Crude oil futures remain lower on weak demand outlook, bearish sentiment

MOSCOW (MRC) -- Crude oil futures were lower in mid-morning trade in Asia Sept. 9 as the global crude complex continued to grapple with a weak demand outlook at the end of the US driving season and a rise in COVID-19 infections worldwide, reporte S&P Global.

At 10:46 am Singapore time (0246 GMT), ICE Brent November crude futures were down 20 cents/b (0.50%) from the Sept. 8 settle at USD39.58/b, while the NYMEX October light sweet crude contract was 24 cents/b (0.65%) lower at USD36.52/b.

"Downward pressure on oil has continued, with ICE Brent futures closing more than 5% lower yesterday, and crucially below the $40/b level. There was no clear catalyst for the move, however a stronger US dollar and weaker equities would have done little to help sentiment, not just for oil, but the broader commodities complex," ING analysts said in a note Sept. 9.

The global crude complex has retreated in recent days as a multitude of negative factors weighed heavily on market sentiment. These include the end of the US driving season and the start of the extended maintenance season for US refineries, which will see a tapering of demand for gasoline and crude, as well as slower buying by China in August as its stocks approach maximum storage capacity.

Combined with a stronger dollar and weaker risk sentiment, which further dented demand across the commodities complex, ICE Brent futures have fallen 13.7% in two weeks since settling at USD45.86/b Aug. 25, a two-week high, while WTI has fallen 15.8% since settling at USD43.39/b on Aug. 26, S&P Global Platts data showed.

As a result, front-month inter-month timespreads for ICE Brent futures have turned significantly more bearish, with the November/December timespread assessed at minus 55 cents/b Sept. 8, Platts data showed.

"Timespreads continue to edge deeper into contango, while the physical market is weaker; over the last few days we have had both Aramco from Saudi Arabia and Abu Dhabi National Oil Company, or ADNOC, from the UAE cutting official selling prices for their crude oil. Both of their flagship grades are now at discounts to their benchmark, which is not a great signal for demand," ING analysts said in a note Sept. 9.

ADNOC set the October OSP for its flagship Murban crude at Platts Dubai minus 50 cents/b, down USD1.35/b from September, and medium sour Upper Zakum grade at a discount of 70 cents/b against Platts Dubai, down USD1.35/b, Platts earlier reported.

Meanwhile, global COVID-19 infections continue to rise to more than 200,000 infections/day, while global deaths approach the 900,000 mark, latest John Hopkins University data showed.

Market participants were awaiting the release of weekly US inventory reports by the American Petroleum Institute later Sept. 9 and the Energy Information Administration on Sept. 10 for fresh cues on price direction.

At 10:46 am Singapore time (0246 GMT), the US dollar index stood at 93.510, up 0.07% from the previous close at 93.441, while the NYMEX October RBOB stood at USD1.0985, down 0.39% from its previous settle at USD1.1028/gal.

As MRC informed before, Abu Dhabi National Oil Co, the UAE's biggest energy producer, and Abu Dhabi conglomerate ADQ will set up an investment platform to fund local chemicals projects amid a push to invest USD45 billion in downstream activities. The joint venture will oversee the development of projects in the planned Ruwais Derivatives Park, which is part of the Ruwais industrial hub in the emirate of Abu Dhabi, ADNOC said in its statement in late July. The venture will allow ADNOC to further its aims to boost operations in petrochemicals and other downstream lines. It didn't disclose funds being made available.

We remind that in early May, 2020, ADNOC began a gradual restart of its Ruwais oil refinery complex after a scheduled maintenance shutdown. The Ruwais complex, which has capacity of 835,000 barrels per day, was shut down early this year, the ADNOC spokesman said.

And 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.

NSRP shut PP plant in Vietnam due to an unexpected technical issue

MOSCOW (MRC) -- Nghi Son Refinery & Petrochemical (NSRP) has been facing a persistent technical issue that forces the company to take its polypropylene (PP) unit in Vietnam off-stream for a week starting 7 September for repair, reported CommoPlast.

The 370,000 tons/year PP line was operating at reduced rates over the past couple of weeks before the shutdown.

As MRC wrote previously, in late June, 2020, NSRP was operating its PP plant in Vietnam at about 70% capacity following a change in the catalyst used in the production processes. The unit restored the normal rates in ten days.

We remind that NSRP shut its PP unit on 21 June, 2019, owing to technical issues. The exact duration of the shutdown could not be ascertained. Besides, the company conducted a scheduled maitenance at this unit from 22 October, 2019, to end-November, 2019.

We also remind that Vietnam’s Nghi Son oil refinery officially began commercial production from 14 November 2018, following months of tests. The USD9 billion refinery is 35.1 percent owned by Japan’s Idemitsu Kosan Co, 35.1 percent by Kuwait Petroleum, 25.1 percent by PetroVietnam and 4.7 percent by Mitsui Chemicals Inc.

According to MRC's ScanPlast report, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.

Circular solution to plastics waste crisis faces numerous hurdles

MOSCOW (MRC) -- Addressing the plastics waste crisis and achieving the circular economy in the European Union through recycling will require new technologies and significant collaboration and investment, say speakers at a waste management and recycling session during the IHS Markit PEPP 2020 Online: Annual Polyethylene-Polypropylene Chain Global Technology & Business Forum, currently underway, reported Chemweek.

Although advances have already been made thanks to technology innovation, investment in infrastructure, and sustainability-focused brands, many challenges remain, largely around aligning regulations, collection, sorting, logistics, conversion, downstream processing, and consumer acceptance to create an economically viable supply chain.

Martin Wiesweg, Executive Director Polymers EMEA, IHS Markit, believes that Europe’s target of recycling 50% of plastic packaging waste by 2025 will be a challenge for industry, but notes that it is attracting billions of dollars in investments. Currently, about half of Europe’s PE films - about 9 million tons of waste material from the packaging, agriculture, and commercial markets - is collected.

But, Wiesweg notes, yields are mixed. “Ag films often contain dirt, so they are high contaminated. Yields there are about 45%,” he says. “Household waste is similarly difficult, and it is very hard to differentiate between PE and PP films. There, about half is recycled.” Commercial waste fares better, with efficient collection and relatively “clean” materials. Yields there are above 80%. “Taken together, PE film yield efficiency is almost 70%, so about 1.8 million tons [of material] is returning to the market,” he says.

Wiesweg also noted that 2020 has been an “awful year” for recycling. “Virgin materials have been at extremely low prices and it is very hard for recycled materials to be competitive,” he says. Bottle-to-bottle polyethylene terephthalate (PET) recycling is supported by strong, recycled-content commitments from brand owners like Coca-Cola, who have remained steadfast to their targets even amid COVID-19, but flake PET for sheet markets “are seeing very difficult times.”

Looking ahead, the EU plastics tax, which comes into effect 1 January 2021 and adds an €0.8 per kilogram tax on nonrecycled plastic packaging waste, will change these economics. Actual imposition of the tax will vary by member country, Wiesweg adds. “We don’t see a single European solution.”

Mark Morgan, Vice President, Chemicals Consulting, IHS Markit, says the circular economy concept is at an “embryonic” stage, with promising technologies but uncertainty of how the supply chain will come together to make it a reality. He notes that chemical recycling - the processing of waste plastics into other chemical building blocks for plastics - has been successfully deployed at small scale. “These units are 20,000 m.t. per year, but if you compare that to the amount of naphtha you need for a typical cracker, it’s less than 1%,” he says. “In terms of economic impact, it’s very small, but it’s a start.”

If legislation gets aggressive and cracker operators find themselves facing a 10% cracking mandate, technology and supply chain will have to “step up,” Morgan says, adding that some chemical recycling technologies have the potential to be scaled to that level. “But it also begs the question - what about upstream? Logistics? How do we get the plastic waste out of homes and to a sorting center at such scale? I am also personally concerned about the fact that there has to be a viable business case for everyone in the chain - cracker operators, customers, logistics, sorters, they all have different business models. Scale and logistics together with the right technology will be required.”

Manica Ulcnik-Krump, head, Recycled Resource, at recycling services provider Interseroh (Cologne, Germany) discussed the challenges related to mechanical recycling of mixed plastics and downstream limitations. “Markets for recycled materials often require high quality and adjustments of properties with additives,” she notes. “It poses the question: Is it really possible to offer the market high-value materials from post-consumer waste?”

There is also a misconception that unlimited amounts of certain materials exist.

“There can be many different polyolefins in a waste steam. In Germany, we have well-established collection schemes collecting 2.5 million tons of light packaging waste [annually],” of which about 8% is polypropylene," Ulcnik-Krump says. “We also tend to have a lower yield because light packaging waste is very contaminated with organics.” In reality, only about 206,000 tons of recycled PP is available, she adds.

Brand owner expectations of recycled plastics is also “really far from what is possible to offer,” Ulcnik-Krump adds. “You will have different colors and qualities.” Brand owners often want white or transparent materials, but that is only available in very small quantities. “We are always asked about bright colors or transparent materials, and I have to be honest, we just don’t have it.” Also, recycled post-consumer waste can never be recycled into food-grade material because of EU legislation requiring 100% traceability.

When asked if a circular economy is possible in the EU, Ulcnik-Krump says the current targets are very ambitious. “There is no issue with the technology, it exists. The collection schemes exist, especially in Western Europe. The difficulty is the commercial aspect. The material needs to be collected, sorted, ground, washed and reprocessed. The cost of mechanically recycled plastics is not the cost of the material - it is the cost of the process. And with extremely low prices for virgin material, it is difficult to compete. But when the recycled material is good quality, sustainable companies are willing to pay.”

Jairo Paternina, Senior Consultant, Jenike & Johanson, Inc, a provider of powder and bulk solids handling, processing, and storage technology, also discussed the challenges for processors of mechanically recycled plastics, such as the existence of volatile organic compounds (VOCs). “If you are not operating well [and stripping VOCs], you will have high residuals going to extrusion, which can create safety risks and expose a company to noncompliance and environmental penalties.” Uniformity is also an issue. “If you shred, you have all sorts of particle sizes and interlocking problems,” Paternina says. “ It is difficult to design a good handling systems for non-uniform material, unlike virgin pellets. Significant issues with equipment handling these types of materials can cause big headaches and stop a plant from reaching nameplate design.”

As MRC informed before, 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.

Fluor starts up two boilers at Al-Zour refinery complex

MOSCOW (MRC) -- Fluor Corporation announced that its joint venture with Daewoo Engineering & Construction and Hyundai Heavy Industries, FDH JV, has successfully started up two boilers and they began generating steam in the new Al-Zour Refinery at the Kuwait Integrated Petrochemicals Industrial Company’s (KIPIC) Package 2 and 3 Project in Kuwait, said the company.

"Working together with the Fluor-led joint venture to achieve this important milestone for the ZOR Program is a true success – not only for KIPIC, but for the State of Kuwait – and will help bring energy self-sufficiency and further prosperity for all of us."

Fluor is leading a joint venture that is working to deliver two engineering, procurement, fabrication and construction packages for key process support units, utilities and infrastructure for the highly complex, mega-sized Al-Zour Refinery project in Kuwait. Upon completion, the grassroots complex is expected to be one of the largest refineries in the world and process 615,000 barrels of oil per day.

"This significant milestone marks the completion of several critical utility systems to start up and advance the refinery into commercial operations with our ongoing support,” said Mark Fields, president of Fluor’s global Energy & Chemicals business. “Timely delivery of the new Al-Zour Refinery is critical to the Kuwait economy. Our team worked closely with KIPIC to continue with about 15,000 workers on site to maintain progress throughout the COVID-19 pandemic. This accomplishment was made possible through the joint venture team’s well-conceived health and safety strategy that was implemented with rigorous discipline."

"Working together with the Fluor-led joint venture to achieve this important milestone for the ZOR Program is a true success – not only for KIPIC, but for the State of Kuwait – and will help bring energy self-sufficiency and further prosperity for all of us," said Khaled Al-Awadhi, deputy CEO of KIPIC.

Leading up to this achievement, various enabling facilities were successfully completed and handed over including the central control room building and other associated buildings, fire water systems, communication systems and other refinery infrastructure. COOEC Fluor Heavy Industries Co., Ltd. – Fluor’s joint venture fabrication yard in Zhuhai, China – also delivered 188 modules with a combined weight of 65,000 metric tons to support the project’s large-scale, onshore modular execution strategy.

The Fluor joint venture has executed more than 154 million work hours on site, and at peak, employed more than 20,000 craft workers backed by joint venture team members spread across three continents.

As MRC informed earlier, Fluor Corporation has announced that it was recently awarded a contract to provide engineering, procurement and construction for a new 400 kilo-ton-per-annum adiponitrile (ADN) plant in Shanghai, China. The new ADN plant is part of INVISTA’s ongoing work at the Shanghai Chemical Industry Park where the company recently completed a 215 kilo-ton-per-annum hexamethylenediamine (HMD) plant and a 150 kilo-ton-per-annum nylon 6,6 polymer plant. Fluor booked the undisclosed contract value in the fourth quarter of 2019.

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.

Fluor Corporation is a global engineering, procurement, fabrication, construction and maintenance company with projects and offices on six continents. Fluor’s 47,000 employees build a better world by designing, constructing and maintaining safe, well-executed, capital-efficient projects. Fluor is ranked 181 among the Fortune 500 companies. With headquarters in Irving, Texas, Fluor has served its clients for more than 100 years.

Chevron Phillips Chemical delays final investment decision on USGC petrochemical JV with QP

MOSCOW (MRC) -- Chevron Phillips Chemical has deferred a final investment decision on a USD8 billion joint venture petrochemical complex project along the US Gulf Coast that was expected in 2021, reported S&P Global with reference to Phillips 66's statement.

Company executives did not mention the project or its FID deferral during a second-quarter 2020 earnings call, as discussions focused largely on coronavirus pandemic fallout on Phillips 66's crude oil and refined fuels businesses.
The company's earnings release noted the FID deferral, but did not specify a new target date.

The project, in partnership with Qatar Petroleum (QP), was announced in July 2019. It is slated to include a 2 million mt/year cracker and two 1 million mt/year high density polyethylene plants. The FID delay will also push the original target startup date past 2024.

Documents filed in January 2019 with the Texas Comptroller's office said CP Chem, a joint venture of Phillips 66 and Chevron, was evaluating the purchase of 1,700 acres in Orange, east of Beaumont in far southeastern Texas, as a possible site for the project.

Phillips 66 reported a net loss of USD141 million in Q2, compared with a USD1.4 billion profit in the year-ago period.

The company said it operated its chemical segment at 103% utilization and recorded record polyethylene sales volumes.

CEO Greg Garland said polyethylene prices have risen in the US, Europe and Asia, in part because of a rebound in crude prices on top of strong demand for consumer plastics amid the global coronavirus pandemic.

"The consumer part is doing really well," he said. "The durables is still challenging, but improving, so think automotive and others."

Consumer plastics include single-use items made with polyethylene like grocery bags, milk jugs, shampoo bottles and diapers. Durables include plastics in vehicles, appliances and other items used longer term.

Garland said consumer markets are seeing two top trends, hygiene and "nesting," or consumers who are buying more products for in-home use.

"They're cooking more. They're using more disposables. They're using more trash bags. They're buying more bottled water that's wrapped in plastic," he said.

In addition, consumers are buying more kayaks and coolers for outside activities as well as home improvement products packaged in plastics, both of which boost demand for high density polyethylene (HDPE).

"I think we're constructive on the demand side. And I would say strong demand, weak to improving margins, and that's what we're running into," Garland said.

As MRC reported earlier, Chevron Phillips Chemical, part of Chevron Corporation, declared force majeure Sept. 1 on its polyethylene (PE) products after assessing the impact of Hurricane Laura to its Gulf Coast PE operations.

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

Headquartered in San Ramon, California, Chevron Corporation is the the second-largest integrated energy company in the United States and among the largest corporations in the world. Chevron is involved in upstream activities including exploration and production, downstream activities including refining, marketing and transportation, and advanced energy technology. Chevron is also invested in power generation and gasification processes.