Crude futures rise as market eyes possible OPEC+ intervention

MOSCOW (MRC) -- Crude oil rose during the mid-morning trade in Asia Nov. 12, as indications that OPEC+ may deepen production cuts in 2021 kept the market afloat even as a rally seen due to a promising Pfizer and BioNTech vaccine ran out of steam, reported S&P Global.

Now At 10:54 am Singapore time (0254 GMT), ICE Brent January crude futures were up 43 cents/b (0.98%) from the Nov. 11 settle to USD44.23/b, while the NYMEX December light sweet crude contract was up 44 cents/b (1.06%) at USD41.89/b. Both markers had risen 0.44% and 0.22% on Nov. 11 to settle at USD43.80/b and USD41.45/b, respectively.

Optimism over OPEC+ intervention continued to fuel the uptrend in prices, after Algerian energy minister Abdelmajid Attar, who holds OPEC's rotating presidency, said that the OPEC+ alliance's current 7.7 million b/d in output cuts could be maintained into 2021 instead of being eased as originally planned, or even extended.

At a Gas Exporting Countries Forum ministerial roundtable convened ahead of the body's formal meeting Nov. 12, Attar reassured the market that the OPEC+ alliance remains committed to preventing another slide in oil prices, and said that doing so "includes the possibility of extending today's production adjustment into 2021 as well as deepening this adjustment should market conditions so require."

Vandana Hari, CEO at Vanda Insights, however, told S&P Global Platts on Nov. 12, "There have been some hints from the OPEC+ regarding the status of the production cuts. But the market is still awaiting definitive statements and the alliance is still keeping its cards close to its chest. It is possible right now, with the recent rise in crude prices, that the alliance may now be more dovish on supply."

Hari also added that the rally built upon vaccine hopes was coming to an end, as "indicated on Nov. 11 alone, when Brent traded well above $45/b at during the intraday trading period but the settlement was much lower than the intradays highs."

Hari surmised that until further development, the trajectory of the prices will once again depend on the progression of the coronavirus pandemic in the coming winter months.

In the background, COVID-19 infections have surged in the US and much of Europe remains under some degree of lockdown, forcing the OPEC to turn more bearish on the global oil demand outlook.

In its monthly report released Nov. 11, the OPEC revised down its projections of global demand by 280,000 b/d for 2020 and by 580,000 b/d for 2021.

The alliance said: "The oil demand recovery will be severely hampered and sluggishness in transportation and industrial fuel demand is now assumed to last until mid-2021. "

As MRC informed previously, global oil demand may have already peaked, according to BP's latest long-term energy outlook, as the COVID-19 pandemic kicks the world economy onto a weaker growth trajectory and accelerates the shift to cleaner fuels.

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).

ccording to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

MOSCOW (MRC) -- The global polyolefins market is expected to decline in 2020 due to weaker end-market demand from applications such as construction, automotive and industrial. However, the pandemic-driven feeble demand is partially offset by strong and increased demand from sectors such as packaging, fast-moving consumer goods (FMCG), and healthcare, according to Hydrocarbonprocessing with reference to GlobalData.

When asked about the weak market demand for polyolefins, David Leggett, Automotive Analyst at GlobalData, comments: "The global auto industry is facing a pandemic-led sales decline of 16-17% this year. That translates to much lower demand for materials such as polyolefins in automotive manufacturing. Although the global vehicle market is in recovery phase, the outlook for sales remains uncertain while the pandemic and its adverse economic impacts, persists. The underlying level of demand is not forecast to recover to pre-pandemic levels until 2023".

While some industries are struggling, meanwhile, the strong gains of polyolefin use within FMCG and packaging may be due to consumer behavior. Carmen Bryan, Consumer Analyst at GlobalData, notes: "The COVID-19 pandemic has led many consumers to report being more cautious when buying food and FMCG products. Many have reverted to more traditional packaging materials such as PET, despite ongoing environmental concerns, as these are perceived as safer and more hygienic. In fact, 53% of respondents to GlobalData’s survey in June noted that they are concerned about the safety of product packaging amid the pandemic - a concern that has remained relatively stable over the past few months, standing at 50% as of the October survey. This suggests the emergence of a new trend as single-use plastics that securely seal food and beverages return to popularity."

John Paul Somavarapu, Oil and Gas Analyst at GlobalData, comments: “With the gradual appreciation of economic activity, the demand for polyethylene and polypropylene is likely to improve towards the end of 2020 and maintain the upward momentum from 2021.

“The pandemic has impacted the demand for polyethylene and polypropylene in the shorter term. Consequently, polyolefin producers have either lowered operating rates, halted operations or declared force majeure to withstand the challenging economic conditions. Petrochemical companies are closely monitoring economic developments and would undertake a strategic review of the progress and development of key projects.”

In response to the economic impact of COVID-19 on sectors worldwide, major petrochemical companies have preferred deferring final investment decisions (FIDs) or delaying project execution wherever possible. For instance, FIDs of PT Chandra Asri Perkasa Cilegon Polyolefin projects have been postponed from 2021 to 2022, while the PTT Global Chemical Belmont County project has been postponed to Q1 2021 from the initially planned 2020.

Somavarapu notes: “Although prospects for additional FIDs in the sector look challenging, companies look to focus on key projects and ensure the completion of these projects on priority.”

Polyolefin capacity additions are largely concentrated in Asia - primarily China and India - that target self-sufficiency to meet the existing and growing demand in their respective countries. Other majors such as Russia, Iran and the US also have a significant capacity addition.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers" inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

MOSCOW (MRC) -- Total is seeking to sell stakes in a number of Angolan oilfields, in what is seen as an early sign of an expected wave of divestments by big energy companies from the West African country, reported Reuters with reference to industry sources.

Total could raise around USD300 million from the sale of its 20% stake in Angola’s offshore Block 14, which includes the Tombua-Landana, Kuito fields as well as a cluster of fields that make the BBLT project, the sources said.

Chevron-operated Block 14 produced around 40,000 barrels of oil equivalent per day in 2019.

Total declined to comment.

The sale of Total’s stake in Block 14 is part of the company’s drive to focus on its larger and more profitable oil and gas fields in Angola, where it remains the largest operator, one of the sources said.

Last December, Total and its partners extended their production license in Angola’s giant Block 17.

Total and rivals including BP, Chevron and Exxon Mobil aim to sell tens of billions worth of oil and gas assets around the world in the coming years to reduce debt that ballooned following the collapse in oil prices due to the coronavirus crisis.

Those disposals are expected to include a number of stakes in Angolan oilfields, where production is generally more complex and expensive than other basins, the sources said.

For the European companies, the sales are also part of a long-term strategy to shift away from fossil fuels to renewable energy and power markets to reduce greenhouse gas emissions.

Unlike most big oil companies, Total does not provide a clear divestment target.

HSBC analysts, however, estimate that Total will sell around 200,000 bpd of production over the coming decade to meet its target of keeping production unchanged until 2025.

As MRC wrote earlier, within the framework of its net zero strategy, Total will convert its Grandpuits refinery (Seine-et-Marne) into a zero-crude platform and will invest more then EUR500 mln into this project. By 2024 the platform will focus on four new industrial activities: production of renewable diesel primarily intended for the aviation industry, production of bioplastics, plastics recycling and operation of two photovoltaic solar power plants.

We remind that in November 2019, Total disclosed that itis evaluating construction of a new gas cracker at its Deasan, South Korea, joint venture (JV) with Hanwha Chemical.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
MRC

MOSCOW (MRC) -- The world's public development banks have pledged to align their financial firepower with the Paris Agreement on climate change, but avoided a firm commitment to phase out fossil fuel financing, said Hydrocarbonprocessing.

As a source of funding for many large infrastructure projects, including in the energy sector, public development institutions are key to efforts to steer finance away from fossil fuels and into low-carbon projects. Together, such institutions invest around USD2.3 trillion each year - equivalent to 10% of all global investments from public and private sources.

At a green finance summit organized by the French government, the world's 450 public development banks said they would "increase the pace and coverage" of investment in renewable energy, energy efficiency and clean technologies. However, the group stopped short of pledging to phase out fossil fuel investments, a step announced last week by a smaller group of European development banks, while the Asian Development Bank (ADB) refrained from signing the declaration.

The group said it would work towards adopting a tougher stance on the narrower issue of investment in coal - responsible for a large share of the world's carbon emissions - in time for the next round of global climate talks in Scotland in 2021. "We will consider the range of fossil fuel investments in our portfolios, avoid stranded assets, and work towards applying more stringent investment criteria, such as explicit policies to exit from coal financing in the perspective of COP26," the group said in its declaration, seen by Reuters.

Remy Rioux, chief executive of the French Development Agency (AFD), told Reuters the final declaration - the first-ever such joint statement by the world's development banks - should prove a springboard for more action. "We pushed for the most ambitious text and I think the results are fantastic," Rioux told Reuters. Despite the prospect for the pledge to be toughened over time, sources spoken to by Reuters said it had been watered down, compared with a previous draft dated July.

That had included a clearer commitment to "develop explicit policies to exit from or reduce fossil fuels investments." This would have covered all fossil fuels - including oil and gas - while the final version only explicitly targets coal.

Two sources told Reuters the weaker wording was partly the result of pressure from Asian lenders. Some, including the Japan International Cooperation Agency (JICA), were even concerned about the language in the agreed declaration, they added. A spokeswoman for JICA declined to address that point, but said it had negotiated in line with the country's recent pledge to be carbon neutral by 2050 and would sign the declaration.

The ADB said it would not sign it at all. "ADB supports many of the elements of the Summit Declaration but will not be signing it, as it contains policy commitments that have not yet been deliberated by the ADB Board," said Woochong Um, the director general of its Sustainable Development and Climate Change Department.

As MRC informed earlier, Russia's output of chemical products rose in September 2020 by 6.7% year on year. At the same time, production of basic chemicals increased by 6.1% year on year in the first nine months of 2020, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-September output. Last month's production of primary polymers decreased to 852,000 tonnes from 888,000 tonnes in August due to shutdowns in Tomsk, Ufa and Kazan. Overall output of polymers in primary form totalled 7,480,000 tonnes over the stated period, up by 16.4% year on year.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

MOSCOW (MRC) -- K+S (Kassel, Germany) has reported an adjusted group net loss of EUR1.97 billion (USD2.33 billion) for the third quarter, plunging year on year (YOY) from a loss of EUR41.8 million, due mainly to a EUR2.0-billion write-down of the company's potash assets after it lowered assumptions for long-term global potash prices, said Chemweek.

The company says its adjusted earnings were “strongly negative” due to the extraordinary non-cash impairment of its potash assets and a higher cost of capital rate. EBITDA, however, rose 19% YOY to EUR96.0 million for the third quarter despite a 9% decline in sales to EUR821.7 million.

K+S says it expects a “slight recovery” in potassium chloride (KCl) prices for the rest of this year compared with the third quarter, with prices for fertilizer specialties to remain “largely stable.” It has reaffirmed its full-year guidance for EBITDA of about EUR480 million, down from EUR640 million in 2019. Adjusted net earnings will fall to a “significantly negative figure” as a result of the EUR2.0-billion impairment, it says.

The USD3.2-billion sale of the K+S Americas salt business to Stone Canyon Industries Holdings and affiliates, announced in October, is expected to complete in the summer of 2021, according to the company. “With the proceeds from the sale of the American salt business and the consistent implementation of our package of measures, we will significantly reduce the company’s debt and secure financing for the coming years,” says K+S chairman Burkhard Lohr. “With the impairment in the third quarter, we have now also adjusted the balance sheet. All this increases our flexibility for developing the company further."

The company’s Americas operating unit saw increased earnings contributions in its industry and consumers customer segments, which together with strict cost discipline almost completely offset the effects of lower early de-icing salt fills, it says. EBITDA of EUR24.4 million for the third quarter was down EUR1.0 million YOY on sales almost 9% lower at EUR257.7 million. A higher KCl price level could not compensate for lower volumes and an unfavorable exchange rate, it says.

The Europe+ operating unit saw operating earnings rise 26% YOY to EUR84.8 million despite a decline of more than 9% in revenue to EUR562.6 million, mainly attributable to the weaker KCl price as well as currency effects.

The ongoing restructuring of administrative functions within K+S in Germany is expected to be completed by the end of this year and reduce annualized costs by EUR60.0-140.0 million from 2021, it says.

As MRC informed earlier, in September, 2.014 million tons of mineral fertilizers were produced (in terms of 100% nutrients) against 1.993 million tons a month earlier. In general, in January - September 2020, Russian enterprises produced just over 18.5 million tons of fertilizers, which is 3.5% more than in 2019.

Also, in 2019, Russian enterprises produced 23.588 million tons of fertilizers, which is 3.2% more than in 2018.
MRC