Crude futures flactuate in a narrow range despite economic rebounds, COVID-19 concerns linger

MOSCOW (MRC) -- Crude oil futures were rangebound during mid-morning Asian trade April 16, as bullish sentiment, bolstered by signs of increasing US and Chinese economic activity, was tempered by the dire coronavirus situation in key economies around the world, reported S&P Global.

At 11:59 am Singapore time (0359 GMT), the ICE Brent June contract was 4 cents/b (0.06%) higher than the April 15 settle at USD66.98/b, while the May NYMEX light sweet crude contract was 2 cents/b (0.03%) lower at USD63.44/b.

Propping up market sentiment are reports that the US economic recovery is well underway, as evidenced by a 9.8% improvement in March retail sales, the largest increase since May 2020, according to data from the Department of Commerce. Additionally, data by the Department of Labor showed that new applications for US unemployment benefits fell to a seasonally adjusted 576,000, the lowest since the pandemic caused mass unemployment in March 2020.

Providing further tailwind to the markets are reports of a strong Chinese GDP growth, which the National Bureau of Statistics quantified at 18.3% in the first quarter of 2021, the fastest year-on-year rate for any quarter on record. On a quarterly basis, the Chinese economy grew at a slower 0.6% in Q1, the data showed.

"The latest economic data out of the US and China point to a global economic recovery that is truly gathering pace and taking meaningful strides into the post-pandemic era, bolstering hopes for oil bulls to reclaim the USD70 Brent handle," Han Tan, FXTM's analyst told S&P Global Platts April 16.

A rebound in economic activity in the US and China portends well for oil, as it is expected to be accompanied by an increase in oil and energy demand. Analysts have noted spillover effects of the economic advance on downstream products demand, specifically gasoline demand in the US.

Optimism due to the economic recovery narrative has also been dulled by a protracted battle with the coronavirus in key oil-consuming countries around the world. Italy, France and Germany, among other European states, remain under lockdown, while the situation in India has analysts particularly worried, as the country reported a record high 200,739 cases on April 14, according to John Hopkins University data.

The market, however, is hopeful of an improvement in the situation in Europe, as vaccination programs in the region are picking up pace.

As MRC informed earlier, 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 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 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) -- SIBUR's main shareholder, Leonid Mikhelson, has reduced the effective ownership of the company's shares to 36% from 42.23% as a result of the sale of Trust 2 OOO (owns 6.25% of SIBUR shares) to Sogaz's subsidiary, according to the company's press release.

Thus, SIBUR Holding received a notification that on April 2, 2021, JSC SOGAZ Tower (a subsidiary of SOGAZ JSC) acquired the ownership of 100% of the authorized capital of Trust 2 OO, which owns 6.25% of the company's shares. Hence, L. V. Mikhelson's effective stake in SIBUR went down to 36%.

The transaction does not give rise to any breaches of covenants or other restrictions by SIBUR Holding or among the Company’s shareholders. Leonid Mikhelson is still the Company’s major shareholder and chairs its Board of Directors.

Thus, SOGAZ increased its stake in SIBUR to 12.5%.

As MRC reported earlier, on March 16, 2021, L. Mikhelson reduced its effective ownership of the company's shares to 42.23% from 48.5%, having sold to SOGAZ the rights to 100% of the shares of Trust 3 OOO, which owns 6.25% of the petrochemical company.

As for the rest, the structure of SIBUR shareholders has not changed. Gennady Timchenko owns 17%, Kirill Shamalov - 3.9% of the company's shares. 10% each are at the disposal of Sinopec and the Silk Road Fund, 10.6% of the shares are controlled by the current and former management of the company. The share of L. Mikhelson in the authorized capital of SIBUR also decreased - to 21.59% from 27.83%, according to the company. The share of SOGAZ in the authorized capital of the petrochemical company is now 12.5%.

We remind that SIBUR Holding's revenue decreased by 1.6% last year and to Rb523 billion. At the same time, SIBUR increased EBITDA to Rb179 billion, up by 5.4% year on year.

We also remind that in December 2020, SIBUR Holding chose Spheripol LyondellBasell polyolefin technology for its Amur Gas Chemical Complex (AGHK), which is under construction. The technological process will be used at a polypropylene (PP) plant with a capacity of 400,000 mt/year, which will be built in the town of Svobodny, Amur Region.

According to MRC's ScanPlast, Russia's overall PP production increased by 31% year on year in 2020, totalling about 1,883,000 tonnes. The main increase in production was provided by ZapSibNeftekhim.

SIBUR is the largest vertically integrated gas processing and petrochemical company in Russia, uniting a number of production sites in various regions of the Russian Federation. The company sells products to consumers in the fuel and energy complex, automotive, construction, consumer goods, chemical and other industries in more than 80 countries around the world.
MRC

MOSCOW (MRC) -- RusVinyl has passed the audit of the management system according to ISO standards, said the company.

The integrated management system of RusVinyl, a joint venture between SIBUR and Solvay for the production of polyvinyl chloride, has been successfully tested for compliance with the requirements of international standards for environmental management (ISO 9001: 2015), product quality, business processes (ISO 14001: 2015) and health and safety labor (ISO 45001: 2018). The new certificate, valid for three years, was issued by the international certification body TUV NORD CERT GmbH in March.

Voluntary certification of the integrated management system RusVinyl has been successfully carried out since 2015. The certificate of conformity is issued for a period of 3 years with confirmation as part of annual supervisory audits.

As it was written earlier, the total volume of polyvinyl chloride production at RusVinyl decreased by 2% in 2020 compared to the previous year and amounted to 333,000 tonnes.

RusVinyl ranks first in terms of PVC production in Russia. The design capacity of the enterprise is for suspension polyvinyl chloride (SPVC) - 300,000 tonnes per year, for emulsion polyvinyl chloride (PVC-E) - 30,000 tonnes per year and caustic soda - 225,000 tonnes per year.
MRC

MOSCOW (MRC) -- On Tuesday, the first in April export trades for Turkmenbashi refinery's polypropylene (PP) were held at the State Commodity and Raw Materials Stock Exchange of Turkmenistan. Demand has subsided significantly since the March trades, only 500 tonnes of PP were sold during one trading day, according to ICIS-MRC Price report.

According to the bidders, on Tuesday, 13 April, 2,000 tonnes of Turkmenbashi refinery's PP raffia grade were put up for export sale at the State Commodity and Raw Materials Exchange of Turkmenistan. The starting price was set at USD1,775/tonne FOB/FCA in accordance with the results of the March trades. Demand for PP was very weak in the trades, and only one deal was registered for 500 tonnes at the starting price.

The deal was done for shipments within six months.

The previous export trades for Turkmenbashi refinery's PP were held back on 10 March 2021, and only 1,500 tonnes of PP raffia grade were sold then at USD1,775/tonne FOB/FCA, given the starting prices of USD1,515/tonne FOB/FCA.
MRC

MOSCOW (MRC) -- Sasol announced it will work alongside a consortium comprising Linde PLC (Linde), ENERTRAG AG (ENERTRAG) and Navitas Holdings (Pty) Ltd (Navitas) – the LEN Consortium – to bid in concept for the production of sustainable aviation fuel (SAF) under the auspices of the German Federal Government’s H2Global auction platform, said Hydrocarbonprocessing.

The LEN Consortium will enable Sasol to work with world-class partners on the opportunity, employing its extensive experience to produce liquid fuels and chemicals with Fischer-Tropsch (FT) technology. SAF is key to decarbonizing the aviation sector, which is widely viewed as one of the most challenging sectors in which to reduce greenhouse gas emissions. SAF production employs a Power to Liquid (PTL) process, which relies on the supply of a sustainable carbon feedstock (biomass or other unavoidable industrial carbon dioxide sources) and the production of green hydrogen through electrolysis using renewable energy. The carbon and hydrogen are converted to synthesis gas, a mixture of carbon monoxide and hydrogen, which in turn is converted to longer chain hydrocarbons for the production of jet fuel or SAF via the FT process.

The H2Global platform has developed a framework for double auction systems for required projects to produce green hydrogen and its derivatives, as well as the importation of the resulting products into Germany. H2Global will enable green hydrogen projects to be established in designated countries, such as South Africa.

Sasol, as a global leader in FT technology, licensing and operations, is exploring the feasibility of SAF production at its Secunda Synfuels plant with its consortium partners. The project would leverage Sasol’s existing facilities, deep technical know-how in the FT process and downstream processing capabilities.

"Action on climate change is central to Sasol’s strategy, and we continue to take significant steps to reduce greenhouse gas emissions generated in our production processes," said Fleetwood Grobler, Sasol President and CEO.

Grobler added: “The decision to explore the creation of a SAF production demonstration facility at our Secunda Operations is aligned with our long-term decarbonization strategy. Green hydrogen is one of the key transitional fuel sources that we are working with via various strategic demonstration opportunities and partnerships. The H2Global consortium provides us with a powerful platform to support the development of these new technologies and their applications and markets.

“Sasol’s expertise in hydrogen and our extensive R&D capabilities, combined with our specialist knowledge of Fischer-Tropsch technology, supports our ambition to play a key role in creating South Africa’s hydrogen economy." Linde is a leading global industrial gases and engineering company listed on both the New York and Frankfurt stock exchanges. Through its ITM Linde Electrolysis joint venture, Linde is a leader in the design and operations of next generation PEM (Proton Exchange Membrane) electrolysers required to produce green hydrogen.

ENERTRAG is a German renewables energy company that owns close to 1 Gigawatt generation capacity and operates more than 6 Gigawatts of renewable assets. It also has a strong presence in South Africa. Navitas is a South African development, construction and investment company that primarily focuses on solar photovoltaic technology and sectors related to the just energy transition.

Sasol and the LEN Consortium have jointly engaged with the German government to inform H2Global of its intention to bid via the double auction mechanism. The H2Global carbon auction rounds are expected to launch towards the end of 2021.

As per MRC, Sasol North America, a subsidiary of Sasol, halted phenol production in Houston (Houston, TX, USA) on March 27 due to a fire. The company managed to extinguish a fire at this plant with a capacity of 16,000 tonnes of phenol per year.

Phenol is the main raw material for bisphenol A (BPA) production, which in turn is used to produce polycarbonate (PC).

According to MRC ScanPlast, the total consumption of PC granulate in Russia (excluding imports and exports to Belarus) amounted to 8,100 tonnes in January 2021, which is 20% more than the same indicator of the previous year (6,800 tonnes).

Sasol Limited is an integrated energy and chemical company headquartered in Johannesburg, South Africa. The company was formed in 1950 in Sasolburg, South Africa. The company produces liquid fuels, petrochemicals and electricity. The production facilities of the company are located in 37 countries of the world, and the staff is 32 thousand 400 people.
MRC