Asian refiners to raise gasoline output, cut diesel to ease oversupply

Asian refiners to raise gasoline output, cut diesel to ease oversupply

MOSCOW (MRC) -- Several Asian refiners are likely to maximize gasoline output from May and reduce gasoil output, cashing in on higher profits for the motor fuel ahead of the peak summer driving season, industry sources and analysts say, said Hydrocarbonprocessing.

The adjustments come after margins for gasoil and jet fuel slumped on rising supplies as China boosted exports, while the arbitrage window to Europe has been shut since early 2023 due to ample supplies on the continent.

Meanwhile, gasoline profits have rebounded as traders build supplies ahead of a seasonal travel demand boost from April through September. By adjusting production, the oversupplied gasoil market in Asia could tighten again and support prices.

At Taiwan's Formosa Petrochemical Corp, one of Asia's largest oil products exporters, the company plans to cut gasoil output from some units, such as the delayed coking unit, and ramp up gasoline production from its residue fluid catalytic cracker (RFCC), spokesman KY Lin told Reuters.

"Our gasoil production volumes will be down around 5%, with gasoline production yield up 2-3% for May compared with the original production plan," said Lin. Refiners who can switch have been slowly making adjustments in the past few weeks, said a person working for a southeast Asia refinery who declined to be named due to company policy.

If the cracks continue to converge, there is a possibility of a production switch, a source at an Indian refinery said. Complex refinery margins in Singapore, the bellwether for Asian refining margins, have more than halved to USD3.17 a barrel - the lowest since October 2022 - from an average of USD7.56 in March.

The extent to which Asian refiners can change production yields between light distillates - gasoline and naphtha - and middle distillates - gasoil and jet fuel - is limited on feedstock and catalyst reasons, estimated at between 3% and 5% on average, according to industry sources.

Still, refiners are eyeing strong demand from the United States, the world's top petrol guzzler, which is short on gasoline and blendstocks, traders said. Even though U.S. refineries have ramped up output after first-quarter maintenance, imports are still required, one Singapore-based blendstock broker said.

We remind, The rise in gasoline output is typically accompanied by more naphtha, which can be used as a blendstock for petrol or for the production of ethylene and propylene, used for plastics. Refiners considering ramping up their FCC runs would need to assess the overall uplift margins, as higher unit runs will produce more propylene, in addition to gasoline. Gasoline output, on the other hand, rebounded to above 4 million bpd in January.

Cepsa teams up with Apical to build USD1 bn biofuels plant

Cepsa teams up with Apical to build USD1 bn biofuels plant

MOSCOW (MRC) -- Spanish oil company Cepsa teamed up with vegetable oil processor Apical Group’s Bio-Oils unit to build a second-generation biofuels plant in southern Spain, a USD1.11-bn project, said Hydrocarbonprocessing.

The plant, set to start operating in 2026, will be Southern Europe’s largest, the Spanish company said on Friday. It will have a capacity of 500,000 tons of renewable diesel and sustainable aviation fuel (SAF) per year using organic waste, such as used cooking oils. Biofuels are seen as key to decarbonize transportation in sectors hard to electrify, like aviation.

Building and operating the facility, which will be in the southern Spanish region of Andalusia, will create around 2,000 direct and indirect jobs and save 1.5 million tons of CO2 emissions per year, Cepsa said.

The project will help the oil company achieve its goal of producing 2.5 million tons of biofuels by the end of the decade.

We remind, Cepsa plans to nearly double its investments over the next three years to a total of 3.6 B euros (USD3.82 B), with more than half of that amount going to sustainable energy and mobility. It also posted a full-year net profit at current cost of supplies (CCS) of 790 MM euros for 2022, up sharply from the 310 MM euros reported in 2021. The planned investment increase of 93% for 2023-25 is from the previous three years, Cepsa said.

LyondellBasell downgraded by Jefferies

LyondellBasell downgraded by Jefferies

MOSOCW (MRC) -- Jefferies has downgraded its rating on LyondellBasell from “Buy” to “Hold” on rising US recession risk, as well as the US shale thesis being “played out”, said Fintel.

“With OPEC’s production cut and US natural gas testing around USD2/MMBtu, the US shale advantage thesis has played out," Jefferies analyst Laurence Alexander said in a research note. "A US recession in H2 2023-2024, in contrast, still presents significant risk to sentiment as it will likely trigger another round of destocking and margin erosion.”

While near-term trends are encouraging – specifically strong refining margins, stable propylene spreads and polyethylene (PE) benefitting from competitor force majeures, capacity expansion delays and higher oil prices, which support US olefins margins, demand risks are rising, he pointed out. “We expect the key risks in H2 2023-2024 to be increasing pressure on US consumers as the US economy slides into recession,” Alexander said.

“We expect the recession to last 4-6 quarters, with the first step-up in the unemployment rate likely triggering another round of inventory destocking in retail channels,” he added. The analyst estimates that each 1% cut to global GDP represents a USD250-300m headwind to LyondellBasell’s earnings before interest, tax, depreciation and amortisation (EBITDA) due to compressing spreads.

In a more severe recession, naphtha usually dislocates from oil prices, most likely creating another USD650-750m headwind to EBITDA, he pointed out. In this situation with markedly lower naphtha feedstock prices benefitting its competitors, LyondellBasell’s US cost advantage based on natural gas would erode.

We remind, LyondellBasell NV said it was exploring strategic options for its U.S. Gulf Coast-based ethylene oxide & derivatives (EO&D) business. The company said it was analyzing the potential to retrofit the Houston refinery to build up its Circular and Low Carbon Solutions (CLCS) business.

Covestro reports preliminary net loss in Q1

Covestro reports preliminary net loss in Q1

MOSCOW (MRC) -- Covestro’s Q1 earnings before interest, tax, depreciation and amortisation (EBITDA) will be much higher than previous guidance and analysts’ consensus, the Germany-based polymer major said.

While demand remained weak in Q1, “we took the right measures on the cost side”, chief financial officer (CFO) Thomas Toepfer said.

“As a result, the first three months of 2023 have been significantly better than expected at the beginning of the year,” he said.

Covestro's preliminary Q1 EBITDA amounts to EUR286m - compared with the company's previous guidance of EUR100-150m and analysts’ consensus of EUR158m.

However, preliminary Q1 sales of EUR3.74bn are lower than consensus expectations of EUR3.94bn. Covestro is still preparing the Q1 results report, which is due to be released on 28 April. Toepfer will leave the company as of 31 August 2023 to join European aircraft manufacturer Airbus as CFO.

We remind, Covestro successfully started up a new world-scale facility for the production of chlorine in Tarragona, Spain. It is the first world-scale production plant for chlorine based upon the highly innovative and energy efficient ODC (oxygen depolarized cathode) technology invented by Covestro and its partners.

Heidelberg Materials and Linde to build large-scale carbon capture facility

Heidelberg Materials and Linde to build large-scale carbon capture facility

MOSCOW (MRC) -- Linde announced it has signed an agreement with Heidelberg Materials, one of the world's largest building materials companies, to jointly build, own and operate a large-scale carbon capture and liquefaction facility, said the company.

Carbon dioxide is a by-product of cement production and is estimated to be responsible for around 7% of global carbon emissions1. Through the use of carbon capture, Linde and Heidelberg Materials will aim to reduce carbon emissions at Heidelberg’s Lengfurt plant in Germany. The new plant will capture, liquefy and purify around 70,000 tons of CO2 per year, with the majority of the resulting liquid CO2 to be marketed by Linde as feedstock for the chemicals and food & beverage end markets.

"For many of Linde’s customers in the heavy industrial sector, improving the environmental performance of their operations is a priority," said Sean Durbin, Executive Vice President EMEA, Linde. "Our innovative project with Heidelberg Materials is one of the first large-scale plants of its kind for the cement industry. Considering current market constraints, it is also a welcome new source of CO? that will help ensure supply for the merchant market."

Linde is a leading global industrial gases and engineering company with 2022 sales of USD33 billion. We live our mission of making our world more productive every day by providing high-quality solutions, technologies and services which are making our customers more successful and helping to sustain, decarbonize and protect our planet.

The company serves a variety of end markets such as chemicals & energy, food & beverage, electronics, healthcare, manufacturing, metals and mining. Linde's industrial gases and technologies are used in countless applications including production of clean hydrogen and carbon capture systems critical to the energy transition, life-saving medical oxygen and high-purity & specialty gases for electronics. Linde also delivers state-of-the-art gas processing solutions to support customer expansion, efficiency improvements and emissions reductions.

We remind, Linde has signed a long-term agreement with oil and gas firm ExxonMobil for the off-take of carbon dioxide (CO2) from its new clean hydrogen production site in Beaumont, Texas. Back in February (2023), the industrial gas giant said it would invest USD1.8bn to build, own and operate an on-site complex to supply clean hydrogen and nitrogen to OCI Global’s “world-scale” blue ammonia plant in Texas.