MOSCOW (MRC) -- U.S. oil refiners are predicting a strong recovery in fuel demand in the second half of this year as vaccination rates increase and workers are expected to resume commuting and taking vacations, said Hydrocarbonprocessing.
U.S. plants are running at about 82% of capacity, according to U.S. government data, down about 10 percentage points from normal capacity at this time of year. Margins on average are positive on each barrel of oil processed, but refiners are losing money on output as crude prices rise faster than demand for fuel.
"Certainly by summer, we would expect that a good portion of the American public is able to get out and burn the fuels that we make,” Robert Herman, an executive vice president at fourth-largest U.S. refiner Phillips 66, told investors last week. His view of a second-half demand recovery was echoed recently by executives at Valero Energy Corp and LyondellBasell Industries.
Top U.S. oil refiners Marathon Petroleum Corp and Exxon Mobil Corp have signaled production could remain down more because of lower fuel demand than because of planned maintenance shutdowns in the early part of the year. Exxon said its turnaround costs would rise this quarter.
But Marathon forecast first-quarter spending of USD150 million on planned maintenance, less than half its year-ago period budget. Phillips 66 estimated USD200 million to USD230 million in turnaround costs this quarter, versus USD329 million a year ago. Lower costs could reflect reduced stress from lower output on equipment, or stretching out work and limiting overtime, said Matthew Blair, a refining analyst at Tudor, Pickering, Holt & Co.
“But turnarounds were low in 2020. It does seem like there will need to be a catch-up at some point,” said Blair. Early spring and fall traditionally are busy periods for U.S. refinery maintenance, as operators gear up for summer driving demand and switch to making more heating oil and winter gasoline blends. Regular overhauls also are needed to ensure safety.
Production will fall when maintenance begins, said Bob Yawger, director of futures for financial firm Mizuho Americas. He forecast fuel output falling another 6.5 percentage points from January’s 82.5% peak utilization. “No matter how you cut it, turnaround season is simply a matter of time,” Yawger said on Jan. 27. “How far the refinery run rate slides is the only question."
Refiners conducting spring maintenance would be building crude oil inventories and drawing down fuel stocks by now, “and that’s not happening,” he said this week.
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 ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).