Crude rally extends as COVID-19 vaccine rollouts boost demand outlooks

MOSCOW (MRC) -- Crude futures climbed to fresh 13-month highs Feb. 12 as oil demand outlooks improved amid signs of progress on US COVID-19 vaccination distribution and a coronavirus stimulus package, reported S&P Global.

NYMEX March WTI settled up USD1.23 at USD59.47/b and ICE April Brent climbed USD1.30 to USD62.44/b.

President Joe Biden announced late Feb. 11 that the US has secured deals to buy 200 million more COVID-19 vaccines from producers Moderna and Pfizer, boosting optimism that a rapid rollout of doses will lead to a robust oil demand recovery in the second half of the year.

"The crude demand outlook looks like it could get its best-case scenario as Americans who want a COVID[-19] vaccine will be able to get it by April," OANDA senior market analyst Edward Moya said in a note. "WTI crude is having an amazing February and given the strength heading into a long weekend, it seems energy traders are hesitant on scaling back."

Meanwhile, the president's USD1.9 trillion coronavirus relief bill continued to advance through Congress, with the House of Representatives Ways and Means Committee passing a USD940 billion portion of the package that included a third round of direct relief payments totaling USD1,400.

NYMEX March RBOB settled up 4.23 cents to USD1.6925/gal and March ULSD climbed 2.68 cents to USD1.7714/gal.

Over the next three years, global oil consumption is set to see the fastest rise in absolute volumes since the 1970s, according to Bank of America's Global Energy Weekly report, released late Feb. 11. Total demand is expected to grow nearly 9 million b/d by 2024, the report said, with 5.3 million b/d of that total being realized in 2021, 2.8 million b/d in 2022, and 1.4 million b/d in 2023.

Notably, the recovery in demand has not been even across sectors and has not improved steadily, either, on a sequential basis, BofA analysts said.

"For instance, mobility dropped across a broad range of regions in December and January, dragging down fuel demand. Meanwhile, segments like petrochemical demand have flourished due to increased use of single-use plastics, while others, like jet fuel, have floundered," the Global Commodity research team wrote in the report.

"This lack of consistency in the oil demand recovery is visible also across different regions and points in time. For example, workplace mobility in Europe has taken a major hit, particularly in the UK ... . Also, after a steady improvement since (first-quarter) 2020, China has seen a sharp drop in the number of flights heading into the Chinese New Year," they added.

In the US, crude inventories have declined more than 17 million barrels since mid-January and are rapidly approaching their five-year average following three weeks of counter-seasonal draws, but European demand outlooks remain under pressure as Germany recently extended its nationwide lockdown to March amid concern regarding the spread of new variants of the virus.

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).
MRC

MOSCOW (MRC) -- U.S. refiner PBF Energy Inc reported a bigger-than-expected loss in the fourth quarter, hit by uneven demand for fuel due to COVID-19 restrictions and a lower refining margin, said Hydrocarbonprocessing.

The company joined other U.S. independent refiners in reporting multi-billion dollar losses in 2020 as demand has struggled to regain footing after multiple waves of coronanvirus-induced travel restrictions were enacted globally. The refiner reported a loss of USD1.4 billion in 2020, following its competitors Valero, Marathon Petroleum and Phillips 66. In 2020, U.S. fuel demand fell 12% from the previous year due to the pandemic.

“PBF’s fourth-quarter, and full-year, results reflect the continuing headwinds brought on by the global pandemic and attendant demand destruction for our products,” Chief Executive Officer Tom Nimbley said. He added that although there are some signs of improvement, “we expect demand to remain depressed until vaccine distribution is improved, so that everyone can return to their normal routines."

U.S. refining margins were below USD10 - the threshold above which most refiners make money - for the majority of the fourth quarter of 2020. The resurgence of coronavirus cases across the world has complicated the recovery in fuel consumption worldwide.

PBF also said it expects refining capital expenditures to be about $150 million for the first six months of 2021. It aims to reduce operating expenses across the company by USD200 million to USD225 million annually. It expects near-term throughput for the company’s refining system to be between 675,000 barrel per day and 725,000 bpd.

Total crude oil and feedstocks throughput in the quarter was 62.3 million bpd, down from 65 million bpd in the third quarter. On a sequential basis, gross refining margin, excluding special items, declined 68.5% to USD60.8 million.

The company’s adjusted loss widened to USD547.4 million, or $4.53 per share, in the fourth quarter ended Dec. 31, from USD346.6 million, or USD2.87 per share, in the third quarter. Analysts were expecting a loss of USD3.17 per share, according to Refinitiv IBES.

PBF also said it completed its East Coast refining reconfiguration and is continuing a strategic review of its portfolio. PBF plans to engage the Biden administration about potential changes to the Renewable Fuels Standard after RINs prices climbed tenfold in 2020, said company president Matthew Lucey.

“The prior administration made attempts to level the playing field but left the situation worse than when they started,” Lucey said. The refiner said it is assessing the possibility of a renewable diesel project at the Chalmette, Louisiana refinery that could produce 15,000 to 20,000 barrels per day of the fuel. “Chalmette happens to have an idled hydrocracker with an ample supply of hydrogen,” said Lucey. Reporting by Laura Sanicola in New York and Arunima Kumar in Bengaluru; Editing by Shailesh Kuber and Andrea Ricci.

As per MRC, BF Energy will shut most refining units at its Paulsboro, New Jersey, refinery, the company's chief executive said in a letter to employees that cited the impact of the coronavirus pandemic on fuel demand.

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).
MRC

MOSCOW (MRC) -- A force majeure declared by Lanxess on supplies of nylon-6 copolymer-based compounds and film materials produced at its Krefeld-Uerdingen site in Germany, will remain until further notice, reported Chemweek with reference to a spokesperson's statement to OPIS in January.

Lanxess declared force majeure for supplies of the compounds and film materials from the facility on 22 December, 2020. A spokesperson for the company confirmed force majeure had been declared due to a defective chemical-reactor tank.

"We don't know how long the force majeure will last," Lanxess said. It adds that the defective chemical reactor will be repaired or replaced. "As a consequence, Lanxess is not able to produce the materials in adequate amounts and has to limit the existing supply agreements," the spokesperson added.

Lanxess told OPIS it was unable to assess how long delivery of affected products would be restricted.

Nylon-6 copolymer-based compounds are used in the production of automotive parts, and electrical and electronics components. They are also used in the manufacturing process of industrial goods, appliances, and consumer goods.

Lanxess can also produce 120,000 metric tons/year of nylon-6 polymer at the Krefeld-Uerdingen site.

OPIS is an IHS Markit company.

As MRC informed before, in January, 2021, Lanxess completed the sale of its membrane business to French resource management firm SUEZ. The deal was previously announced in July, 2020, as Lanxess realigned its water treatment technologies segment, resulting in the sale of its reverse osmosis membrane business.

We remind that Russia's output of chemical products rose in November 2020 by 9.5% year on year. At the same time, production of basic chemicals increased in the first eleven months of 2020 by 6.6% year on year, 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-November 2020 output. November production of polymers in primary form rose to 896,000 tonnes from 852,000 tonnes in October. Overall output of polymers in primary form totalled 9,240,000 tonnes over the stated period, up by 17.1% year on year.

Lanxess is a leading specialty chemicals company with about 19,200 employees in 25 countries. The company is currently represented at 74 production sites worldwide. The core business of Lanxess is the development, manufacturing and marketing of chemical intermediates, additives, specialty chemicals and plastics. Through Arlanxeo, the joint venture with Saudi Aramco, Lanxess is also a leading supplier of synthetic rubber.
MRC

MOSCOW (MRC) -- Mitsui Chemicals has registered 6.4% growth in net profit for the fiscal first nine months ended 31 December, to Yen 33 billion (USD313 million), compared with ?31 billion in the year-ago period. Operating income fell 6% year on year (YOY) to Yen 51.9 billion on net sales of ?857.4 billion, down 15% YOY, according to Chemweek.

Selling prices decreased in line with lower costs of naphtha and other raw materials, the company adds.

Mitsui's mobility unit registered a 41.0% YOY decline in operating income to Yen 19.5 billion, with a 21.4% decline in sales to ?220.8 billion. The segment was hurt by poor demand for cars. The company says the elastomers, performance compounds, overseas polypropylene (PP) compounds, and solutions businesses performed weakly because of the COVID-19 pandemic. Sales were healthy in performance polymers, and demand for information communication technology products was solid.

Mitsui's basic materials business registered an operating profit of Yen 5.3 billion, down by 53% YOY, compared with an operating profit of Yen 11.2 billion a year earlier. Sales at this sector were Yen 381.8 billion, down 17.5% YOY. Naphtha-cracker operating rates were lower compared with the year-earlier period because of lower demand for downstream products due to COVID-19. The sluggish automotive sector weakened the performance of Mitsui's PP business. Higher demand for sanitizers boosted the company's acetone business overseas.

Operating income plunged 61% YOY to Yen14.8 billion at Mitsui's healthcare unit, with revenue of Yen 105.7 billion, down 1.1% YOY. The pandemic hurt sales of dental- and vision-care materials. In nonwoven fabrics, sales of masks, medical gowns, and disposable diapers stayed healthy.

Sales decreased 3.9% YOY to ?139.3 billion in the food and packaging business unit, with operating income of ?15.2 billion, up 31% YOY. Sales of performance films, sheets, and agricultural chemicals were strong. Sales of coatings and engineering materials were low due to COVID-19.

Mitsui has raised its forecast for the full fiscal year ending 31 March 2021. It now projects sales of Yen 1.215 trillion, compared with a previous estimate of Yen 1.175 trillion. Revised full-year operating income stands at Yen 77 billion, versus an earlier forecast of Yen 50 billion. The new net-income guidance is ?53.5 billion, against a previous forecast of Yen 37.5 billion.

Mitsui expects higher income because of stable overseas markets and progress in reducing fixed costs.

As MRC informed earlier, Mitsui Chemicals operated its naphtha cracker normally following a maintenance turnaround. The company resumed operations at the cracker on July 19, 2020. The cracker was shut for maintenance on June 11, 2020. Located in Osaka, Japan, the cracker has an ethylene capacity of 500,000 mt/year and a propylene capacity of 280,000 mt/year.

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). Supply of exclusively PP random copolymer increased.

Mitsui Chemicals is a leading manufacturer and supplier of value added specialty chemicals, plastics and materials for the automotive, healthcare, packaging, agricultural, building, and semiconductor and electronics markets. Mitsui Chemicals is a Japanese Chemicals company, a part of the Mitsui conglomerate. The company has a turnover of around 15 billion USD and has business interests in Japan, Europe, China, Southeast Asia and the USA. The company mainly deals in performance materials, petro and basic chemicals and functional polymeric materials.
MRC

MOSCOW (MRC) -- Japan began assessing damage and restoring power after a magnitude-7.3 earthquake struck off Fukushima late Saturday, leaving about 150 people injured and temporarily cutting power to almost a million households, reported Bloomberg.

No deaths were reported, according to public broadcaster NHK, and Prime Minister Yoshihide Suga said at a press conference on Sunday that no incidents were reported from reactors. Six coal- and gas-fired power units, with a combined capacity of about 3.6 gigawatts, are offline due to the quake without any timeline for restart, according to the Japan Electric Power Exchange.

The powerful tremor, which was felt in Tokyo, occurred just one month before the 10-year anniversary of the 2011 earthquake and tsunami that led to a meltdown at three reactors of the Fukushima Dai-ichi nuclear plant and left about 19,000 people dead or missing. The latest tremor was an aftershock of the 2011 quake, according to Japan’s national meteorologist.

Tokyo Electric Power Co. said there was a minor overflow of water from the pool that stores used atomic fuel at the Fukushima nuclear plants, but no uncontrolled radiation was detected, NHK reported. Suga said Monday 12 people sustained serious injuries from the quake and 141 were slightly injured.

Mitsui Chemicals Inc. said its Ichihara plant, which includes a naphtha cracker, in Chiba was shut due to a power outage. It would take about 10 days to restart the plant.

ENEOS Holdings Inc. also said it temporarily suspended the Sendai refinery, while some units at the Negishi refinery were halted.

Idemitsu Kosan Co. said the sole crude distillation unit and some secondary units at the Chiba refinery were halted due to power outage following the quake. Some secondary units at the Keihin refinery operated by Idemitsu’s unit Toa Oil Co. were also shut.

As MRC informed earlier, Mitsui Chemicals operated its naphtha cracker normally following a maintenance turnaround. The company resumed operations at the cracker on July 19, 2020. The cracker was shut for maintenance on June 11, 2020. Located in Osaka, Japan, the cracker has an ethylene capacity of 500,000 mt/year and a propylene capacity of 280,000 mt/year.

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). Supply of exclusively PP random copolymer increased.
MRC