Oil stocks fall to pre-pandemic levels and may face further tightness

MOSCOW (MRC) -- Global oil inventories have come down to pre-pandemic levels and may face further tightness as OPEC+ spare capacity nears a critical level by the middle of next year, causing "some people Angst," reported S&P Global with reference to the head of Vitol Asia's statement Nov. 7.

OPEC+'s gradual approach to output hikes is taking place amid concern about the coalition's spare oil capacity, which is being challenged by production hiccups at some producers, including Angola and Nigeria, security concerns in Libya and sanctions on Iran and Venezuela.

"If there no relaxation of sanctions on Iran, if we continue to see not much coming out of Venezuela and if Libya continues to be troubled, we will very quickly go down to levels (of spare capacity) that cause some people angst," Mike Muller told a Gulf Intelligence webinar. "Right now, we are still talking about a supply cushion of several million barrels per day. Come middle of next year that is a very small level, (and) that is a pinch people are concerned about because they do not see investment going to the US and what little non-OPEC investment has taken place giving us some extra oil from Johann-Sverdrup and some Guyana and places like that is not enough."

The tightness in the oil markets prompted Saudi Aramco to hike its official selling prices for December. Aramco increased all of its December OSPs for Asian, Mediterranean, European and US-bound cargoes Nov. 5 as strengthening demand in Asia during colder months ahead is expected to tighten crude supplies. Aramco's biggest price increases were for light grades into Asia and Europe.

The increase in Aramco's OSPs was "larger than expected," particularly to Asia, Muller said.

"They went further than anybody expected and that was immediately seen as a signal to those who critiqued OPEC+ for not putting enough oil in the market that the Saudis felt they can indeed make higher prices stick," Muller said.

"The market is definitely in a position where inventories are low, there is a perception in the markets that crude supply is tight and the Saudis are pricing their crude accordingly."

The increase in prices comes on the back of two consecutive months of OSP cuts to Asia, when Saudi Aramco slashed prices by USD1.40/b-USD1.70/b for crude loading in October and November.

Despite the low inventories and US pressure to pump more oil, OPEC+ ministers agreed on Nov. 4 to hike output as planned by 400,000 b/d in December, citing concerns about COVID-19 infections and the demand recovery.

"There was of course an opportunity...that OPEC could possibly take note of the fact that inventories have now depleted to pre-pandemic levels and therefore they have accomplished what they set out to do in many ways," Muller said. "The fact they didn't do so does not come as a surprise to most traders."

OPEC+ stood firm on boosting crude output quotas by the planned increment for December despite prices holding close to three-year highs. The December hike is in line with a July agreement to boost output by 400,000 b/d per month as of August, adding a total of 2 million b/d by the end of the year.

As MRC informed earlier, Saudi Aramco's downstream business consumed 43.5% of the company's crude in the first nine months of 2021, while its bottom line for the third quarter to September was in the black amid an improvement in market conditions. During January-September 2020, Aramco's downstream oil consumption stood at 39.5%, the company said in an earnings report released Nov. 1.

We remind that in June 2020, Aramco finalized its USD69 billion acquisition of a 70% stake in Saudi Basic Industries Corp., the Middle East's biggest petrochemical maker. SABIC reported more than a fivefold year-on-year increase in its Q3 net profit to USD1.49 billion thanks to higher average sales prices.

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 PE consumption totalled 1,868,160 tonnes in the first nine months of 2021, up by 18% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,138,510 tonnes in January-September 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding statistical copolymers of propylene (PP random copolymers) decreased significantly.
MRC

MOSCOW (MRC) -- Zhejiang Petroleum & Chemical (ZPC) is in plans to start up its No. 4 crude distillation unit (CDU) in Zhoushan, China, which is part of the company's phase 2 petrochemical project in the cournty, in November 2021, reported S&P Global.

The sufficient feedstock, as the company has increased its crude oil imports recently, will help ZPC not only to start up its fourth CDU, but also to boost utilisation rates in the other three CDUs.

Zhejiang Petroleum & Chemical and Hengli Petrochemical (Dalian) Refinery lifted their imports by 7.1% on the month to 4.12 million mt.

ZPC in late-October separately gained 12 million mt of crude import quotas for 2021, which would enable the complex to import crude through the rest of the year and use up the quotas as much as possible.

As MRC informed earlier, ZPC started operations at its No. 1 cracker in the first half of November 2019, whereas the commercial procution at this cracker was received in late December 2019.

And this year, ZPC started up its No. 2 cracker in Zhoushan, China, which is part of the company's phase 2 petrochemical project in the cournty. Thus, the cracker with an annual capacity of 1.4 million tons/year of ethylene and 700,000 tons/year of propylene began trial runs in H1 April, 2021. The commercial production at this facility was received later that month.

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 PE consumption totalled 1,868,160 tonnes in the first nine months of 2021, up by 18% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,138,510 tonnes in January-September 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding statistical copolymers of propylene (PP random copolymers) decreased significantly.
MRC

MOSCOW (MRC) -- Many polypropylene (PP) plants in China have reduced their run rates due to emissions cuts and are selling their propylene feedstock in the spot market, reported S&P Global with reference to sources.

The Chinese government announced new emissions mitigation measures mid-September that require industries that use coal for power generation to reduce rates or shut down.

As MRC informed earlier, China's Oriental Energy-Ningbo, a subsidiary of Oriental Energy, a major petrochemical producer in the country, resumed production at its No. 1 (PP plant in Ningbo (Ningbo, Zhejiang province, China) on October 6. This plant with a capacity of 400,000 tonnes of PP per year was shut on September 28 due to the policy of dual control of energy consumption in the region.

According to MRC's ScanPlast report, PP shipments to the Russian market were 1,138,510 tonnes in January-September 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding statistical copolymers of propylene (PP random copolymers) decreased significantly.
MRC

MOSCOW (MRC) -- Negotiations over prices of European polyvinyl chloride (PVC) for November shipments to the CIS countries began in the middle of last week. Given a major increase in ethylene prices and the cost of electricity in the region, European producers raised their export prices by EUR95/tonne, and in rare cases, there was even a price rise of EUR150/tonne, according to ICIS-MRC Price report.

The November contract price of ethylene was agreed up by EUR92,5/tonne from the previous month, which theoretically allows to talk about an increase of EUR47/tonne from October in the net cost of PVC production. Electricity prices have also grown significantly for the past few months. All these factors amid an acute and long shortage led to another wave of growth in European producers' PVC prices. Producers raised their export prices by EUR95-100/tonne for November shipments.

Disruptions in operations and scheduled shutdowns for maintenance at production capacities in Europe, as well as low PVC imports from the United States seen for a long time, have negatively affected the balance of the European PVC market, including exports. As a result, some buyers from the CIS countries reported an almost complete absence of PVC for them from some European producers for the past three months.

Overall, deals for November shipments of suspension polyvinyl chloride (SPVC) to the CIS markets were discussed in the range of EUR1,650-1,710/tonne FCA, whereas the previous month's deals were negotiated at EUR1,500-1,615/tonne FCA.
MRC

MOSCOW (MRC) -- Oil prices rose on Monday after Saudi Arabia's state-owned oil producer Aramco raised the official selling price for its crude, suggesting demand remains strong at a time of tighter supplies, said Hydrocarbonprocessing.

Brent crude was up by 90 cents or 1.1% at USD83.64 a barrel, after dropping nearly 2% last week. U.S. oil gained 87 cents or 1.1% to USD82.14, having declined almost 3% through Friday.

Aramco late on Friday raised its December official selling price to Asia for its Arab light crude to USD2.70 a barrel versus Oman/Dubai crude, up USD1.40 from this month.

The move by Aramco suggests "demand remains strong" as the OPEC producer and other major oil exporters keep the reins on supply, ANZ Research said in a note.

The Organization of the Petroleum Exporting Countries and allies such as Russia, together known as OPEC+, agreed last week to stick to their plan to raise oil output by 400,000 bpd from December.

U.S. President Joe Biden had called on OPEC+ to produce more barrels to dampen rising prices and on Saturday said his administration has "other tools" to deal with the higher price of oil.

Elsewhere, China's oil imports slumped in October to the lowest in three yr, as state-owned refiners withheld purchases due to higher prices, while independent refiners were restrained by limited quotas for bringing in crude.

As per MRC, crude oil futures edged higher in mid-morning trade in Asia Nov. 8, extending gains from the previous session amid a broad risk-on sentiment in financial markets following a strong US jobs report and news of Pfizer's antiviral drug. At 10:10 am Singapore time (0210 GMT), the ICE January Brent futures contract was up USD1.03/b (1.24%) from the previous close at USD83.75/b, while the NYMEX December light sweet crude contract rose USD1.02/b (1.26%) at USD82.29/b. Both benchmarks had settled higher by 2.7%-3.1% in the last session Nov. 5.

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 PE consumption totalled 1,868,160 tonnes in the first nine months of 2021, up by 18% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,138,510 tonnes in January-September 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding statistical copolymers of propylene (PP random copolymers) decreased significantly.
MRC