Oil & Petrochemicals Monthly

Transcription

1 1 Petrochemical prices increase Propane and butane prices rose to 5-months high in June: In early June, Propane prices rose 12.0% MoM to a 5-month high of USD 560 per ton, while butane prices increased 10.9% MoM to USD 560 per ton. For May, Propane prices rose to USD per ton, while butane increased to USD 505 per ton. The PP-propane spread expanded to USD 743 per ton in May from USD 737 in April, while the PP-butane spread decreased to USD 738 per ton from USD 742 per ton. Naphtha prices surge: Naphtha prices increased 8.7% MoM from those in April to USD 685 per ton in May. PP and PE prices rise: PP prices rose 2.9% MoM to USD 1,255 per ton in May, driven by an increase in propylene prices (up 4.3% MoM). HDPE and LLDPE were up 1.5% and 1.3%, respectively, while LDPE fell 0.4%. Polystyrene prices increase: Polystyrene prices jumped 4.0% to USD 1,560 per ton in May, driven by a 4.5% rise in styrene prices to USD 1,385 per ton. During the month, PVC prices decreased 3.2% MoM to USD 910 per ton. MEG prices decline, ethylene advances: MEG prices plunged 10.3% MoM to USD 910 per ton in May. Ethylene prices increased 3.2% MoM to USD 1,280 per ton, while methanol prices remained flat at USD 460 per ton. Titanium dioxide falls marginally: The weighted average price of titanium dioxide fell 0.1% MoM to USD 3,436 per ton in May from USD 3,441 per ton in April. Urea falls, DAP and ammonia rise: Ammonia prices rose 3.8% MoM to USD 270 per ton, while those of urea fell 2.1% to USD 235 per ton in May. DAP prices increased 1.2% to USD 420 per ton. Brent breaches $80 mark in May Oil prices at new high: Oil prices started the month on a promising note as the fate of the Iran nuclear deal and its potential effect on global oil supply outdid a rising US oil rig count. In mid-may, Brent briefly touched $80 per barrel, reaching the highest since November However, the high levels could not sustain and prices sank on news of OPEC and Russia possibly increasing production. By the end of May, Brent stood steady, while WTI started declining on high US output. This created a rare spread between the two, reflecting uncertainty in the oil market. Oil prices continue uptrend: Brent gained 2.4% MoM, while WTI fell a marginal 0.3% MoM. The Brent-WTI spread expanded to nearly USD 8.6 per barrel in May from USD 6.5 per barrel in April. Brent and WTI closed at USD 76.4 per barrel and USD 67.9 per barrel, respectively. Natural gas prices at Henry Hub increased 6.1% MoM to USD 2.9 per MMBtu. EIA increases US crude production estimates for 2019, but keeps 2018 unchanged: In its latest short-term energy outlook, the EIA expects oil output in the US to average 10.7 mbpd in However, it increased the forecast to 11.9 mbpd for OPEC oil production rises 12 kbpd in April: According to the Monthly Oil Market Report (MOMR), OPEC s oil production rose to 31.9 mbpd in April. OECD commercial inventories rose 9 mn barrels from the latest fiveyear average, with a forward cover of 59.9 days. Table 1: Petchem Prices May 2018 Name Price (USD pet ton) MoM % YTD % Naphtha % 11.4% Saudi Propane 5.3% -15.3% Saudi Butane % -11.4% Ethylene 1, % -3.8% Propylene-Asia 1, % 14.8% HDPE 1, % 7.0% LDPE 1, % 1.3% LLDPE 1, % 3.0% PP-Asia 1, % 8.2% Styrene-Asia 1, % 7.8% Polystyrene 1, % 7.6% TiO2 3, % 5.3% PVC-Asia % 4.0% MEG % -4.2% Methanol % -2.1% DAP-Gulf % 3.7% Urea-Gulf % -2.1% Ammonia-Gulf % -18.2% MTBE-Asia % 23.6% EDC % 70.3% Butyl-A 1, % 2.4% BPA 1, % 18.2% PX-Asia 1, % 10.4% EVA 1, % -1.0% Vinyl Acetate Monomer-VAM 1, % 11.0% Source: Argaam, Reuters Eikon, AlJazira Capital Research Table 2: Economic Calendar Date Country Event Jun 05,12,19,26 US Weekly Petroleum Status Report 15-Jun to 25-Jun KSA CPI YoY 18-Jun KSA April Crude Oil Output Exports: JODI 20-Jun to 05-Jul KSA Non-Oil Exports YoY 28-Jun US GDP Annualized QoQ 3-Jul KSA Emirates NBD Saudi Arabia PMI 6-Jul US Trade Balance 12-Jun EIA Short-term Energy Outlook 12-Jul US Monthly Budget Statement 12-Jun OPEC Monthly Oil Market Report 13-Jun IEA Oil Market Report 12-Jul KSA M1, M2, M3 Money Supply YoY 26-Jun to 05-Jul KSA Unemployment Rate Source: Bloomberg, IEA, EIA, OPEC Analyst Jassim Al-Jubran j.aljabran@aljaziracapital.com.sa

2 Key comments from international energy agencies IEA Oil Market Report (Published on May 16) The global demand growth forecast for 2018 declined marginally to 1.4 mbpd (down 0.1 mbpd from the previous month s estimate) to 99.2 mbpd. OPEC s oil output fell to mbpd in April, led by further decline in Venezuela and reduced output in Africa. Global oil supplies remained steady at 98.0 mbpd in April, led by robust non-opec output growth. OECD commercial inventories decreased to 2,819 million barrels in March, the lowest level since March Global refining throughput is expected to rise to a record 83 mbpd over July August. However, growth is still insufficient to cover total demand for refined products. OPEC Monthly Oil Market Report (Published on May 14) Oil consumption is expected to grow 1.65 mbpd to an average of 97.2 mbpd in 2017 (up 0.1 mbpd from the previous month s estimate). It is estimated to further increase 1.65 mbpd to an average of mbpd in 2018 (up 0.14 mbpd from the previous month s estimate). OPEC s oil production rose 12 kbpd to mbpd in April, according to secondary sources. Non-OPEC supplies averaged an estimated 57.9 mbpd in Non-OPEC oil supply is expected to grow 1.72 mbpd (up 0.01 mbpd from the previous month s estimate) to an average of mbpd in OECD commercial oil stocks fell to 2,829 mn barrels in March from 2,854 mn barrels in February. OECD commercial inventories rose 9 mn barrels from the latest five-year average, with a forward cover of 59.9 days (down 1.6 days from the latest five-year average). Demand for OPEC crude is projected to increase 0.6 mbpd (unchanged from the previous month s estimate) to an average of 33.0 mbpd in In 2018, demand is estimated to stand at 32.7 mbpd (up 0.1 mbpd from that in 2017). EIA Short-Term Energy Outlook (Published on May 08) Brent averaged USD 72 per barrel in April, and is expected to average USD 71 per barrel in 2018 (up USD 8 per barrel from the previous month s estimate) and USD 66 per barrel in 2019 (up USD 3 per barrel from the previous month s estimate). WTI is estimated to average USD 5 per barrel lower (up USD 1 per barrel from the previous month s estimate) than the average for Brent in 2018 and US crude production averaged 10.5 mbpd in April 2018, up 120 kbpd from the March average, according to EIA estimates. Furthermore, production is expected to average 10.7 mbpd for 2018 (unchanged from the previous month s estimate) and increase to 11.9 mbpd on average in 2019 (up 0.5 mbpd from the previous month s estimate). As of May 25, natural gas inventories in the US stood at 1,725 bn cubic feet (up 28.4% MoM). Global consumption of petroleum and other liquid fuels is expected to increase 1.76 mbpd in 2018 (down 0.3 mbpd from the previous month s estimate) and 1.73 mbpd in 2019 (down 0.1 mbpd from the previous month s estimate). Non-OPEC production is projected to grow 2.50 mbpd in 2018 (down 0.1 mbpd from the previous month s estimate) and 1.91 mbpd in 2019 (up 0.4 mbpd from the previous month s estimate). On average, OPEC members produced 34.5 mbpd of crude in 2017 (unchanged from the previous month s estimate). They are estimated to produce 34.0 mbpd in 2018 (down 0.1 mbpd from the previous month s estimate) and 33.7 mbpd in 2019 (unchanged from the previous month s estimate). OPEC s unplanned oil supply disruptions averaged 1.2 mbpd in April (unchanged from March). OECD inventories are anticipated to rise to 2.9bn barrels by end (down 0.1 mbpd from the previous month s estimates) and further increase to 3.0bn barrels in

3 Figure 1: US oil production 13 mbpd US oil production stood at 10.7 mbpd on average in May Production increased 0.8% MoM in May compared with mbpd in April; it rose 17.7% YoY from 9.09 mbpd in May The surge in US crude production surge shows no sign of fading as drillers continue to explore new oil fields to exploit. 8 7 Jan-15 Jul-15 Jul-16 Jul-18 Jan-19 Jul-19 Source: US EIA, AlJazira Capital Research Figure 2: US weekly Rig count In the week ended June 8, the US rotary rig count rose by 2 WoW to 1,062. The average number of rigs rose 3.4% MoM in May vis-à-vis a 2.3% MoM in April. The rig count was up 15.7% YoY. Of the total, 861 rigs (up by 2 WoW) were used to drill for oil and 197 (down by 1 WoW) for natural gas. In the US, oil exploration and gas exploration rose 17.5% YoY and 8.2%, respectively. 0 May-14 Sep-14 Jan-15 Sep-15 May-16 May-17 Sep-17 Source: Baker Hughes, AlJazira Capital Research Table 3: World Oil Demand and Supply (mbpd) E E 2019E World Crude Oil & Liq. Fuels Supply Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 OPEC Supp Non-OPEC Suppl Total World Supply World Crude Oil & Liq. Fuels Cons. OECD Consumption Non-OECD Consumption Total World Cons OECD Inventory (mn bbls) 3,012 3,001 2,954 2,839 2,812 2,850 2,880 2,881 2,967 2,839 2,881 3,015 OPEC Surplus Crude Oil Prod. Cap OPEC s surplus production capacity fell to 1.91 mbpd in 1Q18 vis-à-vis 2.10 mbpd in 4Q17. 3 Source: EIA STEO May 2018, AlJazira Capital Research The gap between crude supply and consumption widened to a negative 0.80 mbpd by 1Q18 (higher consumption than supply) from a negative 0.32 mbpd in 4Q17. OECD crude inventories declined to 2,812 mn barrels in 1Q18.

4 Table 4: OPEC monthly oil production Prod. ( 000bpd) Cap. Feb Mar Apr May % MoM Chg. Equatorial Guinea % Gabon % Ecuador % Qatar % Algeria 1,150 1, , % Libya 1, % Angola 1,710 1, 1,540 1, 1, % Venezuela 1, 1,610 1,510 1,490 1, % Nigeria 1, 1, 1,810 1,810 1, % Kuwait 3,000 2, 2, 2, 2, % U.A.E. 3,150 2, 2,860 2,860 2, % Iran 4,000 3,830 3,810 3,780 3, % Iraq 4, 4,430 4,430 4,430 4, % Saudi Arabia 11, 9,880 9,870 9, 10, % Total OPEC 35,715 32,210 31,970 31, 31, 0.0% Source: Bloomberg Figure 3: OPEC May Oil Production Saudi Arabia Iraq Iran U.A.E. Kuwait Nigeria Venezuela Angola Libya Algeria Qatar Ecuador Gabon Equatorial Guinea -2,000 4,000 7,000 10,000 ('000 bpd) Source: Bloomberg Figure 4: US Weekly Oil Inventories Figure 5: OECD Monthly Oil Inventories 3, 3,100 3,000 mbpd mbpd 2, 2, 2, 350 2, 2, May-14 Sep-14 Jan-15 Sep-15 May-16 May-17 Sep-17 Source: Bloomberg Source: US EIA, AlJazira Capital Research Figure 6: World Oil Production and Forecast US weekly oil inventories declined 0.8% WoW to mbpd for the week ended May 25; also, it decreased a marginal 0.3% MoM from mbpd on April 27. mn bbls World oil production forecast for 2018 and 2019 remain unchanged at mbpd and mbpd, respectively May-14 Sep-17 Jul-18 Dec-18 May-19 Oct-19 Source: US EIA, AlJazira Capital Research 4

5 Corporate announcements Name of company Date Announcement (SABIC). Nov 26, 2017 SABIC signed a Memorandum of Understanding (MoU) to build a complex valued at SAR 20bn with Saudi Aramco to convert crude oil to chemicals. A concluding decision would be made by the end of 2019 on whether the companies would proceed with the MoU. (SABIC). Dec 19, 2017 SABIC has announced a cash dividend of 22% at SAR 2.2 per share for 2H 17 amounting to SAR 6.6 bn on the recommendation of Board of Directors. (SABIC) Dec 27, 2017 SABIC awarded Jubail United Petrochemical Company the contract for engineering, supply and construction of the Ethylene Glycol plant with Samsung (Korea). The total cost of the project is SAR 3.3 bn. (SABIC) Jan 02, 2018 SABIC has started construction works of the plant in relation to its agreement with Celanese Corporation for the establishment of Polyacetal plant with an annual capacity of 50,000 metric tons within Ibn Sina Complex in Jubail Industrial City. The total cost is estimated to be USD 387 mn. (SABIC) (SABIC) (SABIC) (SABIC) Jan 25, 2018 March 12, 2018 Apr 02, 2018 May 01,2018 SABIC bought 25% stake in Swiss chemical maker Clariant becoming the largest shareholder of the Company. SABIC bought approximately 83 mn shares from 40 North and Corvex Management to acquire its share. SABIC decided to willingly liquidate wholly owned subsidiary SABIC Sukuk Co. after loss increased to 50.0% of the capital. The company was established with a capital of SAR,000; its offerings comprised services related to the bonds and sukuk issued by SABIC and affiliates. SABIC announced the successful conclusion of the pilot operation of methyl methacrylate monomer (MMA) and poly methyl methacrylate (PMMA) plants and the commencement of commercial operations of Samac a joint venture of SABIC and Japan s Mitsubishi Chemical Corporation (MMC). SABIC announced it reached an agreement to create joint venture petrochemical industries with ExxonMobil Chemical to advance the project, which is estimated to cost about USD 7.3bn and includes the establishment of 1.8mn tons of ethane cracker. The facility would also include a monoethylene glycol unit and two polyethylene units. This would be SABIC s first polyolefin production in North America and the facility is expected to become functional in 2021 or National Industrialization Co. (TASNEE) May 10, 2018 TASNEE announced that its subsidiary, Advanced Metal Industries Cluster Company Limited (AMIC) has entered into an Option Agreement with Tronox Ltd, in which the latter shall acquire 90% of AMIC ownership in a world-class titanium slag smelter facility (the Slagger). Further to this, the announcement was inked on May 10. Saudi Kayan Petrochemical Co. Jan 03, 2018 Kayan in relation to the shutdown announcement made in November 2017 has further announced the resumption of the operational work of all the suspended factories and completion of the regular scheduled maintenance work. Rabigh Refining and Petrochemical Co. (Petro Rabigh) Nov 05, 2017 Maintenance work at Petro Rabigh s vacuum gas oil (VGO) hydro-treating unit has been completed. The division resumed normal operations before schedule. Rabigh Refining and Petrochemical Co. (Petro Rabigh) Jan 07, 2018 Rabigh Refining announced latest developments in the Rabigh (Phase II). The company announced it has reached on-spec production at 10 of the total 12 projects. The remaining two units are scheduled to start in 1Q18. Upon completion, both Phases I and II will be integrated operationally within the Petro Rabigh Industrial Complex. Source: Tadawul, AlJazira Capital Research 5

6 Oil and gas price trends Figure 7: Brent Crude (USD per Barrel) Figure 8: WTI Crude (USD per Barrel) Aug-14 Nov-14 Jun-15 Oct-15 Apr-16 Aug-16 Mar-17 Jun-17 Oct Aug-14 Nov-14 Jun-15 Sep-15 Apr-16 Aug-16 Mar-17 Jun-17 Oct-17 Aug-14 Nov-14 Jun-15 Oct-15 Apr-16 Aug-16 Mar-17 Jun-17 Oct-17 Source: Reuter Eikon, AlJazira Capital Research Figure 9: OPEC Reference Basket (USD per Barrel) Source: Reuter Eikon, AlJazira Capital Research Figure 10: Henry Hub Natural Gas (USD per mmbtu) Aug-14 Nov-14 Jun-15 Oct-15 May-16 Aug-16 Mar-17 Jun-17 Oct-17 Source: Reuter Eikon, AlJazira Capital Research Source: Reuter Eikon, AlJazira Capital Research 6

7 Petchem price trends Figure 11: Naphtha (USD per Ton) Figure 12: Ethylene (USD per Ton) , 1, 1, , , , 1, 1,620 1, 1, 1, 1,045 1, 1, 1,610 1, 1, 1, 1,040 Figure 13: HDPE (USD per Ton) Figure 14: LDPE (USD per Ton) 1, 1, 1,720 1, 1, 1, 1, 1,050 Figure 15: LLDPE (USD per Ton) Figure 16: MTBE (USD per Ton) 1,130 7

8 Figure 17: Propylene (USD per Ton) Figure 18: Polypropylene (USD per Ton) 1, 1, 1,440 1, 1, 1,560 1, 1, Figure 19: Styrene (USD per Ton) Figure 20: Polystyrene (USD per Ton) 1, 1, 1, 1,690 1, 1,815 1, 1, 1, 1, 1, 1, 1, 1, 1, 820 1, Figure 21: EDC (USD per Ton) Figure 22: PVC (USD per Ton) 1,060 1, Aug-14 Nov-14 Jun-15 Oct-15 May-16 Aug-16 Mar-17 Jun-17 Oct-17 Source: Reuter Eikon, AlJazira Capital Research Source: Reuter Eikon, AlJazira Capital Research 8

9 Figure 23: Methanol (USD per Ton) Figure 24: DAP (USD per Ton) Figure 25: Urea (USD per Ton) Figure 26: Ammonia (USD per Ton) Figure 27: TiO2 Europe (USD per Ton) Figure 28: TiO2 America (USD per Ton) 3, 3, 3,470 3, 3, 3, 3,000 2, 2, 3,610 3, 3,100 2, 2, 2, 2,000 2,150 2, 2, 2,645 9

10 Petchem Spreads Naphtha prices averaged USD 673 per ton in May, up from USD 610 per ton in April. Polypropylene prices rose to USD 1,243 per ton in May from USD 1,212 per ton in April. The HDPE-naphtha spread contracted to USD 690 per ton in May from USD 723 per ton in April. The PP-naphtha spread tapered to USD 570 per ton from USD 602 per ton. The LDPE-naphtha spread contracted to USD 541 per ton, while the LLDPE-naphtha spread decreased to USD 514 per ton in April. The PP-propane spread expanded to USD 743 per ton, while the PP-butane spread decreased to USD 738 per ton in May. The HDPE-ethylene and LDPE-ethylene spreads fell to 148 and a negative 1, respectively. The LLDPE-ethylene spread contracted to a negative 29 in May from a negative 176 in April. The PVC-EDC spread contracted to USD 634 per ton in May from USD 735 per ton in April, while the Polystyrene-Benzene spread expanded to USD 675 per ton in May from USD 653 per ton in April (3.4%). Figure 29: HDPE-Naphtha Figure 30: LDPE-Naphtha Figure 31: LLDPE-Naphtha Figure 32: PP-Naphtha

11 Figure 33: HDPE-Ethylene Figure 34: LDPE-Ethylene Figure 35: LLDPE-Ethylene Figure 36: PP-Propane (Saudi) Aug-14 Nov-14 Jun-15 Oct-15 May-16 Aug-16 Mar-17 Jun-17 Oct-17 Figure 37: PVC-EDC Figure 38: Polystyrene-Benzene

12 Table 5: Petchem Price Performance Name Price * (USD per ton) MoM % Chg. QoQ % Chg. YoY % Chg. YTD % Chg. Naphtha % 21.2% 55.7% 11.4% Saudi Propane 5.3% -4.8% 29.9% -15.3% Saudi Butane % 0.0% 29.5% -11.4% Ethylene 1, % 8.5% 29.9% -3.8% Propylene-Asia 1, % 2.4% 26.2% 14.8% HDPE 1, % 1.5% 24.0% 7.0% LDPE 1, % -2.8% 1.3% 1.3% LLDPE 1, % -0.8% 8.2% 3.0% PP-Asia 1, % 2.9% 25.5% 8.2% Styrene-Asia 1, % -2.1% 28.8% 7.8% Polystyrene-Asia 1, % 0.6% 26.8% 7.6% TiO2 3, % -0.1% 21.5% 5.3% PVC-Asia % -7.1% 4.6% 4.0% MEG % -11.2% 20.5% -4.2% Methanol % -4.2% 43.8% -2.1% DAP-Gulf % 1.2% 15.1% 3.7% Urea-Gulf % -9.6% 17.5% -2.1% Ammonia-Gulf % -14.3% -10.0% -18.2% MTBE-Asia % 25.4% 37.3% 23.6% EDC % 26.0% 8.6% 70.3% Butyl-A 1, % 8.1% 26.5% 2.4% BPA 1, % 4.8% 47.7% 18.2% PX-Asia 1, % 4.7% 28.8% 10.4% EVA 1, % -0.7% 4.6% -1.0% Vinyl Acetate Monomer 1, % 7.8% 32.8% 11.0% Table 6: Petrochemical Products by Saudi Petrochemical Companies *Weighted average Note: : *Prices as of May 27, 2018 Company Finished Products SABIC Polyethylene, polypropylene, poly styrene, ethylene glycol (MEG), methyl tert-butyl ether (MTBE), benzene, urea, ammonia, PVC, and PTA SAFCO YANSAB Tasnee Saudi Kayan Petro Rabigh Petrochem Sahara Petrochemicals Saudi Group Sipchem Advanced Alujain CHEMANOL NAMA MAADEN 12 Urea, ammonia Polyethylene, polypropylene, MEG, MTBE, and benzene Polyethylene, polypropylene, and propylene (TiO2) Polyethylene, polypropylene, MEG, polycarbonate, and bisphenol A Polyethylene, polypropylene, propylene oxide, and refined petroleum products Polyethylene, polypropylene, and polystyrene Polyethylene, polypropylene Styrene, benzene, cyclohexene, and propylene Methanol, butanol, acetic acid, and vinyl acetate monomer Polypropylene Polypropylene Formaldehyde improvers concrete Epoxy resin, hydrochloric acid, liquid caustic soda, and soda granule Ammonia and DAP Source: Argaam Plus

13 RESEARCH DIVISION Head of Research Talha Nazar Analyst Waleed Al-jubayr Analyst Sultan Al Kadi, CAIA Analyst Muhanad Al-Odan Analyst Jassim Al-Jubran BROKERAGE AND INVESTMENT CENTERS DIVISION General Manager Brokerage Services & sales Alaa Al-Yousef AGM-Head of Sales And Investment Centers Central Region Sultan Ibrahim AL-Mutawa AGM-Head of international and institutional brokerage Luay Jawad Al-Motawa AGM-Head of Qassim & Eastern Province Abdullah Al-Rahit AGM- Head of Western and Southern Region Investment Centers Mansour Hamad Al-shuaibi RESEARCH DIVISION AlJazira Capital, the investment arm of Bank AlJazira, is a Shariaa Compliant Saudi Closed Joint Stock company and operating under the regulatory supervision of the Capital Market Authority. AlJazira Capital is licensed to conduct securities business in all securities business as authorized by CMA, including dealing, managing, arranging, advisory, and custody. 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