Brent oil hovers above USD80 as U.S inflation eases

Global oil benchmark Brent hovered above USD80 a barrel on Thursday after U.S. inflation data implied interest rates in the world's biggest economy are close to their peak, said Hydrocarbonprocessing.

Data released on Wednesday showed U.S. consumer prices rose modestly in June and registered their smallest annual increase in more than two years as inflation continued to subside. Markets expect one more interest rate rise before the U.S. rate-hiking cycle peaks. Higher rates can slow economic growth and reduce oil demand.

Oil prices have rallied by around 12% in two weeks, primarily in response to supply cuts from top producers Saudi Arabia and Russia, said Craig Erlam, senior market analyst at OANDA. "Some profit-taking at these levels wouldn't be hugely surprising and may have come sooner if not for the U.S. consumer price inflation data," he said.

Brent crude futures were up 20 cents to USD80.31 per barrel by 1135 GMT, while U.S. West Texas Intermediate crude futures were up 11 cents at USD75.86. The futures contract structure of the global benchmark Brent indicates the market is tightening and that OPEC could be succeeding in its mission to support the market.

The premium of a front month Brent contract to a six-month February 2024 contract rose to USD2.64 a barrel on Wednesday. At the end of the June, the front month contract was at a discount to the six month contract.

In the latest insights on the supply-demand balance, a report by the International Energy Agency (IEA) on Thursday predicted oil demand would hit a record high this year, but that broader economic headwinds and interest rate hikes meant the increase would be slightly less than previously anticipated.

Meanwhile, an OPEC report also published on Thursday, maintained an upbeat world oil demand outlook despite economic headwinds. It raised its growth forecast for 2023 and predicted only a slight slowdown in 2024 with China and India expected to continue to drive the expansion in fuel use.

In China, however, momentum in the post-pandemic recovery slowed with exports contracting last month at their fastest pace since the onset of the pandemic three years ago, the country's Customs Bureau showed on Thursday.

We remind, Oil benchmark Brent futures breached USD80 a barrel for the first time since May on Wednesday after U.S. inflation data suggested the interest rate hike cycle in the world's biggest economy is set to finally cool. Data released on Wednesday showed U.S. consumer prices rose modestly in June and registered their smallest annual increase in more than two years as inflation continued to subside.

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Saudi Arabia imported record volumes of discounted Russian fuel oil in June, a near 10-fold annual increase to meet summer power generation demand and maintain crude exports despite OPEC+ production cuts, according to traders, analysts and Kpler data, said Hydrocarbonprocessing.

For Russia, its growing oil trade with the world's biggest exporter enables it to keep output flowing to global buyers despite Western sanctions that have shut its access to key markets including Europe. Saudi Arabia imported a record 910,000 metric tons (193,000 barrels per day) of fuel oil from Russia in June, data from analytics firm Kpler showed.

The kingdom has ramped up fuel oil imports from Russia this year following the European Union's ban on Russian products. Saudi's Russian fuel oil imports hit 2.86 million metric tons for the first half of 2023, exceeding the 1.63 million metric tons for all of 2022, the data showed. Saudi Arabia's energy ministry did not respond to a Reuters query. State oil giant Saudi Aramco declined to comment.

The predominantly high-sulfur fuel oil (HSFO) cargoes from Russia mostly end up at Saudi oil-fired power plants, said Royston Huan, fuel oil and feedstocks analyst at consultancy Energy Aspects. Saudi Arabia said this month it would extend an extra 1 million barrels per day output cut for a second month in August to support prices as part of a pact between the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.

"We believe there is a linkage to the cuts, as Saudi Arabia will be incentivized to prioritize their crude exports, therefore prioritizing fuel oil utilities burn over crude oil burn," Huan said. Traders and analysts said the OPEC kingpin has been importing cheap Russian fuel oil as well as diesel and ramping up exports in order to generate higher profits.

Saudi Arabia is forecast to boost fuel oil exports to 1.2 million metric tons in July, up from 750,000 metric tons in June, Kpler data showed, as margins for the fuel strengthened. Asia's HSFO crack - the margin for refiners from producing the residue fuel from Dubai crude - is at a discount of $7.83 a barrel on Wednesday, up nearly 50% from the start of the second quarter, based on Refinitiv data.

"The recent strength in HSFO cracks were likely due to concerns of tighter HSFO availability after Saudi extended their 1 million bpd voluntary cuts," analysts from consultancy FGE said in an email.

We remind, Oil benchmark Brent futures breached $80 a barrel for the first time since May on Wednesday after U.S. inflation data suggested the interest rate hike cycle in the world's biggest economy is set to finally cool. Data released on Wednesday showed U.S. consumer prices rose modestly in June and registered their smallest annual increase in more than two years as inflation continued to subside.

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Toray Industries, Inc. has shared the news about their Korean subsidiary, Toray Advanced Materials Korea Inc., receiving ISCC PLUS certification for their PPS resin manufacturing at the Gunsan plant, said Chemanalyst.

Being an independent multi-stakeholder initiative, ISCC PLUS is a renowned certification system that promotes sustainable, climate-friendly, and deforestation-free supply chains through full traceability.

Polyphenylene Sulfide is an organic polymer that comprises aromatic rings connected through sulfides. The synthetic fiber and textile manufactured using this polymer can withstand thermal and chemical damage. PPS finds its application in various fields like filter fabric for coal boilers, papermaking felts, electrical insulation, film capacitors, specialty membranes, gaskets, and packings. Moreover, it is also used to create a semi-flexible rod polymer family's conductive polymer. PPS, which is non-conductive, can be transformed into the semiconducting form by oxidation or using dopants.

Toray Advanced Materials Korea can now produce and provide PPS resins that include raw materials made from biomass naphtha and pyrolysis oil from waste plastics allocated through the mass balance method, with identical features as fossil-derived PPS resins, all thanks to the ISCC PLUS certification. This certification ensures that the recycled and biomass raw materials are adequately handled in the supply chain during mass-balance method production. The company is currently making arrangements to begin mass production.

As the biggest integrated PPS manufacturer in the world, the Toray Group manages a wide range of products, from polymers and compounds to fibers and films. Toray Advanced Materials Korea and Toray's Tokai Plant situated in Aichi Prefecture, Japan, have a combined PPS polymerization capacity that is the largest globally. Toray Advanced Materials Korea provides PPS resins to Group compounding sites located in China, Europe, the United States, and Southeast Asia.

Toray is currently seeking certification for the Tokai Plant. This initiative aims to establish a global supply structure for eco-friendly PPS resins and develop supply setups at compounding sites in countries where the company operates. This way, Toray can meet customer requirements for biomass and recycled raw materials while reducing its carbon footprint. Toray Group Sustainability Vision envisions a world where people manage resources sustainably by 2050. As part of its corporate philosophy to create new value and contribute to society, Toray will continue to cater to customer demand for environmentally friendly resins.

Toray Industries, Inc. is a multinational corporation that focuses on producing industrial goods utilizing organic synthetic chemistry, polymer chemistry, and biochemistry expertise. Initially, the company's focus was on fibers, textiles, plastics, and chemicals. The company has now expanded its operations into several other sectors, including but not limited to pharmaceuticals, biotechnology and R&D, medical products, reverse osmosis big membranes, electronics, IT-products, housing and engineering, and advanced composite materials.

We remind, Toray Advanced Materials Korea (TAK) has announced plans to increase its annual production capacity of polyphenylene sulfide (PPS) resin by 5,000 tons. The expansion will take place at the Gunsan plant located in Saemangeum Industrial Complex and is set to be completed by 2024, bringing TAK's total annual capacity to 13,600 tons, the largest in South Korea. TAK will also raise its capacity for sodium sulfide, the main raw material for PPS resin, to 4,800 tons per year.

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A bipartisan group of U.S. lawmakers introduced legislation this week directing the Biden administration to allow oil refiners to purchase compliance credits for U.S. biofuel blending laws at a lower, fixed cost compared to the open market, said Hydrocarbonprocessing.

The proposal would reduce rising compliance costs associated with the U.S. Renewable Fuel Standard (RFS) and aim to help struggling refineries stay afloat at a time of great flux in the global energy markets, lawmakers said. As part of the standard, oil refiners must blend billions of gallons of biofuels into the nation's fuel mix or buy tradable credits from those that do.

Oil refiners argue the mandates are pricey, while biofuel proponents like ethanol producers and corn farmers like the obligations because it increases the market for their products. Under the proposed bill, refiners could buy credits around conventional biofuel blending, which includes corn-based ethanol blending, at the fixed price if they are not able to obtain them in the market at cost-effective levels, according to a news release.

News of the bill caused prices for the credits, known as RINs, to dip. "We can and must do more to address volatile and soaring compliance costs driven by fuel mandates that are out of step with domestic fuel demand,” said Chris Coons, who introduced the bill along with fellow Democratic Senator Bob Casey and Republican U.S. Representative Brian Fitzpatrick.

It is unclear whether the measure, unveiled on Tuesday, will pass. Issues around the RFS typically draw strong lobbying efforts from both oil refining advocates and biofuel advocates. The bill must pass both the Democratic-controlled Senate and the Republican-led House of Representatives before it could reach President Joe Biden's desk, who would decide whether to sign it into law.

Renewable fuel credits traded at USD1.54 each on Tuesday after the bill came out, down from USD1.56 prior, traders said. Credits traded on Wednesday between USD1.55 and USD1.56 each amid U.S. government data release.

We remind, Oil benchmark Brent futures breached $80 a barrel for the first time since May on Wednesday after U.S. inflation data suggested the interest rate hike cycle in the world's biggest economy is set to finally cool. Data released on Wednesday showed U.S. consumer prices rose modestly in June and registered their smallest annual increase in more than two years as inflation continued to subside.

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Russian petrochemical company Sibur said on Tuesday it suspended production at its plant in the city Dzerzhinsk after fire, said the company.

It said the blaze hit production of ethylene oxide and glycols. "Personnel have been evacuated. There is no threat to the life and health of the population," it said.

A fire at Sibur's petrochemical plant in the Russian city of Dzerzhinsk has been extinguished, emergency services said on Wednesday.

Sibur earlier said that it suspended production of ethylene oxide and glycols after due to fire.

Local emergency service said on social media that the fore had been put out and there were no injuries.

We remind, ZapSibNeftekhim produced the first batches of colored polyethylene pipe grades in Russia — blue HD 03505 RC blue and orange HD 03505 PE orange — for water and gas supply systems. The main feature of pipes from RC grades is their bright color, which makes it easy to identify the intended purpose of the pipeline during installation or repair work. In addition, the presence of a colored layer makes it easier to detect damage to the pipe surface during installation.


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