Chinese refiners cool on crude purchases as oil futures rally

MOSCOW (MRC) -- China's crude oil imports are set to slow in the second quarter after Brent prices hit a 13-month high, cooling demand and capping refiners' margins as they prepare to shut for planned maintenance, industry sources and analysts said, as per Hydrocarbonprocessing.

Expectations of a recovery in global fuel demand and tighter oil supplies from Saudi Arabia and the United States pushed front-month Brent futures to their highest since January 2020 this week, up around 30% from January. Chinese independent refiners, who account for a fifth of the country's import demand, have become reluctant to buy cargoes as they enter a low-demand season, while domestic margins have yet to catch up with strong gains in international prices, the sources said.

Easing purchases from China, the world's largest crude importer, led to a drop in spot prices for Middle East and Russian grades this week, while prices of crude from other regions such as Africa and South America have also weakened. "Demand is very slow now and there are many available cargoes to choose from," said a source at a Chinese refinery, adding that high oil prices have cooled buying interest. "The lack of substantial demand, plus strong backwardation, put a lot of pressure on traders," said a source with an Asian refiner, noting an increasing number of unsold cargoes due to arrive in Asia in March and April.

The sources declined to be named due to company policies. Iraq's Basra Light crude and Upper Zakum from the United Arab Emirates have dropped to discounts against their official selling prices (OSPs) in spot purchases by Chinese refiner Hengli Petrochemical, traders said. Companies typically do not comment on their trades. More than 10 Chinese independent refiners, including one operated by Zhenghe Petrochemical, a subsidiary of ChemChina, and Shandong Qicheng Petroleum Chemical's plant, will shut for maintenance between March and June, according to Chinese consultancy JLC. Capacity at both plants are at 5 million tonnes per year (tpy).

The run rate at independent refineries is expected to fall below 70% in April, from around 74% presently, JLC analyst Zhou Guoxia said.

As MRC informed before, earlier this week, ExxonMobil Corp said it will close its 72-year-old Altona refinery in Australia, the country’s smallest, and convert it to a fuel import terminal as refiners struggle with low demand.

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.
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MOSCOW (MRC) -- Oil prices were mixed with U.S. crude edging up to its highest close since 2019 as Texas refineries restarted production after last week's freeze, while Brent eased on worries that four months of gains will prompt producers to boost output, said Hydrocarbonprocessing.

Earlier in the day, an assurance that U.S. interest rates will stay low and a sharp drop in U.S. crude output last week due to the winter storm in Texas, helped boost both U.S. crude and Brent to their highest intraday prices since January 2020. Brent futures for April delivery fell 16 cents, or 0.2%, to settle at USD66.88 a barrel. The April Brent contract expires on Friday.

U.S. West Texas Intermediate (WTI) crude, meanwhile, ended 31 cents, or 0.5%, higher at USD63.53, its highest close since May 2019. Analysts said WTI increased late in the day as more Texas refineries started to return to service, including Valero Energy Corp's Port Arthur plant and Citgo Petroleum Corp's Corpus Christi plant.

The freeze caused U.S. crude production to drop by more than 10%, or a record 1 million barrels per day (bpd) last week, while refining runs tumbled to levels not seen since 2008, the Energy Information Administration said. "The more refineries return to service, the more crude oil they will burn through, and the less crude oil will go to storage," said Bob Yawger, director of energy futures at Mizuho in New York. Overall, however, analysts noted price gains slowed on Thursday.

"With momentum appearing to slow a week before the next OPEC+ meeting, crude may be positioning for a small correction," said Craig Erlam, senior analyst at OANDA, noting "There's still plenty of downside risks in the market and one of them is OPEC+ unity coming under strain in the coming months." The Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+, are due to meet on March 4.

Analysts noted recent higher oil prices - both Brent and WTI have gained more than 75% over the past four months - could encourage U.S. producers to return to the wellpad and OPEC+ to loosen its production reductions.

The group will discuss a modest easing of oil supply curbs from April given a recovery in prices, OPEC+ sources said, although some suggest holding steady for now given the risk of new setbacks in the battle against the pandemic. Extra voluntary cuts by Saudi Arabia in February and March have tightened global supplies and supported prices.

Meanwhile, an assurance from the U.S. Federal Reserve that interest rates would stay low for a while helped support oil prices earlier in the day and should boost investors' risk appetite and global equity markets.

We remind that 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 following unspecified process upset. Maximum steam cracker operating rate in Texas falls to 89%.

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.
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MOSCOW (MRC) -- Global demand for oil-based marine fuels is set to fall in the next three decades as stricter carbon emissions rules for the shipping industry kick in and alternative fuel use climbs, consultancy Wood Mackenzie said, said Hydrocarbonprocessing.

The U.N.'s International Maritime Organization (IMO) is set to formally adopt energy efficiency regulations in June that aim to reduce the carbon footprint of new and existing ships by 40% by 2030 compared with 2008 levels. By 2050 the IMO aims to reduce the overall greenhouse gas emissions from ships by 50% from 2008 levels.

Adoption of the upcoming efficiency rules would achieve the IMO's 2030 target and cause a decline in global bunker fuel demand of around 370,000 barrels per day (bpd) by 2030 compared to the current outlook, Iain Mowat, a principal analyst at Wood Mackenzie.

Even with these reductions, global consumption of marine fuels, currently estimated at just under 5 million bpd, is expected to grow to 5.9 million bpd by 2030, said Mowat. The use of liquefied natural gas (LNG) in marine fuels could limit the growth in carbon emissions from the shipping sector and is expected to further displace nearly 700,000 bpd of oil bunkers by 2030, Wood Mackenzie said in a report on Friday.

"In our current outlook we have the overall size of the marine bunker market dropping to less than 5.6 million bpd by 2050, of which oil bunkers accounts for less than 3.6 million bpd," said Mowat. But with LNG's carbon content still high relative to low-carbon alternatives, demand growth for the super-chilled fuel as a shipping fuel will also slow after 2040 as zero-carbon fuels, such as methanol and ammonia produced from green hydrogen, become more prevalent, said Mowat.

"A major shift towards low- and zero-carbon fuels by 2050 is absolutely required to reach IMO's target to halve overall greenhouse gas emissions," he said, resulting in a further 900,000 bpd decline in oil bunker demand by 2050.

As MRC informed before, earlier this week, ExxonMobil Corp said it will close its 72-year-old Altona refinery in Australia, the country’s smallest, and convert it to a fuel import terminal as refiners struggle with low demand.

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.
MRC

MOSCOW (MRC) -- Texas state legislators started digging into the causes of deadly power blackouts that left millions shivering in the dark as frigid temperatures caught its grid operator and utilities ill-prepared for skyrocketing power demand, said Hydrocarbonprocessing.

Hearings are highlighting shortcomings by grid planners, electric utility and natural gas transmission operators that led to billions of dollars in damages and dozens of deaths. Consumer advocates have called for more stringent regulation of utilities and a review of retail marketing plans. "The entire energy sector failed Texas," said NRG Energy Inc Chief Executive Mauricio Gutierrez, who testified at the hearing.

The biggest failure was the state's natural gas system, said Curtis Morgan, CEO of Vistra Corp, adding that without better ties between gas producers, pipelines and power plants, the state could face future cold weather outages. "We just couldn't get the gas at the pressures we needed," said Morgan, who instructed employees to buy gas at any price but could not acquire enough to run plants.

Up to 48% of the state's power generation was offline at times last week and at least 32 people died, including an 11-year-old boy of hypothermia in an unheated mobile home. "We owe it to them and every Texan to make sure this never happens again," said State Representative Ana Hernandez, noting that hospitals still have supply chain problems and burst pipes, and some people cannot access food and water. "The impact of this disaster was not only financial."

Utilities were ordered to cut power to prevent a larger catastrophe, Bill Magness, CEO of the Electric Reliability Council of Texas (ERCOT), the state's grid operator, said on Wednesday. ERCOT, whose board is appointed by the state Public Utility Commission, faces lawsuits by customers and a generator claiming damages from misrepresentation and lack of planning. Six of ERCOT's 15 directors resigned this week and a nominee withdrew before taking a seat.

ERCOT did not warn residents that the state's power generation would not keep up with demand, even under perfect conditions, despite warnings the week prior from utilities, Morgan said. "We did not give people a fighting chance," Morgan said.

We remind that 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 following unspecified process upset. Maximum steam cracker operating rate in Texas falls to 89%.

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

MOSCOW (MRC) -- Royal Dutch Shell in Germany aims to produce aviation fuel and naphtha made from crops and renewable power and to increase to commercial scale an electrolysis plant that makes fossil-free hydrogen, as it seeks to move away from crude oil, said Hydrocarbonprocessing.

The energy major told an online conference it had applied for subsidies to carry out the work from the European Union and from German funds earmarked for decarbonisation. Fabian Ziegler, head of Shell Deutschland, said several hundred million euros should be spent per year, but he did not give a desired ratio between company and public funding.

The global Shell group has set itself a goal of net zero emissions by 2050. At Wesseling, part of the Rheinland refinery, Shell plans to use green electricity and biomass to produce synthetic power-to-liquids (ptl) in a carbon-free way to replace, over the long term, conventional jet fuel and naphtha. The 100,000 tonnes/p.a. ptl plant could be built from 2023 and start producing in 2025.

Shell also gave a timeline for building a 100 megawatt (MW) electrolysis plant, to be called Refhyne II, scaling up from an existing 10 MW plant. Hydrogen is considered a green fuel when electricity from renewable energy sources is used in its production. Shell has begun securing offshore wind power assets whose electricity it could use as feedstock for electrolysis.

Through its latest purchase of Next Kraftwerke, a virtual power plant (VPP) operator, it gets access to aggregated biomass-to-power and solar plants. A final investment decision for Refhyne II is due this year and production could start by the end of 2025, Ziegler said.

The Berlin government last summer earmarked 7 billion euros for the build-up of green hydrogen in Germany, plus a further 2 billion euros to set up partnerships with other countries, to introduce the alternative fuel across industries and energy. The market's build-up will take many years but there are clear targets in place for 2030, accompanied by plans to repurpose existing gas and oil transport infrastructure for example around existing refinery clusters.

Hydrogen has a high energy content by mass, but conversion losses from electrolysis and high costs involved in readying it for delivery pose challenges. Costs of producing green hydrogen of 5-6 euros per kg must come down, given that fossil fuels-based hydrogen costs 1.50 euros/kg, he said. The plans for Wesseling tie in with other European Shell initiatives, with partners, to build electrolysis production in Hamburg and in the Netherlands. Shell wants to build up transport sector delivery chains for hydrogen and provide electric charging.

We remind that 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 following unspecified process upset. Maximum steam cracker operating rate in Texas falls to 89%.

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.

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.
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