Page 14 - MEOG Week 18

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prompt July prices at a discount to forward values, has narrowed sharply this month as the Opec+ production restraint agreement took effect on 1 May, lending support to Mideast Gulf crude values.
Front-month Dubai narrowed to a $2.96/bl discount to third-month Dubai as of 4.30pm Singapore time today, the spread’s narrowest discount since 18 March. The front-month to third-month Dubai contango had reached a record wide spread of $10.93/bl on 21 April amid a supply glut and reduced demand caused by the Covid-19 pandemic.
The Dubai intermonth contango in the forward months has also narrowed to around 50-60¢/bl compared with last month when the contango in the forward months was around $1/bl. Expectations of reduced crude supplies and the prospect of increased demand as more countries ease lockdown measures mean the period of the “super contango” could be over, market participants said.
Mideast Gulf producers Saudi Arabia, Iraq, Kuwait, the UAE and Oman will account for more than half of the total production cuts of 9.7mn b/d that the 23-country Opec+ alliance has pledged for this month and next, largely from an October 2018 baseline.
Crude demand is also expected to slowly recover as more refineries increase run rates. Abu Dhabi’s state-owned Adnoc has begun to restart two crude distillation units at its 817,000 b/d Ruwais refinery complex after a planned shutdown for maintenance.
But a build-up of crude stocks at some
key oil consuming countries may keep a
lid on prompt spot differentials of Mideast Gulf crudes in the short term. India, which
is a large buyer of Mideast Gulf crude, has filled all its available crude storage capacity, including commercial and strategic petroleum reserve facilities, and is holding around 50mn bl in floating storage.
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KNPC halts work at refinery after COVID-19 case
The Kuwait National Petroleum (KNPC) has
halted work at the Al-Ahmadi oil refinery, it said on April 24, after a worker was diagnosed with coronavirus (COvID-19).
The worker was an Indian national employed by a contractor, KNPC said on social media.
“Work has stopped on the project until precautionary measures are taken to identify those who came in contract with him and the necessary tests are done,” KNPC said.
Kuwait has so far registered 4,024 coronavirus cases and 26 deaths.
KNPC did not say which project it was referring to. However, the company in early April completed a new biofuels expansion at the site.
The refinery has been fitted with two extra production units – one for coal and one for naphtha hydrotreating – that will produce 37,000 and 8,400 barrels of oil equivalent per day (boepd) respectively. Work is underway on a similar project at the Abdullah refinery, according to KNPC.
Both refineries are undergoing modernisation. Once work is finished at Al- Ahmadi, the refinery will boast a production capacity of 364,000 barrels per day (bpd). The cost of the biofuels project is KWD4.6bn ($14.7bn).
KNPC reported on April 16 that demand for jet fuel and gasoline has plummeted by 70% and 55% respectively over the previous two months as a result of COvID-19 lockdown measures.
The government suspended all commercial flights in and out of Kuwait International Airport on March 13. Jet demand averaged 11,500 bpd in March and April last year, according to data from the Joint Organisations Data Initiative (JODI).
Authorities also began restricting movement on March 1, causing gasoline demand to drop to 5.9mn litres per day. Demand for diesel has fallen by 5% in the past eight weeks, according to KNPC. In comparison, diesel consumption averaged 40,000 bpd in March and April last year, JODI states.
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Iran expects fall in petchems export revenues
Iran’s petrochemical export revenues will contract by nearly one-third year on year given market impacts of the coronavirus (COvID-19) pandemic, according to the Iranian government-owned Press Tv broadcaster.
The revenues would shrink by at least 30%, a report from parliament’s Research Center cited by the media outlet has concluded. Depressed prices as well as problems with the transportation of goods across borders and by sea amid pandemic restrictions would be the main cause, the report added. Press Tv gave an official figure of $12bn per annum for Iran’s petrochemical earnings.
The slump in demand was expected to make a clear and immediate impact on Iran’s sales of methanol, liquefied petroleum gas and aromatics, while it was predicted that demand for other products such as polymers, urea and ammonia would gradually decrease over coming months. Petrochemical exports have served as an increasingly important component of Iran’s hard currency income since the US in 2018 re-imposed heavy sanctions on the country. In May last year, Washington tightened its sanctions to include an effort to drive all Iranian crude oil sales of world markets. Petrochemical products are more difficult for sanctions enforcers to target for reasons including their great diversity and the difficulty of tracing where petrochemical components of finished or intermediate products originated.
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Oman’s $6.7bn petchem venture nears completion
Oman’s flagship $6.7bn petrochemicals
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Week 18 06•May•2020