlook, as per S&P Global.

At 11:05 am Singapore time (0305 GMT), ICE Brent September crude futures were up 11 cents/b (0.25%) from the July 28 settle at USD43.33/b, while the NYMEX September light sweet crude contract was 1 cent/b (0.02%) higher at USD41.05/b.

"Broadly, we have been seeing crude oil prices paring gains from Tuesday with continued growth concerns capping further upsides at current levels," IG market strategist Pan Jingyi said July 29. "The surprise draw in crude oil inventories according to the API report had played a part in supporting prices overnight, though WTI can be seen staying relatively more cautious with a buildup in official EIA crude inventory expected on Wednesday," she added.

The American Petroleum Institute overnight reported a 6.83 million-barrels draw in crude oil inventories for the week ending July 24, against market expectations of a 450, 000-barrel rise, according to analyst reports. More definitive US stocks data is due for release by the Energy Information Administration later on July 29.

"The enormity of the inventory draw should be sufficient to hold the bears (at) bay (and) temporarily alleviate some concerns about ongoing demand distress," AxiCorp chief global markets analyst Stephen Innes said in a note July 29.

However, a resurgence in coronavirus infections in the Asia-Pacific, protracted US fiscal stimulus negotiations and an increase in supply from OPEC+ from August were weighing heavily on market sentiment, keeping crude prices rangebound, market sources said.

China reported 101 new coronavirus cases July 28 and Vietnam 30, while Tokyo, Hong Kong and Melbourne have reported jumps in infections rates in recent days, underlining the difficulty of containing the virus as restrictions ease in places that had earlier curbed infection rates, and indicating that demand was likely to remain subdued amid the uncertainty.

In the US, negotiations over a proposed trillion-dollar fiscal stimulus package that would provide a one-off USD1,200 payment while cutting weekly federal unemployment benefits from USD600 to USD200 are continuing; analysts said the protracted stimulus negotiations and USD400 reduction would weigh on consumer spending and market sentiment.

Global crude output is also set to increase in August as OPEC+ sticks with its schedule of tapering coordinated production cuts from 9.7 million b/d to 7.7 million b/d from August 1.

As MRC reported earlier, US crude oil inventories moved sharply lower during the week ended July 24 as exports and refinery demand climbed to multi-month highs, US Energy Information Administration data showed July 29, 2020. Commercial crude stocks fell 10.61 million barrels to 525.97 million barrels last week, EIA data showed. While the draw pushed stockpiles to 14-week lows, they remained more than 17% above the five-year average for this time of year.

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 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.

PetroChina Ningxia to complete trurnaround at PP plant in Yinchuan

MOSCOW (MRC) - PetroChina Ningxia PC, part of PetroChina, is in plans to bring on-stream its polypropylene (PP) plant following a turnaround, according to Apic-online.

A Polymerupdate source in China informed that, the company is likely to resume operations at the plant on August 18, 2020. The plant was shut for maintenance on July 1, 2020.

Located at Yinchuan, China, the PP plant has a production capacity of 110,000 mt/year.

As MRC reported earlier, PetroChina has nearly doubled the amount of Russian crude being processed at its refinery in Dalian, the company’s biggest, since January 2018, as a new supply agreement had come into effect. The Dalian Petrochemical Corp, located in the northeast port city of Dalian, was expected to process 13 million tonnes, or 260,000 bpd of Russian pipeline crude in 2018, up by about 85 to 90 percent from the previous year’s level. Dalian has the capacity to process about 410,000 bpd of crude. The increase follows an agreement worked out between the Russian and Chinese governments under which Russia’s top oil producer Rosneft was to supply 30 million tonnes of ESPO Blend crude to PetroChina in 2018, or about 600,000 bpd. That would have represented an increase of 50 percent over 2017 volumes.

According to MRC's DataScope report, 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.

PetroChina Company Limited, is a Chinese oil and gas company and is the listed arm of state-owned China National Petroleum Corporation, headquartered in Dongcheng District, Beijing. It is China's biggest oil producer.

ADNOC and ADQ form JV to catalyze the UAE’s chemicals sector

MOSCOW (MRC) -- The Abu Dhabi National Oil Company (ADNOC) and ADQ signed a joint venture (JV) agreement to create a new investment platform to fund and oversee the development of industrial projects within the planned Ruwais Derivatives Park, a key enabler of ADNOC Downstream’s 2030 smart growth strategy and the UAE’s chemicals and industrial growth strategy, reported Reuters.

The agreement was signed by H.E. Dr. Sultan Ahmed Al Jaber, UAE Minister of Industry and Advanced Technology and ADNOC Group CEO, and H.E. Mohamed Hassan Alsuwaidi, CEO of ADQ.

Under the terms of the agreement, ADNOC and ADQ will jointly evaluate and invest in anchor chemicals projects. ADNOC will hold a 60% majority equity stake in the JV with ADQ holding the remaining 40%. ADQ’s extensive portfolio, including local and international logistics and transport, power and water, industrial construction, and other essential infrastructure and enabling services, will complement ADNOC’s strong hydrocarbon feedstock position in Ruwais as well as its longstanding relationships with trusted international partners and investors. These combined strengths will enhance the overall value proposition of the planned Ruwais Derivatives Park and, in turn, support the long-term growth of the broader Ruwais industrial complex and increased investment in the Emirate of Abu Dhabi.

The JV partners will conduct a comprehensive feasability study to further develop identified projects in Ruwais and take forward those that show maximum potential for value creation. The JV plans to announce the results of this study before the end of 2020, including specific details on its selected target projects and the range of potential opportunities available for prospective investors and partners.

H.E. Dr. Sultan Ahmed Al Jaber said: “The range, scale and caliber of resources ADNOC and ADQ each bring to this new chemicals investment platform underscore Abu Dhabi’s position as a leading global destination for international investors and industrial partners. In line with ADNOC’s commitment to smart, responsible investment in the current market environment, as well as our unwavering focus on stretching the margin of every barrel of oil produced, our partnership with ADQ will expand on existing efforts to maximize the value of our assets in Ruwais, to kickstart the development of the UAE’s downstream deriviatives sector, support the transformation of Ruwais into a global hub for industry and attract additional foreign direct investment.”

H.E. Mohamed Hassan Alsuwaidi, CEO of ADQ, said: “By partnering with ADNOC to faciliate the development of the investment platform in Ruwais Derivatives Park, we will play a key role, together with the public and private sectors, in providing essential infrastructure development services. At ADQ, we are driving value creation and helping to build a prosperous economy for the benefit of Abu Dhabi through our diverse portfolio of the emirate’s leading entities such as Abu Dhabi Ports, Abu Dhabi National Energy Company (TAQA), Etihad Rail, Emirates Steel, DUCAB and Arkan.”

ADNOC and ADQ both have strong track records of driving private sector growth in Abu Dhabi. At the core of its current plans, ADNOC’s in-country-value (ICV) program, to date, has driven more than AED 44 billion (USD12 billion) back into the UAE economy and created over 1,500 private-sector jobs for UAE nationals since it was launched in 2018. ADQ brings together a range of vital local expertise across power and logistics, industrial fabrication and manufacturing which will support the development of the planned Derivatives Park in Ruwais.

With the required approvals, the JV will be incorporated in Abu Dhabi Global Markets with both companies jointly determining the JV’s management team and board, in line with global corporate governance best practice.

The development of a robust downstream derivatives industry in Ruwais is the cornerstone of ADNOC downstream’s growth strategy, launched at ADNOC’s Downstream Investment Forum in 2018. Since the Forum, ADNOC has attracted signinficant foreign investment and expanded its downstream partnership base across its refining, fertilizer and pipeline assets. Concurrently, ADNOC has successfully progressed large-scale capital projects in Ruwais to further stretch the margin of each barrel of oil produced, including the Crude Flexibility Project, ADNOC’s flagship refinery upgrade program, which will enable processing of crudes other than Murban, and, in turn, unlock more robust crude export optionality. ADNOC’s joint venture with Borealis, Borouge, has also advanced the development of production units at the Borouge 4 complex, a core enabler of the Ruwais Derivatives Park which will support feedstock production capacity for the Park’s anchor projects.

ADNOC continues to deliver on the expansion of its downstream business as part of its 2030 smart growth strategy, which will see the Ruwais industrial complex transformed into a globally competitive chemicals cluster, leveraging the UAE’s close geographic proximity to global growth markets, access to competitive feedstocks, streamlined utilities and services offer, as well as Abu Dhabi’s attractive fiscal and regulatory environment.

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.

Petrobras opens leasing process for Brazil's busiest LNG import terminal

MOSCOW (MRC) -- Petrobras on Aug. 3 announced the start of bidding for lease of its LNG regasification terminal and associated facilities in the northeast state of Bahia - a move that comes as the state-led producer continues to diversify away from midstream and downstream oil and gas operations in Brazil, reported S&P Global.

"The lease aligns with the company's strategy to improve its capital allocation and create a favorable environment for new investors to enter the natural gas sector," Petrobras said in a statement.

The leasing process also comes in accordance with a June 2019 agreement signed between Petrobras and Brazil's antitrust market regulator, Conselho Administrativo de Defesa Economica, or Cade.

The move is the latest in a series of asset divestitures made by the company.

Most recently, Petrobras and Brazil's government have been considering reforms to the state-led company's complex and costly concession agreements offered in bid rounds and production-sharing auctions in an effort to attract more international competition for the country's offshore assets.

As part of Brazil's New Gas Market reform, launched in June 2019, Petrobras in late May announced the opening of its natural gas processing facilities to rival producers and interested third parties. Last year, the company sold a large chunk of its downstream gas distribution business and agreed to lease transmission capacity on the Bolivia-Brazil Gasbol pipeline – the country's largest gas import system.

The lease of Petrobras' Bahia Regas terminal marks a significant step in fomenting competition in Brazil's gas market. The terminal's location in the state of Bahia gives potential importers access to northeast Brazil's largest municipal gas market with proximity to heavily populated neighboring states, all of which are severely under-serviced by gas pipelines.

The Bahia import terminal, recently Brazil's most active, uses Floating Storage and Regasification Unit, or FSRU, technology to make ship-to-ship LNG transfers that can be later regasified for sendout.

The terminal's capacity allows for regasification of up to 700 MMcf/d and includes a 28-mile, 28-inch diameter pipeline with connections to two onshore delivery points in the city of Salvador.

The lease agreement exclude Petrobras' FSRU, but does include power generation and electric-supply equipment at an onshore gas-fired power plant, located at the Madre de Deus Waterway Terminal.

One year on, Brazil's New Gas Market reform continues to mark key milestones.

In July, Brazil's National Petroleum Agency, or ANP, relaunched its open season for capacity on Gasbol – its third attempt to carry out the process after previous setbacks caused by Petrobras' involvement in the bidding and later by concerns related to the coronavirus pandemic.

ANP was scheduled to publish a list of approved shippers by July 27 but has yet to provide any official updates on the process. According to local media reports, though, at least two companies have been named as approved shippers, including Compass of Cosan Group and Gas Bridge. The open season is scheduled to conclude by mid-August with the startup of new gas import contracts by September.

As MRC reported previously, Petrobras may need more than a year to divest its stake in Braskem, said Andrea Almeida, Petrobras CFO, in early July. She said during the company’s recent webinar that Petrobras plans to give more time for potential investors to make offers for the company's assets, including for its refineries and stakes at its petrochemical and fuel distribution affiliates. The divestment of Petrobras's stake in Braskem in 2020 would be desirable but "might not be possible" as the COVID-19 pandemic has changed market conditions, she said. The company plans to close part of its refinery sales in 2021. In December, Roberto Castello Branco, CEO of Petrobras, said that he wants to sell the company’s stake in Braskem within a year. Petrobras owns 32.15% of Braskem.

We remind that Braskem is no longer pursuing a petrochemical project, which would have included an ethane cracker, in West Virginia. And the company is seeking to sell the land that would have housed the cracker. The project, announced in 2013, had been on Braskem's back burner for several years.

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.

Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm. Petrobras' activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks as well as refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.

Indian Oil predicts recovery to pre-Covid levels only by year-end

MOSCOW (MRC) -- The chairman of Indian Oil Corporation, the country’s biggest refiner, predicted demand would begin to rebound only by year-end as the coronavirus pandemic hits one of the world’s largest energy markets, said the Financial Times.

Shrikant Madhav Vaidya said new lockdowns in India had knocked capacity utilisation down from 93 per cent in early July to 75 per cent by the end of the month but predicted it would stabilise in the coming months. "There is demand destruction but then the country is recovering,” Mr Vaidya told the Financial Times after reporting a sharp fall in year-on-year net profit in the quarter ended June 30. “By the end of the year, I expect that things will be nearly back to pre-Covid times."

New lockdowns in India are hitting the country’s economic recovery as coronavirus rips through the population of 1.4bn people. India is adding more than 50,000 infections daily, bringing its tally of Covid-19 cases to more than 1.6m, the third-largest in the world, with no sign of the infection rate slowing. Recovery looks difficult, we don’t know whether there will be multiple lockdowns imposed

IOC reported a 47 per cent drop in net profit to Rs19bn (USD253m) in the quarter ended June 30 compared with a year earlier. This followed a sharp loss in the three months ended March 31. The economy was hit by a tough initial lockdown imposed by Prime Minister Narendra Modi while dreams of a V-shaped recovery have been obliterated by a surge in cases and new lockdowns. The country’s crude imports fell 19 per cent year on year to a five-year low in June, according to oil ministry data released on Friday.

Mr Vaidya said that once the turmoil had settled, he expected appetite for fossil fuels in India, the world’s third-largest oil importer, to recover more strongly than in other markets. Unlike other refiners, Mr Vaidya said IOC had no plans to cut capital expenditure. "The energy demand for the country is going up, unlike the US or Europe, where it is either stagnant or there is negative growth," said Mr Vaidya.

"No single one form of energy will be able to satisfy it all. The Indian bouquet will [consist] of traditional fossil fuels with an increasing amount of gas."

India is seeking to increase the share of gas in its energy mix from 6.2 per cent to 15 per cent by 2030 but progress on meeting the target and deregulating the sector has been slow. Mr Vaidya, who took over as IOC chairman in July, said the refiner was also seeking to expand capacity in petrochemicals and catch up with peers Reliance Industries — the flagship company of billionaire Mukesh Ambani — and Gail.

Probal Sen, oil and gas analyst at Centrum Broking in Mumbai, said IOC was “sounding the alarm” by underlining the impact of new lockdowns. Other companies were predicting a faster return to relative normality. Mr Sen pointed to a flood of new cases hitting Andhra Pradesh, Karnataka and Kerala. “Recovery looks difficult, we don’t know whether there will be multiple lockdowns imposed,” he said.

As MRC wrote before, Indian Oil Corporation Ltd (IOCL) was in plans to undertake a planned shutdown at its polypropylene (PP) plant in Paradip last weekend. The plant is expected to remain under maintenance for about two weeks. Located at Paradip in the India state of Odisha, the PP plant comprises of two lines with a production capacity of 340,000 mt/year each.

We remind that Indian Oil Corp restarted operation at its naphtha cracker in India in early-October, 2019, after completing maintenance works. The cracker was shut in early-September, 2019 for a maintenance turnaround. Located in Panipat, in the northern Indian state of Haryana, the cracker has an ethylene production capacity of 857,000 mt/year and propylene capacity of 425,000 mt/year.

According to MRC's DataScope report, 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.

Indian Oil Corporation Limited, or IndianOil, is an Indian state-owned oil and gas corporation with its headquarters in New Delhi, India.