Crude oil futures down on higher US crude inventories and OPEC+ JMMC endorses impending output increase

MOSCOW (MRC) -- Crude oil futures ticked lower during mid-morning Asian trade April 28, as data from the American Petroleum Institute showed a build in US crude inventories, and the OPEC+ Joint Ministerial Meeting Committee recommended to uphold the earlier OPEC+ decision to increase production from May onwards, reported S&P Global.

At 10:55 am Singapore time (0255 GMT), the ICE Brent June contract fell 6 cents/b (0.09%) from the April 27 settle at USD66.36/b, while the June NYMEX light sweet crude contract was down 12 cents/b (0.19%) at USD62.82/b.

Data from the API took the market by surprise as it showed a significant 4.32 million-barrel build in US crude inventories in the week ended April 23. Market analysts had expected a marginal draw in crude oil inventory amid an uptick in refinery demand.

A dip in sentiment was, however, tempered by indications that downstream demand remained strong, with US gasoline and US distillate inventories falling 1.29 million barrels and 2.42 million barrels, respectively. Market participants will be looking to the more comprehensive US Energy Information Administration data, due to be released later April 28, for corroboration of the inventory changes, and for fresh pricing cues.

Meanwhile on April 27, the OPEC+ JMMC, co-chaired by Saudi Arabia and Russia, backed the coalition's earlier decision to gradually taper crude production cuts from May onwards, delegates told S&P Global Platts. As per the decision reached during the April 1 OPEC+ meeting, the producer group is due to raise its collective output by 350,000 b/d in May, another 350,000 b/d in June, and 441,000 b/d in July. Saudi Arabia, which is currently in the middle of an additional 1 million b/d cut, will also ease the cut by 250,000 b/d in May, 350,000 b/d in June and 400,000 b/d in July.

Delegates said the full OPEC+ meeting scheduled for April 28 will also be canceled, and that ministers will convene online again on June 1 to review their decision.

The endorsement from the JMMC comes after the OPEC+ Joint Technical Committee had raised its 2021 crude demand growth forecast on April 26 from 5.6 million b/d to 6 million b/d, bringing it in line with the 5.95 million b/d forecasted in the April 13 OPEC oil market report.

The OPEC+ coalition's rosy demand outlook is predicated on robust vaccination programs in the US and Europe, which are expected to fuel their respective economic rebound. OPEC+ is confident that the increased demand brought upon by an economic expansion in these regions will outweigh the demand-destruction caused by an escalation of the pandemic in countries such as India, Japan and Turkey.

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 polyethylene (PE) consumption totalled 356,370 tonnes in the first two month of 2021, down by 9% year on year. Shipments of exclusively low density polyethylene (LDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market was 246,870 tonnes in January-February 2021, up by 30% year on year. Supply of homopolymer PP and PP block copolymers increased.

BP forecasts further reduction in oil, gas output in 2021 due to impact of asset sales on its portfolio

MOSCOW (MRC) -- On April 27, BP, the world's oil and petrochemical major, forecast a further drop in its upstream production in 2021 due to the impact of asset sales on its portfolio, as it reported a 14% year-on-year fall in upstream oil and gas output for the first quarter, reported S&P Global.

In a results statement, the UK major said second-quarter production would be even lower than first-quarter production in both its conventional operations and newly created 'gas and low carbon' unit due to a combination of asset sales and maintenance, the latter in the North Sea, Gulf of Mexico as well as Trinidad and Tobago.

The downbeat production outlook follows a 10% drop in the company's 2020 output, mainly attributed to asset sales in its US shale business and Alaska. Upstream production in the first quarter hit 2.22 million b/d of oil equivalent, excluding the company's near-20% stake in Rosneft, due to the asset sales, reduced investment and asset decline, BP said.

"For full-year 2021 we expect reported upstream production to be lower than 2020 due to the impact of the ongoing divestment program. However, underlying production should be slightly higher than 2020 with the ramp-up of major projects, primarily in gas regions, partly offset by the impacts of reduced capital investment and decline in lower-margin gas assets," BP said, noting its startup of two gas projects in recent days, in Egypt and India.

BP responded to the global price crash and pandemic by slashing its capital expenditure by 21% last year, starting in the second quarter, and has since said it expects to see its oil and gas output fall by 40% by 2030 as it shifts toward lower-carbon energy production.

However, in a broadly optimistic results statement, CEO Bernard Looney hailed the company's success in lowering its net debt and reviving its cash generation, and forecast an improvement in oil market conditions.

"The oil market is set to continue its rebalancing process. Global stocks are expected to decline and reach historical levels (in terms of days of forward cover) at the end of 2021," BP said. "Oil demand is expected to recover in 2021 due to strong growth in US and China and as the distribution of vaccinations gains momentum and lockdown restrictions are gradually lifted," it added, noting also that OPEC+ decisions would play a significant role.

In the downstream, "industry refining margins are expected to improve over the course of 2021 compared to the first quarter, with the recovery in demand and the closure of some capacity supporting higher utilization rates compared to the exceptionally low levels seen last year. However, refining margins are expected to remain weaker than pre-COVID-19 levels," BP said.

As MRC informed earlier, Rosneft together with BP will develop the hydrogen business. Together they will study the prospects for new projects using renewable energy sources (RES), as well as the use of technologies for capturing, utilizing and storing CO2. Earlier in Russia, Gazprom and Novatek spoke about their intention to create a hydrogen business and new technologies for the disposal of harmful emissions.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated polyethylene (PE) consumption totalled 356,370 tonnes in the first two month of 2021, down by 9% year on year. Shipments of exclusively low density polyethylene (LDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market was 246,870 tonnes in January-February 2021, up by 30% year on year. Supply of homopolymer PP and PP block copolymers increased.

Sika plans to acquire Japanese company Hamatite

MOSCOW (MRC) -- Sika has agreed to acquire Hamatite, the adhesives business of Japanese tyre producer The Yokohama Rubber Co for an undisclosed fee, said the company.

Sika has agreed to acquire Hamatite, the adhesives business of The Yokohama Rubber Co., Ltd. Hamatite is a market leader in Japan, offering adhesives and sealants to the automotive and construction industries. The acquisition will significantly strengthen Sika’s market position in Japan, increase market access to all major Japanese OEMs, and notably extend the product offering for sealing and bonding applications in the Japanese construction industry. Headquartered in Tokyo, the business generates annual sales of CHF 160 million. The transaction is subject to clearance by anti-trust authorities.

As per MRC, Sika, one of the leading European manufacturers of building materials, has expanded its product line through the acquisition of the Belarusian plant "BelINECO", which is a resident of the FEZ "Brest".

We remind that Russia's output of chemical products rose in February 2021 by 5.3% year on year. Thus, production of basic chemicals increased year on year by 7.5% in the first two months of 2021, according to Rosstat's data. February production of polymers in primary form was 861,000 tonnes versus 196,000 tonnes in January. Overall output of polymers in primary form totalled 1,770,000 tonnes over the stated period, up by 8.4% year on year.

Hamatite 's business portfolio comprises various technologies such as polyurethanes, hot melts, and modified silicones. The company operates five plants, the main site being in Hiratsuka, Japan. Additional Hamatite manufacturing facilities are located in Japan, China, Thailand, and the US.

Sika has been operating in Russia since 2003 and has 5 plants for the production of concrete admixtures, 2 plants for the production of dry building mixtures, a plant for the production of polycarboxylate ethers, a plant for the production of roofing and waterproofing PVC membranes, a plant for the production of epoxy and polyurethane floor coatings. laboratory of physical and chemical tests of concretes and concrete mixtures, a chemical laboratory and 5 branches in different regions of the country with a central office in the city of Lobnya, Moscow region.

Russian oil exporters may suspend supplies to Belarusian largest refinery Naftan already in May due to US sanctions

MOSCOW (MRC) -- Russian oil firms might stop supplying Belarusian Naftan refinery after the United States tightened sanctions on Belarus over alleged human rights violations and abuses, four sources familiar with the matter told Reuters.

Washington last week revoked authorisations for certain US transactions with nine sanctioned Belarusian state-owned enterprises, including Naftan and its owner Belneftekhim.

While not directly affected by the move, Russian companies are concerned they could be penalised if they continue dealing with the Belarusian businesses. Apart from loans, Russia supports its neighbour and fellow former member of the Soviet Union with oil supplies on beneficial terms. But that may change after the recent US order, the sources said, speaking anonymously due to the sensitivity of the matter.

Russia’s Rosneft and Surgutneftegaz do not plan to supply oil to Naftan in May, two of the sources said. Naftan is one of Belarus’s two refineries and has a processing capacity of around 200,000 barrels per day. Russia’s Tatneft, Russneft and Neftisa also supply oil to Naftan.

“We are waiting for our bosses’ decision, not signing off (orders) for now,” one Russian oil company source said.

Russia supplies Naftan with 5.5 million barrels of oil per month and the four sources said they now expected the volumes to be redirected to sea ports for export.

Rosneft, Surgutneftegaz, Tatneft, Russneft and Neftisa did not immediately reply to Reuters’ requests for comment. Belneftekhim declined to comment.

As MRC informed previously, in 2015, the US Treasury Department suspended sanctions against nine Belarusian companies and issued a license to cooperate with them, which was renewed annually.

Earlier it was also reported that at the beginning of 2020, the state concern Belneftekhim approved a strategy for the development of the petrochemical complex for the period until 2030. Among the priority projects is the construction of a new pyrolysis unit at Polymir. The corporate publication of the concern noted that "an ethylene-propylene unit will be built at the Polymir plant, this will allow to fully provide the existing production with raw materials." The capacity of pyrolysis, as well as the timing of its construction, are not given. The development plan of the petrochemical complex of the Republic of Bashkortostan also includes a project for the production of ABS plastics, which is planned to be implemented on the basis of the Naftan oil refinery. In addition, it is planned to launch polycarbonate production capacity at the refinery.

According to ICIS-MRC Price report, Polymir intends to shut some of its production capacities (158 grade PE) for a one-month scheduled turnaround already next month. The second part of the production capacities will be loaded at 100%. The plant's total annual capacity is 130,000 tonnes. Local converters became more active last week and were trying to replenish their inventories with domestic polyethylene as much as possible. At the same time, it was quite problematic to do this, as Polymir has reduced its low density polyethylene (LDPE) shipments to the domestic market since March, 2021.

OJSC "Naftan" is one of the largest oil refineries in the countries of Central and Eastern Europe. Commissioned in 1963, the enterprise was incorporated in 2002. The state share in OJSC "Naftan" is 99.83%, the rest of the shares belong to the individual employees of the enterprise. In 2008, a large petrochemical enterprise Polymir was included in Naftan. Naftan produces more than 70 types of products, including various types of fuel, lubricating oils and bitumen, aromatic hydrocarbons and petrochemical products. The company exports 70% of its products, mainly to the CIS countries and the European Union.

Mitsubishi Gas Chemical and Origin Materials to jointly produce advanced chemicals and materials

MOSCOW (MRC) -- Origin Materials, Inc., the world’s leading carbon negative materials company, and Mitsubishi Gas Chemical, Inc., a global leader in basic and fine chemicals and advanced materials, have announced a partnership to industrialize and manufacture advanced chemicals and materials built on the Origin Materials technology platform, according to BusinessWire.

“Together, we aim to revolutionize entire industries. This is a groundbreaking partnership that we believe will change how countless materials and products are made, with far-reaching impact supporting the world’s ambition to reach net zero emissions.”

The partnership includes an agreement for Origin Materials to sell Mitsubishi Gas Chemical carbon-negative materials and a joint development agreement for the companies to create new, functionally advantaged chemicals and derivatives, including high-value specialty chemicals.

The partnership aims to rapidly develop and industrialize new products based on Origin Materials’ technology platform, leveraging the leadership position of Mitsubishi Gas Chemical as a provider of expertise and resources across global supply chains; Mitsubishi Gas Chemical as an important strategic partner for Origin Materials for accessing end markets in the automotive, medical, food, information and communication, energy, and infrastructure sectors.

The companies believe the market for carbon-negative chemicals and advanced materials will grow significantly in response to rising global demand for low-carbon products and services. The companies aim to explore not only new technologies, but new industrial supply chain relationships that are expected to support technology commercialization and enable downstream products across a variety of industries and applications, including functionally advantaged chemicals and materials.

We remind that, as MRC informed before, Mitsubishi Chemical Corp (MCC) consolidated its headquarter functions for its global methyl methacrylate (MMA) business in Singapore, and renamed its major MMA subsidiaries to Mitsubishi Chemical Methacrylates, effective 1 April, 2021. The move is aimed at optimising the company's global product supply network by utilising digital technologies that connect regional production, costs and supply and demand.

We also remind that in December 2020, Mitsubishi Chemical acquired a greenfield property at a large integrated site in Geismar, Louisiana, and plans to advance its feasibility study for the design and construction of a 350,000-metric tons/year MMA plant. The plant will be the third and largest to employ the Alpha production technology developed by subsidiary Lucite. The company earlier in March this year announced its intent to build the plant.

The main application, consuming approximately 75% MMA, is in the production of polymethyl methacrylate acrylic plastics (PMMA). Methyl methacrylate is also used to produce methyl methacrylate-butadiene-styrene copolymer (MBS), used as a modifier for polyvinyl chloride (PVC).

According to MRC's ScanPlast report, Russia's overall PVC production reached 259,400 tonnes in the first three months of 2021, down by 3% year on year. All producers reduced their output over the stated period.

Headquartered in West Sacramento, Origin Materials is the world's leading carbon negative materials company. Origin Materials’ mission is to enable the world’s transition to sustainable materials. Over the past 10 years, Origin Materials has developed a platform for turning the carbon found in non-food biomass into useful materials, while capturing carbon in the process. Origin Materials’ first commercial plant is expected to be operational in 2022 with a second commercial plant expected to be operational by 2025 and plans for additional expansion over the next decade.

Mitsubishi Gas Chemical Company, Inc. (MGC), headquartered in Tokyo, is a unique technology-oriented manufacturer producing more than 90% of its products using proprietary technologies. Committing itself to creating new technology and value, MGC boasts a broad range of products, from basic chemicals such as methanol, xylene, and hydrogen peroxide to high-performance products such as engineering plastics, foamed plastics, materials for printed wiring boards and oxygen absorbers.