Crude futures rangebound in Asia trade as weak demand outlook counters bullish US jobs report

MOSCOW (MRC) -- Crude oil futures were largely stable in mid-morning trade in Asia Aug. 14 as better-than-expected US jobs data was countered by expectations of a slow global demand recovery as the easing of COVID-19 movement restrictions was impacted by a resurgence of cases in several countries, reported S&P Global.

At 10:50 am Singapore time (0250 GMT), the ICE Brent October crude futures were up 9 cents/b (0.20%) from the previous settle at USD45.05/b, while NYMEX September light sweet crude contract was up 7 cents/b (0.17%) at USD42.31/b.

"Crude markets are trading in a tight range around the Brent $45/b mark with little progressive news flow on the macro front," AxiCorp chief global markets strategist Stephen Innes said in a note Aug. 14.

"This week's inventory data was supportive, but the next significant catalyst that the market is focused on could be the US coronavirus stimulus package, which should positively impact the broader economic recovery and, by extension, energy demand," he added.

US Department of Labor data released Aug. 13 showed weekly initial unemployment claims fell to 963,000 in the week ended Aug. 8 from 1.19 million the week before, below 1 million for the first time since mid-March, and beating market expectations of 1.1 million.

This came on the heels of US Energy Information Administration data released Aug. 12 reporting a 4.51 million-barrel draw in US commercial crude inventories, exceeding market expectations for the third consecutive week. Total gasoline and distillate stocks also fell in the week, with distillates notably snapping three consecutive weeks of builds.

However, negotiations between the US administration and Congress for another coronavirus fiscal stimulus package remained at a stalemate, with the Senate joining the House for recess for the rest of August, according to media reports.

The International Energy Agency also lowered its 2020 world oil demand estimate by 140,000 b/d from the month before to 91.95 million b/d in a report published Aug. 13, the first downgrade in the IEA's oil demand forecast in several months and coming a day after OPEC revised down its 2020 forecast by 100,000 b/d to 90.63 million b/d.

"The downbeat view on demand mirrors our view on the market. The easing of restrictions in many parts of the US and Europe has slowed amid a pick-up in infections," the ANZ analysts said in a note Aug. 14.

"Traffic levels have plateaued and are sitting at 50% below 2019 levels. Air traffic is also weak, with commercial flights in July 50% below 2019 levels. With supply also rising over the coming months, we struggle to see Brent crude remaining above USD45/b in Q3," the analysts said.

As MRC informed before, 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. Commercial crude stocks fell 10.61 million barrels to 525.97 million barrels that 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.

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.
MRC

COVID-19 - News digest as of 19.08.2020

1. US petroleum inventories show gradual rebalancing

MOSCOW (MRC) -- US petroleum inventories show clear signs of trending lower as consumption slowly recovers from the epidemic and lockdowns, while Saudi Arabia restricts production and directs volumes away from North America, according to Hydrocarbonprocessing. Total petroleum inventories fell last week for the fourth time in five weeks, and are now down more than 17 million barrels since early July, according to data from the USEnergy Information Administration. The drawdown has started to whittle away some of the 222 million barrels built up between the end of March and the end of June.

MRC

PCG Q2 net profit falls sharply

MOSCOW (MRC) -- Petronas Chemicals Group Bhd's (PCG) net profit plunged 83.4 per cent to RM186 million in the second quarter (Q2) ended June 30, 2020 from RM1.12 billion recorded in the same quarter a year ago, said NST.

In a filing to Bursa Malaysia today, PCG said the lower net profit recorded in Q2 was due to compressed margin and lower interest income generated from fund placement. The group recorded lower plant utilisation rate, production volume and sales volumes as compared to the corresponding quarter.

Overall average prices for the group decreased from the corresponding quarter in tandem with declining crude oil price arising from OPEC+ fallout and softer demand following global Covid-19 pandemic. Revenue in the same quarter decreased 26.7 per cent to RM3.18 billion from RM4.34 billion.

For the first half of 2020, PCG's net profit was 63.9 per cent lower at RM692 million from RM1.92 billion, while revenue eased 16.5 per cent to RM7.07 billion from RM8.47 billion.

PCG operations are expected to be primarily influenced by global economic conditions, petrochemical products prices which have a high correlation to crude oil price, particularly for the olefins and derivatives segment, utilisation rate of its production facilities and foreign exchange rate movements.

"The Covid-19 pandemic continues to adversely affect the global economy and PCG was also not spared.

"The utilisation of our production facilities is dependent on plant maintenance activities and sufficient availability of feedstock as well as utilities supply. "The group will continue with its operational excellence programme and supplier relationship management to sustain plant utilisation level at above industry benchmark," it said.

PCG has declared an interim single tier dividend of five sen per ordinary share to be paid on September 25.

As MRC wrote before, in early May, 2020, Petronas Chemicals (Kuala Lumpur), Malaysia’s leading petrochemicals player, reported a drop in first-quarter sales and earnings citing the coronavirus disease 2019 (COVID-19) pandemic. The sharp decline in petrochemical product prices following the outbreak of COVID-19, the deepening industry downcycle as crude oil prices collapsed due to the OPEC+ fallout, and the recessionary global economic outlook have hurt results, the company says.

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.

Petronas, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company wholly owned by the Government of Malaysia. The Group is engaged in a wide spectrum of petroleum activities, including upstream exploration and production of oil and gas to downstream oil refining; marketing and distribution of petroleum products; trading; gas processing and liquefaction; gas transmission pipeline network operations; marketing of liquefied natural gas; petrochemical manufacturing and marketing; shipping; automotive engineering; and property investment.

MRC

Repsol, Acteco to increase mechanical recycling capacity for polyolefins in Spain

MOSCOW (MRC) -- Repsol (Madrid, Spain) and mechanical recycling specialist Acteco say they are partnering on a project to increase the production capacity for recycled polyolefins at Acteco’s existing facility in Alicante, Spain. No investment figure has been given, said Chemweek.

Recycled polyethylene (PE) and polypropylene (PP) from the plant will be used in Repsol’s circular polyolefins plastics range, which incorporates a percentage of mechanically recycled materials and is designed for high-value applications and high technical requirements, it says. Repsol has previously set itself a target of recycling the equivalent of 20% of its polyolefins production by 2030, and says it has now launched more than 200 circular economy initiatives to reduce its carbon intensity.

The two companies have been working together since 2018 to promote new circular economy models through the recovery of polymers at the end of their useful lives and their reuse for new added-value products for sectors such as automotive, healthcare, packaging, construction, and infrastructure.

The alliance with Acteco will support Repsol in reaching its commitments regarding recycled plastics and enable it to offer customers various grades of circular polyolefins “that will allow them to increase the amount of recycled materials in their products,” says Jose Luis Bernal, executive director at Repsol Chemicals.

Other circular polyolefins initiatives by Repsol include chemical recycling of low-quality plastics and the development of a technology for the recycling of polyurethane foam, it says.

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.
MRC

Idemitsu Kosan to end petrochemical JV with BASF, close plant

MOSCOW (MRC) -- Japanese oil refiner Idemitsu Kosan said on Wednesday it will end its petrochemical joint venture with German chemical manufacturer BASF due to slumping demand at home and an oversupply caused by plant expansions in Asia, said Reuters.

The joint venture will in December close its Chiba plant for making butanediol, an organic compound used in stretchable fibres and engineering plastics.

Idemitsu said it will exit from the butanediol business.

As MRC reported earlier, BASF Total's cracker in Port Arthur, Texas, is undergoing maintenance and expected to restart on 23 July, 2020, according to the company's statement in a filing with Texas Commission on Environmental Quality (TCEQ). An unexpected outage occurred at BASF Total Petrochemical’s joint-venture (JV) olefins unit at Port Arthur, Texas, on Thursday afternoon, 11 June, 2020. The cause of the outage is being investigated, with a compressor shutdown cited as a possible factor, according to TCEQ filing. The JV’s steam cracker at Port Arthur has a production capacity of more than 1 million metric tons/year of ethylene and 544,000 metric tons/year of propylene, according to IHS Markit data.

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.
MRC