COVID-19 - News digest as of 27.01.2021

1. Reliance Industries shares fall nearly 5% as COVID-19 hits oil business

MOSCOW (MRC) -- Shares of Reliance Industries Ltd fell as much as 4.7% in early trade on Monday after the Indian conglomerate posted a sharp drop in quarterly revenue from its dominant oil-to-chemicals business, reported Hydrocarbonprocessing. Reliance, which operates the world’s largest refining complex, said on Friday revenue from its oil-to-chemicals division fell nearly 30% in the three months ended Dec. 31. Total revenue slid 21% to 1.24 trillion rupees, and the company said its operations and revenue during the period were impacted by the COVID-19 pandemic.


Fire at Ufaorgsintez did not lead to shutdowns of PE and PP production

MOSCOW (MRC) -- A fire at Ufaorgsintez (a subsidiary of ANK Bashneft, part of PJSC "NK Rosneft") did not lead to a shutdown of low density polyethylene (LDPE) and polypropylene (PP) production capacities, according to ICIS-MRC Price report.

On 25 January, two containers with a methane-hydrogen fraction caught fire at the Ufa plant, and the blaze was extinguished in the morning of 26 January. The plant's customers said the fire was not critical for polymer production. PP production has been operating normally, whereas the LDPE production has temporarily reduced its capacity utilisation, thus, production of 158 grade polyethylene (PE) was suspended.

As MRC reported earlier, Ufaorgsintez resumed PP production on 13 October, 2020 after the shutdown for a scheduled maintenance. The outage was quite long and started on 12 September. Ufaorgsintez's overall PP production capacities are 120,000 tonnes/year.

Ufaorgsintez is one of the largest Russian plants specializing in the large-scale production of high-quality organic synthesis products and polymer materials, providing about 30% of phenol produced in Russia, 15% of polyethylene and 8% of polypropylene. The company occupies a leading position in the country as regards the output of acetone and is the only manufacturer of rubber with dicyclopentanediene, and now also with ethylidene norbornene.

Crude searches for direction amid US stimulus headwinds, weaker dollar

MOSCOW (MRC) -- Crude oil futures finished a volatile session mixed Jan. 26 as the market searched for direction amid US stimulus headwinds and bullish economic data, reported S&P Global.

NYMEX March WTI settled down 16 cents at USD52.61/b, while ICE March Brent climbed 3 cents to USD55.91/b.

Newly elected US President Joe Biden is facing major hurdles to his USD1.9 trillion stimulus plan in the US Senate, where Democrats are unable to reach an agreement with their Republican counterparts over the size of the bill. With such high hopes placed on looser fiscal policy measures under a new administration, such political impasse has not gone down well with wider financial markets, including oil.

The US House of Representatives delivered to the Senate a single article of impeachment against former-President Donald Trump Jan. 26, setting the stage for a Senate trial that will likely supplant stimulus negotiations for the foreseeable future.

But downward price pressure was limited by a series of strong economic-indicator data and a weaker US dollar. US consumer confidence climbed to 89.3 in January, Conference Board data showed, up from a five-month low 87.1 and exceeding market expectations.

Meanwhile, the International Monetary Fund reported that it now expects global GDP to grow 5.5% in 2021, after a 3.5% contraction in 2020. The 2020 figure has been revised up 0.9 percentage point from the previous forecast issued in October, while the 2021 estimate is a 0.3 percentage point upward revision.

Oil prices will average just above USD50/b in 2021, a more than 21% rise from 2020's depressed level, as the rollout of vaccines and fiscal stimulus programs will help the global economy post a stronger-than-expected recovery from the pandemic, IMF said.

The ICE US Dollar Index was testing two-week lows at around 90.13 in afternoon trading.

Refined product futures finished the session higher. NYMEX February RBOB settled up 1.96 cents at USD1.5807/gal and February ULSD climbed 45 points to USD1.5984/gal.

RBOB cracks continued to rally on the back of easing US lockdowns and expectations of tightened supply. The ICE New York Harbor RBOB crack versus Brent climbed to around USD10.22/b in afternoon trading, on pace for the highest close since mid-June.

California on Jan. 25 lifted a regional stay-at-home order that affected the vast majority of state residents. New York Governor Andrew Cuomo said Jan. 25 said that the state is planning to ease some restrictions amid a slowdown in new cases.

Analysts surveyed by S&P Global Platts Jan. 25 expected a 1.2 million-barrel build in US gasoline inventories for the week ended Jan. 22, widening the inventory deficit to the five-year average of US Energy Information Administration data to 2.4%.

As MRC informed previously, oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, according to an official with International Energy Agency's (IEA) statement.

We remind that the COVID-19 outbreak has led to an unprecedented decline in demand affecting all sections of the Russian economy, which has impacted the demand for petrochemicals in the short-term. However, the pandemic triggered an increase in the demand for polymers in food packaging, and cleaning and hygiene products, according to GlobalData, a leading data and analytics company. With Russian petrochemical companies having the advantage of access to low-cost feedstock, and proximity to demand-rich Asian (primarily China) and European markets for the supply of petrochemical products, these companies appear to be well-positioned to derive full benefits from an improving market environment and global economy post-COVID-19, says GlobalData.

We also remind that in December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on potential investments in Uzbekistan including a major expansion of Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed construction of a new gas chemicals facility. The signed cooperation agreement for the projects includes “the creation of a gas chemical complex using methanol-to-olefins (MTO) technology, and the expansion of the production capacity of the Shurtan Gas Chemical Complex”.

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

According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

US Gulf braces for more benzene cargoes from South Korea as volumes hit new highs

MOSCOW (MRC) -- Benzene exports from South Korea have increased as prices spiked globally, leading to more than 204,000 metric tons being loaded for export in December for destinations worldwide, said Chemweek.

The last time that South Korean export volumes were near this level was in April 2020. Since then, the country’s exports of benzene have fallen from 196,000 metric tons in both May and June to 147,000 metric tons in October, at a time when low benzene prices and poor margins for para-xylene caused producers in South Korea to throttle back benzene output.

However, the final six weeks of 2020 saw benzene prices spike in North America and Europe as traders and consumers become concerned about availability as styrene monomer prices were also spiking.

In December 2020 more than 80,000 metric tons of benzene departed South Korea for the US Gulf Coast (USGC), the highest since February last year. About 10,000-15,000 metric tons of that volume was the result of delayed November loadings that became early-December departures. November benzene volumes from South Korea to the USGC had been expected to be around 35,000 metric tons and ended up at 23,000 metric tons instead.

The higher benzene prices in the USGC and Europe attracted more supply. With Indian benzene moving to the EU, China pulled in over 100,000 metric tons from South Korea, the highest volume to load from there to China since June 2020.

The driving factor behind the higher benzene prices and better margins remains the stronger end demand for styrene, phenol, and methylene di-para-phenylene diisocyanate (MDI). COVID-19 has changed consumer behavior and caused spikes in demand for food packaging and single-use plastics, and has even improved automobile demand in some regions.

The spot benzene price in North America on 10 November was USD1.68/gallon (gal) for the prompt month. One month later, the prompt month benzene price was USD2.56/gal for North America, an increase of USD0.88/gal, or USD263/metric ton. Such a steep price increase has improved benzene margins for the various production methods, including heavier steam cracker feedstocks, refinery extraction, and selective disproportionation (STDP) units.

Producers noticeably began to increase benzene production in both South Korea and North America by December. North America saw the STDP units increase rates, and domestic producers begin to sell more barrels into the spot market. At the same time, the frenzy of cargoes being booked from South Korea resulted in the 58,000 metric tons loading increase between October and December.

When producers in South Korea are running at high rates, their monthly benzene exports can reach upward of 260,000 metric tons. South Korean derivative production rates or turnarounds also impact how much benzene is exported from month to month.

North American benzene supply is expected to be more plentiful in January than was initially expected in November 2020. The high prices were not sustainable, however, as the influx of cargoes into the USGC combined with US sellers diverting as much supply as possible into the spot market caused prices to ease. The benzene spread over gasoline narrowed from USD1.50/gal on 9 December to USD1.20/gal this week as traders and consumers adjusted their price expectations now that more supply has been made apparent. That includes the consideration that up to 40,000 metric tons of benzene was exported from the USGC to Europe between December and January scheduled loadings, some of which was made available due to unplanned derivative production issues at US styrene and/or phenol plants.

Along with phenol, acetone is largely used to produce bisphenol A (BPA), which, in its turn, is used in the production of plastics such as polycarbonate (PC) and epoxy resins.

According to MRC's ScanPlast report, Russia's estimated consumption of PC granules (excluding imports and exports to\from Belarus) rose in January-November 2020 by 18% year on year to 83,600 tonnes (70,600 tonnes a year earlier).

OPEC+ resumes talks amid divide on February oil output levels

MOSCOW (MRC) -- Top oil producers resume debate on policy after talks stumbled over February supply levels, with Russia leading calls for higher output and others suggesting holding or even cutting production due to new coronavirus lockdowns, said Hydrocarbonprocessing.

Talks are set to restart at 1430 GMT after the OPEC+ group, which combines OPEC and other producers including Russia, failed to find a compromise on Monday. OPEC+ sources told Reuters that Russia and Kazakhstan backed raising production by 0.5 million barrels per day (bpd) while Iraq, Nigeria and the United Arab Emirates suggested holding output steady.

An internal OPEC document, seen by Reuters on Tuesday and dated Jan. 4, suggested a 0.5 million bpd cut in February as part of several scenarios considered for 2021. The document also said that the OPEC+ joint ministerial committee highlighted bearish risks and "stressed that the reimplementation of COVID-19 containment measures across continents, including full lockdowns, are dampening the oil demand rebound in 2021".

Three OPEC+ sources said chances of a cut were slim as very few producers supported it and most countries favoured either steady supply or an increase in February. "Two clear factions have formed - the Saudi-led proposal for a cautious approach to maintain oil prices and the Russia-led clarion call for a swifter return of supply to the market," said Louise Dickson from Rystad Energy.

On Monday, Saudi Energy Minister Prince Abdulaziz bin Salman said OPEC+ should be cautious, despite a generally optimistic market environment, as demand for fuel remained fragile and variants of the coronavirus were unpredictable. New variants of the coronavirus first reported in Britain and South Africa have since been found in countries across the world.

With benchmark Brent oil futures holding above $50 per barrel, OPEC+ took the opportunity to raise output by 0.5 million bpd in January as it looked to eventually ease cuts that currently stand at 7.2 million bpd.

OPEC+ producers have been curbing output to support prices and reduce oversupply since January 2017 and cut a record 9.7 million bpd in mid-2020 as COVID-19 hammered demand for gasoline and aviation fuel.

As MRC informed earlier, in October 2019, McDermott International announced that it had been awarded a contract by Saudi Aramco and Total Raffinage Chimie (Total) for their joint venture (JV) Amiral steam cracker project at Jubail, Saudi Arabia. Amiral is a JV in which Aramco holds 62.5% and Total the rest. The plant, designed to produce 1.5 million metric tons/year (MMt/y) of ethylene, will be one of the world's largest mixed-feed crackers.

Aramco and Total launched their USD5-billion Amiral JV project in October 2018. The steam cracker will be fed with a mixture of 50% ethane and refinery off-gases. It will supply ethylene to a downstream 1 MMt/y polyethylene manufacturing complex and other petrochemical products. The project aims to fully exploit operational synergies with the adjacent refinery, owned by Satorp, another JV between Aramco and Total. Third-party investors, including Daelim and Ineos, will locate plants at the value park adjacent to Amiral with a combined investment of USD4 billion. A final investment decision is expected in 2021.

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

According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.