COVID-19 - News digest as of 28.01.2021

1. Chinese Jan-Feb crude throughput may remain at high levels despite slow demand

MOSCOW (MRC) -- China's crude throughput will likely remain at relatively high levels over January-February despite the slowdown in domestic fuel consumption for the Lunar New Year due to the resurgence in COVID-19 spread, as refiners aim to clear their hefty feedstock stockpiles and make full use of the country's sufficient refined product storage space, reported S&P Global. "Sufficient oil product storage space and hefty crude imports in January/February allow and force Chinese refineries to boost throughput prior to maintenance season in March-May," a Beijing-based analyst said. S&P Global Platts' data showed that average run rate at 39 refineries under the four big state-owned oil barrels - Sinopec, PetroChina, CNOOC and Sinochem - is at 80.3% in January, up from 78.2% in December.



MRC

MOSCOW (MRC) -- Saudi Arabia's "brilliant move" to unilaterally reduce oil output additionally by 1 million b/d has been a great contribution to the stabilization of the global oil market, reported S&P Global with reference to the statement of Kirill Dmitriev, the head of the Russian sovereign wealth fund RDIF, on Jan. 27.

Starting Feb. 1, Saudi Arabia is expected to severely lower its crude production to 8.119 million b/d instead of its OPEC+ quota of 9.119 million b/d. The pre-emptive cut was announced by energy minister Prince Abdulaziz bin Salman after the latest OPEC+ meeting on Jan. 4 in order to bring down oil inventories accumulated during the pandemic.

"The surprise cut that they have done recently is a really brilliant move that led to stabilization of the market joined by other OPEC members at the most critical time," Dmitriev, who has been leading Russia's diplomacy in Saudi Arabia alongside Deputy Prime Minister Alexander Novak, said at the Saudi Future Investment Initiative conference.

His comments come ahead of the group's next meeting on Feb. 3, where compliance with be monitored by the OPEC+ advisory committee.

Russia's own compliance with production quotas remains far from perfect, as the country seeks to gradually regain its market share.

Nevertheless, Dmitriev reiterated Russia's commitment to the OPEC+ agreement and applauded Saudi Arabia's leadership "in doing great things to producers and consumers."

"This partnership is an example of how we can also unite our efforts to address other issues that the world is facing. Energy is definitely something that we have done really well together," Dmitriev added.

His speech echoed Russian President Vladimir Putin's earlier address at the Davos forum. Putin deemed energy cooperation with Saudi Arabia and the US on energy productive "despite different and sometimes even opposite views on other global issues."

As MRC informed earlier, Saudi Aramco's shareholders may consider selling more shares of the company if market conditions are right. The Saudi government sold over 1.7% stake in Aramco in an initial public offering (IPO) in 2019 that raised a record USD29.4 billion.

We remind that 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.
MRC

MOSCOW (MRC) -- Argentina's state-backed energy company YPF plans to ramp up it investment 73% this year, with the brunt of the increased spending going toward rebuilding oil and natural gas production after a 10% slump in 2020, reported S&P Global with reference to a company source's statement Jan. 26.

YPF aims to increase investment in its upstream business more than 90% this year compared with 2020, making it possible to "stabilize" oil and gas production and set it up to return to growth despite the natural declines at maturing conventional fields, the source said on the condition of not being named, citing company policy.

The plan, however, hinges on "the availability of cash," the source added.

To free up cash for investment, the source said YPF is trying to restructure USD6.2 billion in international bonds, but so far bondholders have objected to its proposal. In response, the company has improved the offer to limit losses for bondholders while making a return to production growth more viable than if nothing were done.

"One of the objectives of this debt refinancing is to allocate funds to increase investments that make it possible to reverse the decline in the production of gas and oil in recent years," the source said.

Bondholders have until Feb. 8 to accept the offer.

Argentina's biggest oil and natural gas producer, YPF cannot readily borrow money on the international capital markets because the country is mired in its third year of a financial crisis, deterring lenders. This means it must rely on cash flow, which has been only slowly recovering after an eight-month lockdown of the economy last year slashed sales of diesel and gasoline. As a result, YPF's upstream and downstream investment plunged to USD934 million in the first nine months of 2020 from USD3.3 billion in all of 2019, according to company data.

In a November conference call with investors, YPF CEO Sergio Affronti said the company's total oil and gas production was likely to decline 10% in 2020 from 2019, but he added that as demand recovers the company will be able to gradually increase output.

YPF has since said that it plans to invest more in enhanced recovery techniques in its conventional fields to squeeze more out of the maturing reserves, while pursing growth in Vaca Muerta, one of the world's largest shale plays. The company wants to boost its share of crude production from Vaca Muerta to 25% of the total in 2021 from 20% in November 2020, and then take it to 45% or 50% in 2022 or 2023. YPF is the biggest producer in the play.

As MRC informed before, in 2015, Argentina's state-controlled YPF and the Argentinian unit of US-based Dow Chemical unveiled investment of USD500 mln to be dome in 2016, in orer to triple production at their existing shale gas joint venture, marking the first major upstream investment since a new government took over in December, 2015. The companies are partners in the El Orejano block, located in the Vaca Muerta shale formation in the southwestern province of Neuquen. That investment was aimed at increasing production to 2mn m3/d (70.6mn ft3/d) by the end of 2016, from the previous 750,000 m3/d, YPF said then.

As in March, 2019, YPF announced that it will invest around USD2 billion over the next five years to carry out a desulfurization process in two of its refineries. YPF will initially invest more than USD1 billion in its Mendoza province refinery and hire about 900 people to adapt the plant for the process. The rest of the investment will go towards the company’s refinery in La Plata.

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.
MRC

MOSCOW (MRC) -- US crude oil inventories moved sharply lower during the week ended Jan. 22 as exports surged and imports tested multimonth lows, reported S&P Global with reference to US Energy Information Administration data Jan. 27.

US commercial crude inventories declined 9.91 million barrels during the week ended Jan. 22 to a 10-month low of 476.65 million barrels, according to EIA data. It was the largest one-week draw since the week ended July 24 and left inventories just 6% above the five-year average, the narrowest supply overhang since early April.

All regions outside of the Rockies saw crude inventory draws last week, but the bulk of the decline was concentrated on the US Gulf Coast, where stocks fell 6.43 million barrels to 256.62 million barrels.

Midwest inventories moved 2.68 million-barrels lower on the week to 136.98 million barrels, driven largely by a 2.28 million-barrel decline at the NYMEX delivery point of Cushing, Oklahoma. Stocks there fell to 50.292 million barrels, the lowest since the week ended July 17.

Front-month NYMEX March WTI settled up 24 cents on Jan. 27 to USD52.85/b.

The crude draw came as exports surged 1.1 million b/d to 3.36 million b/d. The rise took exports to their highest average weekly level since the week ended on Jan. 1, and kept the four-week moving-average above 3 million b/d.

The uptick comes despite difficult arbitrage economics. The arbitrage for WTI MEH crude into Rotterdam against local Forties crude fell to a minus 34 cents/b incentive on Jan. 26 and has averaged just a 4 cents/b incentive through the first 26 days on January, according to the S&P Global Platts Crude Arbflow calculator. Through December, by comparison, the arbitrage incentive averaged 57 cents/b.

Adding further pressure to inventories, crude imports sank 980,000 b/d to a 12-week low of 5.06 million b/d. USGC imports slid 39% on the week and were the lowest since late August at 880,000 b/d, while Midwest imports were down around 18% from the week prior at 2.41 million b/d.

Resilient refinery demand likely also contributed to the crude draw. Total net crude inputs edged down just 40,000 b/d to 14.72 million b/d as the nationwide utilization rate fell to 81.7% of total capacity, a 0.8-percentage-point decline.

Refinery demand typically sees much larger declines in late January, and operators begin to idle capacity for shoulder season maintenance. EIA data shows a typical decline of net crude inputs of around 600,000 b/d over this period, and the relatively weak pullback seen last week pushed net inputs to just 8% behind the five-year average, the weakest deficit since the week ended March 20.

Notably, USGC net inputs were the strongest since late March after climbing 110,000 b/d to 8.11 million b/d as margins continued to edge higher. USGC WTI MEH cracking margins inched up 4 cents to USD8.43/b, while USGC coking margins for WCS ex-Nederland gained 31 cents to average USD8.32/b.

Total gasoline inventories climbed 2.47 million barrels to 247.69 million barrels as implied demand slipped 3.4% to 7.83 million b/d. The counter-seasonal decline left demand nearly 12% behind the five-year average, in line with levels seen earlier this month.

Apple Mobility data shows US driving activity was higher for a third straight week last week, climbing nearly 2% from the week prior and up nearly 3% from a late-December nadir. This discrepancy suggests a possible disconnect between actual end-user demand and the EIA figures, which are a proxy based on product disappearing from primary sources.

Front-month NYMEX February RBOB settled down 36 points at USD1.5771/gal on Jan. 27, while February ULSD finished up 1.05 cents at USD1.6089/gal.

Gasoline inventories climbed in all regions during the week ended Jan. 22, but stocks lost ground compared with the five-year average on the US Atlantic Coast and Midwest amid weaker-than-normal builds. USAC inventories moved to around 1.9% above normal, in from 3.4% the week prior, and Midwest stocks fell 7.7% behind average, up from a deficit of 6.9% last week.

Total distillate stocks declined 820,000 barrels to 162.85 million barrels, widening the surplus to the five-year average to 8%.

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.
MRC

MOSCOW (MRC) -- Shell Plc's Singapore bunkering unit, Shell Eastern Trading Pte Ltd, moved up a notch to be the top marine fuel supplier in the world's biggest ship refueling hub in 2020, official data showed, while the overall number of suppliers steadied after years of declines, reported Reuters.

Singapore-based Sentek Marine & Trading Pte Ltd dropped one spot to third in 2020, behind Equatorial Marine Fuel Management Services Pte Ltd in second place after climbing from fourth in the previous year, the latest data from the Maritime and Port Authority (MPA) of Singapore showed.

PetroChina International (S) Pte Ltd, the top supplier by volume in 2019, dropped to fourth place in 2020 followed by BP Singapore Pte Ltd in fifth, the MPA data showed.

The biggest leaps up the MPA's ranking included SK Energy International Pte Ltd which ranked seventh in 2020, up from 15th in the previous year as well as Chevron Singapore Pte Ltd which climbed from 21st to ninth in 2020, the data showed.

The overall number of licensed bunker suppliers steadied at 45 companies in 2020, unchanged from 2019 which marked a sixth year of shrinking supplier numbers amid narrowing profit margins, strict enforcement checks and few new license awards.

New global rules that forced shippers to switch to new and cleaner fuels has helped reshape the bunkering market, favouring larger suppliers with integrated supply chains and better access to capital, trade sources said.

International Maritime Organization rules have capped the sulphur content of ship fuel at 0.5% from the start of 2020 unless vessels are equipped with exhaust-cleaning systems known as scrubbers.

Trafigura's TFG Marine and Mercuria's Minerva Bunkering, the first to issued new bunkering licenses in April by the port authority since 2017, ranked 16th and 22nd, respectively, in their debut year, according to the MPA's ranking.

However, the licence of Ocean Bunkering Services Pte Ltd (OBS), a subsidiary of defunct oil trader Hin Leong, remained suspended since around October, according to the MPA rankings, after it failed to meet licensing requirements.

Sales of marine fuels in Singapore climbed to a three-year high in 2020, supported by resilient December volumes and bucking a weaker global trend as the coronavirus pandemic suppressed demand, official data showed.

The city state accounts about 20% of global bunkering sales.

As MRC wrote before, Royal Dutch Shell has reported an outage at its olefins plant in Deer Park, Texas, USA, on 5 January, 2021. The plant flared for 16 hours last Tuesday following unspecified process upset. Maximum steam cracker operating rate in Texas falls to 89%.

Ethylene and propylene are feedstocks for producing 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.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
MRC