Crude oil futures down on bearish EIA data

MOSCOW (MRC) -- Crude oil futures fell own during the mid-morning trade in Asia March 18, after the Energy Information Administration showed a build in crude and product inventories, even as a free-falling US dollar provided some cushion to the market, reported S&P Global.

At 10:40 am Singapore time (0240 GMT), the ICE Brent May contract was down 38 cents/b (0.56%) from the March 17 settle at USD67.62/b, while the April NYMEX light sweet crude contract was down 37 cents/b (0.57%) at USD64.23/b.

On the back of subdued refinery demand amid lingering storm outages, data from the EIA, released late March 17, showed a 2.4 million-barrel build in US crude inventories in the week ended March 12. The counter-seasonal build pushed inventories to 500.8 million barrels, nearly 7% above the five-year average, thereby opening the widest surplus since the week ended Jan. 15.

The build in crude stocks shown by the EIA data put pressure on prices this morning as it came in above analysts' projections of a 400,000-barrel build, and was contrary to the 1 million-barrel draw shown by data from the American Petroleum Institute released March 16.

The oil complex was also weighed down by EIA's release of uninspiring downstream data, which showed that in the week ended March 12, US gasoline and distillate inventories had edged up 470,000 barrels and 255,000 barrels, respectively. Analysts had expected gasoline and distillate stocks to slide 1.4 million barrels and 900,000 barrels lower, respectively, amid weak refinery runs.

Despite the bearish EIA data, the market is optimistic over the demand outlook for oil, as vaccines promise to reign in the pandemic, and global economic activity picks up pace. While some concerns remain over Europe, where a number of countries have suspended the Oxford-AstraZeneca vaccine, analysts are especially bullish over the US, where the success of the country's vaccination drive may encourage travel and boost downstream demand for gasoline and jet fuel.

The oil complex has already received some support from the movements in the US dollar, which has been weakening since the US Federal Open Market Commission meeting reaffirmed the Federal Reserve's dovish stance on monetary policy. At 10:32 am, the June contract for the US dollar index was down 0.441% from the previous close at 91.475.

As MRC informed before, the largest US refinery, Motiva Enterprises’ 607,000 barrel-per-day Port Arthur, Texas, plant, returned to normal operations. The refinery was shut on Feb. 15 when freezing temperatures, rarely seen on the US Gulf Coast, knocked out steam supply. Motiva began restarting the refinery on Feb. 24.

Motiva Chemicals has also resumed operations at its mixed-feed cracker in Port Arthur, USA. The process of restart of this cracker with the capacity of 635,000 mt/year of ethylene and 340,000 mt/year of propylene began on 27 February, 2021, and finished late last week. The cracker wa shut along with the refinery at the same site on 14 February, 2021, because of the deep freeze.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.
MRC

MOSCOW (MRC) -- Olin (Clayton, Missouri) has announced plans to shut a portion of its diaphragm-grade chlor-alkali capacity in the USA, reported Chemweek.

Thus, th company is to permanently shut down about 200,000 metric tons/year of diaphragm-grade chlor-alkali capacity at its McIntosh, Alabama, facility by 31 March. Olin will take a USD5 million of restructuring charge for the move, which the company expects to be cash flow accretive.

"This is yet another step in Olin's efforts to right-size our asset base and achieve reinvestment economics across our complete electrochemical unit portfolio," says Scott Sutton, Olin president and CEO.

Separately, the company has raised its adjusted EBITDA forecast for Q1 2021 by USD75 million, citing gains related to hedges and contracts that protected the company during the polar storm at the US Gulf Coast in mid-February, .

Before the storm, Olin expected first-quarter adjusted EBITDA of USD400-425 million, up year-over-year (YOY) from USD123 million. The company now expects adjusted EBITDA of USD475–500 million range.

“This forecast includes a net one-time benefit associated with Olin's customary financial hedges and contracts maintained to provide protection from rapid and dramatic changes in energy costs, partially offset by unabsorbed fixed manufacturing costs, reduced profit from lost sales, and storm-related maintenance costs,” says Olin. “This first quarter 2021 outlook has further potential upside associated with the final settlement of these one-time items associated with Winter Storm Uri.”

Olin was forced to shut production at its Freeport, Texas, facility during the storm because of the loss of access to electrical power, natural gas, and other raw materials. Products made at Freeport include chlor-alkali, vinyl chloride monomer (VCM), epichlorohydrin, and bisphenol-A. Olin says production at its facilities in Plaquemine, Louisiana; St. Gabriel, Louisiana; Oxford, Mississippi; and McIntosh, Alabama facilities were also affected. By 18 February, the company had declared force majeure on all chemical product shipments from North America. “While our facilities have returned to operation, product supply constraints are expected to continue,” says Olin.

We remind that Russia's November production of sodium hydroxide (caustic soda) were 111,000 tonnes (100% of the basic substance) versus 108,000 tonnes a month earlier. Overall output of caustic soda totalled 1,165,600 tonnes in the first eleven months of 2020, down by 1.3% year on year.
MRC

MOSCOW (MRC) -- Borealis continues to operate its steam cracker in Stenungsund, Sweden at 100% capacity utilisation in March, reported Chemweek.

The cracker with the capacity of 625,000 mtyear of ethylene was restarted on 15-17 January, 2021, and force majeure was lifted on 29 January. And the company reached full capacity utilisation at this cracker in early February.

The force majeure at Stenungsund was declared after a fire started at the cracker on 10 May last year. A restart of the cracker was initially planned for the fourth quarter of 2020.

As MRC reported previously, the company began the process of the cracker restart in early January, 2021.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.

Borealis is a leading provider of innovative solutions in the fields of polyolefins, base chemicals and fertilizers. With headquarters in Vienna, Austria, Borealis currently employs around 6,500 and operates in over 120 countries.
MRC

MOSCOW (MRC) -- AOC (Collierville, Tennessee) has announced an increase in prices for its entire unsaturated polyester resins (UPR) and epoxy vinyl ester (EVE) portfolio in the EAME region, due to the continued growth in feedstock, logistics, and packaging costs, reported Chemweek.

The company says the announced price rise of EUR350/metric ton (USD417/metric ton) is with immediate effect for all new orders, or as soon as contracts allow.

“The availability of key raw materials from our contract suppliers has been severely hampered and we are having to resort to other, more expensive, sources,” says Fons Harbers, EAME vice president/marketing and sales at AOC. “Also, logistics and packaging costs have been increasing steadily. This leaves us no choice but to raise the prices of our products further as a result, realizing that supply can be somewhat irregular given these new supply routes,” he says.

As MRC wrote before, earlier this month, AOC already announced a price rise for the same products, saying that pricing of raw materials such as styrene, maleic anhydride, liquid epoxy resins, and others had experienced continued increases in recent months following global outages and force majeure declarations in Europe. It had also previously announced increases for the same products in January and February this year.

As MRC informed earlier, in October 2020, AOC, Kaprain and Spolchemie announced they had reached agreement on AOC acquiring the Unsaturated Polyester Resin (UPR) manufacturing operations located at the Spolchemie site in Usti nad Labem (Czech Republic). This footprint extension will allow AOC to further improve service and logistics to its customers in Central/ Eastern Europe as well as in Germany, and will make new products (e.g. based on recycled PET) available for customers around Europe.

According to MRC's ScanPlast report, overall estimated PET consumption in Russia was 71,830 tonnes in December 2020, up by 8% year on year. Russia's PET consumption in all sectors (injection moulding, fibers/filaments, films) exceeded the level of 2019 by 17%, totalling 717,310 tonnes.
MRC

MOSCOW (MRC) -- The U.S. Chemical Production Regional Index (U.S. CPRI) rose 0.8% in January following a 1.4% gain in December and a 1.1% gain in November, said the American Chemistry Council (ACC).

During January, chemical output expanded in nearly all regions. The Gulf Coast region showed the largest gain, with smaller gains seen in the Midwest, Southeast, Ohio Valley, and Northeast regions. Output was flat in the Mid-Atlantic region and edged lower in the West Coast. The U.S. CPRI is measured on a three-month moving average (3MMA) basis.

Chemical production continued to expand in chlor-alkali, fertilizers, organic chemicals, synthetic rubber, plastic resins, manufactured fibers, industrial gases, and synthetic dyes and pigments, measured on a 3MMA basis. Production eased for coatings, adhesives, crop protection, consumer products, and other specialty chemicals.

As nearly all manufactured goods are produced using chemistry in some form, manufacturing activity is an important indicator for chemical demand. The manufacturing recovery continued for a sixth consecutive month in January, with overall factory activity up by 1.0% (3MMA). The trend in production increased in many key chemistry end-use industries, with the strongest gains seen in food and beverages, appliances, motor vehicles, aerospace, construction supplies, fabricated metal products, iron and steel products, petroleum refining, oil and gas extraction, plastic products, structural panels, textile products, and furniture.

Compared with January 2020, U.S. chemical production remained off by 0.6% on a year-over-year (Y/Y) basis, the twentieth straight month of Y/Y declines, but showed continued improvement compared with earlier in the year. Chemical production remained lower than a year ago in all regions except in the Gulf Coast region, which was up 2.5% Y/Y.

As MRC informed earlier, sales of high density polyethylene (LDPE) in the United States and Canada rose 3.8% in January 2021 compared to the same month a year earlier. While the production of LDPE grew by 5.2% over the same period of time. Total sales increased by 2.3%, despite a 0.7% decline in export sales.

At the same time, high-density polyethylene (HDPE) sales in the United States and Canada were up 5% in January 2021 from the same month in the prior year. HDPE production increased by 1% over the same period. Domestic demand for HDPE has strengthened in recent months as demand for consumer durables has been strong since the second half of 2020 amid continued growth in manufacturing activity in the United States.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.
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