Saudi Aramco to ship full oil contract volumes to Asia in December

Saudi Aramco has told at least four refinery customers in North Asia they will receive full contract volumes of crude oil in December, said Reuters.

The producer is maintaining a steady supply to Asia despite the decision by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, to lower the group's output target by 2 MMbpd starting this month.

"People are scratching their heads to figure out when will the output cut be materialized, as the market has not felt a tightened supply," said one of the sources, a Singapore-based trader.

Saudi Arabia's Energy Minister Abdulaziz bin Salman said when the cuts were announced in October that the actual supply cut would be about 1 million to 1.1 MMbpd.

The sources said Saudi Arabia's latest official selling prices (OSPs) to Asian buyers have sent a signal that it will not trim the allocation for the month.

Saudi Aramco lowered the December OSP for its flagship Arab Light crude it sells to Asia by 40 cents a barrel from the prior month amid signs of weaker demand in the region.

But the company raised the OSPs to European customers and kept the prices for clients in the United States unchanged. "(The OSP adjustment) could indicate that Saudi wants to maintain its market share in Asia in December when the price cap on Russian crude kicks in," said another source.

The United States, the European Union and other G7 nations are set to impose a price cap on Russian oil on Dec. 5 in response to Russia's invasion of Ukraine. China, the biggest buyer of Saudi crude oil, has increased purchases from Russia to take advantage of discounts for Russian oil as western countries scaled back trade with Moscow.

Saudi Aramco did not immediately respond to Reuters' request for comment.

We remind, Saudi Aramco's net profit rose by 39.5% year on year to Saudi Riyal (SR) 159.1bn in the third quarter on the back of higher crude oil prices and volumes sold.

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Refiner Phillips 66 said on Wednesday, it plans to reduce its employee headcount by 1,100 to help cut costs and meet its savings target of USD500 MM by end-2022, said Reuters.

Phillips, which had 14,000 employees in 2021 according to a company presentation, expects to cut staff to 12,900 by the end of this year.

We remind, Phillips 66, a diversified energy company, announces third-quarter 2022 earnings of USD5.4 billion, compared with earnings of USD3.2 billion in the second quarter of 2022. Excluding special items of USD2.3 billion, the company had adjusted earnings of USD3.1 billion in the third quarter, compared with second-quarter adjusted earnings of USD3.3 billion.

We remind, Phillips 66 and FreeWire unveiled plans earlier this year to deploy FreeWire’s ultrafast, battery-integrated technology to meet the growing demand from EV drivers for high-speed, on-the-go charging. Phillips 66 will leverage its network of approximately 7,000 Phillips 66, Conoco and 76 branded U.S. sites and other strategic locations. The chargers are the first commissioned FreeWire chargers in Texas.

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South Korean petrochemical operator LG Chem may extend maintenance at its naphtha cracker for a month into December, a company official said on Wednesday, to deal with unattractive cracking margins, said Reuters.

The company had started planned maintenance for its 1.16-MMt Yeosu cracker at the end of September. It was expected to last until November.

"This time we are taking things more flexibly considering the market situation, and we could take this ongoing maintenance into December," the official said.

Asian refiners have been struggling with negative naphtha margins stemming from poor petrochemical demand. The cracking margin for naphtha in the region dropped to a discount of USD22.85 a ton on Tuesday against Brent crude oil.

LG Chem operates three naphtha crackers with total ethylene capacity of 3.3 MMtpy.

We remind, LG Chem announced its 3Q 2022 business performance with sales of Won 14.1777 trillion and operating profits of Won 901.2 bn. Sales rose 33.8% year-over-year and operating profits increased 23.9%. Compared to the previous quarter, sales increased by 15.8% and operating profits grew by 2.6% respectively. The Petrochemicals Company recorded sales of Won 5.4931 trillion and operating profits of Won 92.6 bn.
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China's refined oil product exports in November are set to hit the highest since April 2020 as refiners ramp up output to multi-month highs to boost diesel supply and profit, offsetting the impact of slower domestic demand from COVID-19 restrictions, said Reuters.

The world's top two refiners - the United States and China - are processing more crude to meet higher diesel use globally this winter as countries switch to oil for heating, away from more expensive natural gas. The increased output could also cool prices for other oil products, especially for gasoline, and dampen overall refining margins.

China's crude oil throughput could rise by up to 500,000 barrels per day (bpd), or 4% this month over October, as two new refineries - PetroChina Guangdong Petrochemical and private firm Shenghong Petrochemical - prepare to start operations, three Beijing-based industry sources told Reuters.

Half of the increase, though, will still come from Asia's biggest refiner Sinopec (600028.SS), one of them said, as it raises output to produce more diesel and raise fuel exports. "Crude runs are estimated to increase to around 14.4 MMbpd in November," said senior analyst Daphne Ho at consultancy Wood Mackenzie.

That compares with around 13.8 MMbpd of throughput in September. Official output data for October will be released on Nov. 15.

Sinopec's major coastal plants are expected to raise throughput moderately or extend high operation rates from October, with production geared towards diesel at the expense of gasoline, company sources told Reuters.

"Gasoline demand is not good but diesel inventories are thin. So the mandate from the headquarters is to boost diesel production to supply the domestic market and also to raise exports," one of the Sinopec sources said.

A Sinopec spokesperson declined to comment.

Further boosting supply, China's largest private refiner Zhejiang Petroleum and Chemical Co (ZPC) is raising diesel output by cutting petrochemical production.

We remind, China produced a record volume of gasoil in September as refiners ramped up production ahead of winter and sought to capitalise on high export prices. Output reached just over 17 million tonnes, up 26 per cent from August, noted China’s National Bureau of Statistics on Wednesday. Domestic demand is set to rise with winter approaching, but there are export dollars to be earned as well with refining margins rising to around USD40 a barrel in Asia, according to Refinitiv, a unit of the London Stock Exchange Group.
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LANXESS' third-quarter net income rose by 8% year on year in the third quarter amid significant sales increase in all segments on the back of higher prices, said the company.

Sales increased by a significant 38.2 percent from EUR 1.581 billion in the prior-year quarter to EUR 2.185 billion. EBITDA pre exceptionals reached EUR 240 million, growing by 4.8 percent compared to the previous year’s figure of EUR 229 million.- Sales volumes fell in the third quarter, particularly due to weakening demand.

All business segments continued to record significantly higher raw material and energy prices, which were mainly passed on to the market through increase in selling prices.

"Massively increased raw material and energy costs, declining general demand in response to the drastic increase in inflation, central banks’ interest rate hikes to counter this inflation, and continuing disruptions to global logistics and supply chains are tarnishing the outlook for the world economy," the company said in a statement.

The company expects EBITDA pre exceptionals from continuing operations at between EUR900m and EUR950m in 2022.

"Compared with earnings of EUR815m in 2021, we therefore continue to expect EBITDA pre exceptionals to be significantly higher than the earnings of the previous year," it added.

We remind, on 31st May 2022, Advent and LANXESS announced the joint, Advent controlled, acquisition of DSM Engineering Materials, alongside its combination with LANXESS High-Performance Materials (subject to competition clearance), to establish a leading global engineering materials company with sales of around EUR 3 bn.

LANXESS is a leading specialty chemicals company with sales of EUR 6.1 billion in 2021. The company currently has about 13,200 employees in 33 countries. The core business of LANXESS is the development, manufacturing and marketing of chemical intermediates, additives and consumer protection products.

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