Oil &Petrochemicals Monthly

Transcription

1 1 Petrochemical prices stabilizing Propane and butane prices jump: Propane prices rose 19.8% MoM to a 35-month high of USD 575 per ton in October, while butane prices increased 16.0% MoM to a seven-month high of USD 580 per ton. The PP-propane spread contracted to USD 555 per ton in October from USD 665 in September. The PP-butane spread declined to USD per ton in October from USD 645 in September. Naphtha continues to rise gradually: Naphtha prices increased 6.7% MoM to USD 555 per ton in October, in tandem with oil prices, which advanced 5.0% MoM PP and PE prices continue to increase: PP prices rose 1.3% MoM to USD 1,150 per ton, despite a slight decrease in propylene prices (down 0.5% MoM). On a MoM basis, HDPE, LDPE, and LLDPE prices rose 5.1%, 2.0%, and 0.8%, respectively. Polystyrene prices decline in October: Polystyrene prices fell 9.5% MoM to USD 1,340 per ton in October, as styrene prices declined to USD 1,170 (down 12.0% MoM). In the same month, PVC prices fell 4.8% to USD per ton. MEG prices increase marginally: MEG prices increased to USD 905 per ton in October. Ethylene prices dropped 12.7% MoM to USD per ton, whereas methanol prices increased 14.3% MoM to USD per ton. Titanium dioxide witness reversal in uptrend: The weighted average price of titanium dioxide declined 0.5% MoM to USD 3,135 per ton in October. Surge in fertilizer prices: Ammonia and urea prices increased to USD 290 per ton (up 18.4% MoM) and USD 295 per ton (up 9.3% MoM), respectively, in October. DAP prices rose 1.4% to USD 365 per ton. Oil prices signal uptrend Oil prices rise on news of possible OPEC extension of supply cut deal and outages in Kurdistan: Oil prices gained momentum in October, as tension between Iraq and Kurdistan kept around 0.35 mbpd of production offline. Furthermore, oil prices rose to USD 60 per barrel in late October, supported by robust EIA data and OPEC s comment to extend the deal through the end of 2018 as against three months beyond March (which was previously announced). Strong assurances from OPEC and Russia pushed investors to keep an eye on OPEC s meeting, which is scheduled on November 30, Oil prices rise in October: Brent and WTI increased 5.0% MoM and 4.3% MoM, respectively, in October. The Brent-WTI spread expanded to about USD 6.54 per barrel in October from USD 5.87 per barrel in September. Brent and WTI closed at USD per barrel and USD per barrel, respectively. Meanwhile, Henry Hub natural gas prices declined 8.5% MoM to USD 2.75 per MMBtu. EIA forecast for US crude production remains unchanged: In its latest short-term energy outlook, EIA predicted that oil output in the US would average 9.2 mbpd in 2017 and 9.9 mbpd in OPEC s oil production declines 151 kbpd in October 2017: According to the Monthly Oil Market Report (MOMR), OPEC s oil production declined to mbpd in October. OECD commercial inventories were up 154 mn barrels from the latest five-year average, with a forward cover of 62.3 days. Monthly rig count declines in October: During the week ended November 10, the US rotary rig count rose by nine (WoW) to 907. However, the number of rigs declined about 1.9% MoM compared to 0.8% MoM decline in October. The rig count was up 59.7% YoY. Of the total number of rigs, 738 (up by nine WoW) were used to drill for oil and 169 (unchanged since the previous week) for natural gas. Table 1: Petchem Prices October 2017 Price Name (USD pet ton) MoM % YTD % Naphtha % 14.4% Saudi Propane % 51.3% Saudi Butane % 38.1% Ethylene % 10.1% Propylene-Asia % 12.5% HDPE % 6.9% LDPE % -3.5% LLDPE % 2.6% PP-Asia % 7.0% Styrene-Asia % -2.5% Polystyrene % 1.5% TiO 2 * % 25.4% PVC-Asia -4.8% -1.1% MEG % 5.2% Methanol 14.3% 14.3% DAP-Gulf % 12.3% Urea-Gulf % 20.4% Ammonia-Gulf % 41.5% MTBE-Asia % -5.1% EDC % -27.1% Butyl-A % -4.4% BPA % 8.9% PX-Asia % -0.6% EVA 1 3.4% 2.4% Source: Argaam, Reuter Eikon, AlJazira Capital Research * Weighted average Table 2: Economic Calendar Date Country Event Nov 07,14,21,28 US Weekly Petroleum Status Report 19-Nov KSA Real Estate Sale 20-Nov KSA Crude Oil Data Published: JODI 22-Nov US Initial Jobless Claims 22-Nov to 28-Nov KSA CPI YoY 27-Nov to 03-Dec KSA Non-Oil Exports YoY 29-Nov KSA M1, M2, M3 Money Supply YoY 29-Nov KSA SAMA Net Foreign Assets SAR 29-Nov US GDP Annualized QoQ 05-Dec US Trade Balance 06-Dec KSA Emirates NBD Saudi Arabia PMI 08-Dec US Unemployment Rate 12-Dec US EIA Short-term Energy Outlook 13-Dec OPEC Monthly Oil Market Report 14-Dec IEA Oil Market Report 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 November 14) Global oil demand is expected to grow 1.5 mbpd in 2017 to 97.7 mbpd, further increasing by 1.3 mbpd in 2018 to 98.9 mbpd (revised downwards by 0.1 mbpd each for both 2017 and 2018 from the previous month s estimate). OPEC s oil output reduced by 80 kbpd to mbpd in October, primarily due to lower supply from Algeria, Iraq, and Nigeria. OPEC s compliance rate with supply cuts increased to 96% (and 87% for the year to date). Global oil supplies rose 100 kbpd in October, as non-opec production increased. Non-OPEC supplies are anticipated to rise 0.7 mbpd in 2017 and 1.4 mbpd in 2018 led by increase in US output. OECD s commercial inventories fell 40 mn barrels in September to below 0 mn barrels for the first time in two years. Refining throughput is anticipated to reach 80.8 mbpd in 4Q17 (down 0.1 mbpd QoQ). OPEC Monthly Oil Market Report (Published on November 13) Oil consumption is expected to grow 1.53 mbpd to an average of mbpd in 2017 (up 0.14 mbpd from the previous month s estimate) and further increase 1.51 mbpd to an average of mbpd in 2018 (up 0.27 mbpd from the previous month s estimate). OPEC s oil production decreased 151 kbpd to mbpd in October, according to secondary sources. Non-OPEC supplies are estimated to have averaged mbpd in Non-OPEC oil supply is projected to grow 0.65 mbpd (down 0.02 from the previous month s estimate) to an average of mbpd in 2017 and 0.87 mbpd (down 0.07 mbpd from the previous month s estimate) to an average of mbpd in OECD commercial oil stocks fell to 2,985 mn barrels in September from 2,996 mn barrels in August. OECD commercial inventories were 154 mn barrels higher than the latest five-year average, with a forward cover of 62.3 days (up 1.9 days from the previous five-year average). Demand for OPEC crude is projected to increase 0.7 mbpd (up 0.1 mbpd from the previous month s estimate) to an average of 33.0 mbpd in In 2018, demand for OPEC crude is projected at 33.4 mbpd (0.4 mbpd higher than in 2017). EIA - Short-Term Energy Outlook (Published on November 7) Brent is expected to average USD 53 per barrel in 2017 (up USD 1 per barrel from the previous month s estimate) and USD 56 per barrel in 2018 (up USD 2 per barrel from the previous month s estimate). WTI is anticipated to average USD 5 per barrel (up USD 1.5 per barrel from the previous month s estimate), lower than Brent in US crude production averaged 9.3 mbpd in October 2017, down 90 kbpd from the September average. US crude production is expected to average 9.2 mbpd in 2017 and 9.9 mbpd in 2018, both unchanged from the previous month s estimate. As on October 27, 2017, natural gas inventory in the US stood at 3,775bn cubic feet (up 7.6% MoM). Global consumption of petroleum and other liquid fuels is expected to grow 1.3 mbpd in 2017 and 1.7 mbpd in 2018 (up 0.1 mbpd each from the previous month s estimate). Non-OPEC production is expected to increase 0.7 mbpd in 2017 (up 0.1 mbpd from the previous month s estimate) and 1.5 mbpd in 2018 (unchanged from the previous month s estimate). On average, OPEC members produced 32.7 mbpd of crude in 2016 (up 1.0 mbpd from 2015). Crude production is forecast to average 32.5 mbpd in 2017 and 33.0 mbpd in OPEC s unplanned oil supply disruptions averaged 1.2 mbpd in October (up 0.1 mbpd from September). 2 OECD inventories are anticipated to rise to 3.0bn barrels by the end of 2017 before improving to 3.1bn barrels by the end of 2018.

3 Figure 1: TASI versus Materials sector /01/16 26/01/16 18/02/16 12/03/16 04/04/16 27/04/16 20/05/16 12/06/16 05/07/16 28/07/16 20/08/16 12/09/16 05/10/16 28/10/16 20/11/16 13/12/16 05/01/17 28/01/17 20/02/17 15/03/17 07/04/17 30/04/17 23/05/17 15/06/17 08/07/17 31/07/17 23/08/17 15/09/17 08/10/17 31/10/17 TASI TASI Materials Figure 2: Materials sector versus Oil (Brent) Jan-16 Mar-16 Apr-16 Jun-16 Sep-16 Brent Dec-16 Feb-17 Mar-17 TASI Materials May-17 Jun-17 Aug-17 Sep-17 Nov-17 Table 3: World Oil Demand and Supply (mbpd) E E 2018E 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) 3,000 3,039 3,047 2,966 3,008 2,996 2,985 2,969 2,967 2,966 2,969 3,054 OPEC Surplus Crude Oil Prod. Cap Source: EIA STEO March 2016, EIA STEO, AlJazira Capital Research The gap between crude supply and consumption is expected to expand to 0.15 mbpd by 4Q2017 from a negative 0.35 mbpd (consumption is greater than supply) in 3Q2017. Crude inventories are anticipated to stabilize in 2017, ending the year at 2,969 mn barrels. OPEC s surplus production capacity is expected to expand to 2.10 mbpd by 4Q2017 from 1.95 mbpd in 3Q

4 Table 4: OPEC monthly oil production Prod. ( 000bpd) Cap. July Aug Sept Oct % MoM Chg. Algeria 1,150 1,060 1,060 1,040 1, % Angola 1,870 1,680 1,660 1,640 1, % Ecuador % Gabon % Eq. Guinea % Iran 4,000 3,790 3,790 3,830 3, % Iraq 4, 4, 4,490 4,470 4, % Kuwait 3,000 2, 2,710 2,720 2, % Libya % Nigeria 2, 1,710 1,750 1,770 1, % Qatar % Saudi Arabia 11, 10,030 10,000 10,000 10, % U.A.E. 3,150 2,910 2,920 2,930 2, % Venezuela 2, 1,970 1,970 1,970 1, % Total OPEC 36,655 32,660 32,850 32,710 32, % Source: Bloomberg Figure 3: OPEC October Oil Production Saudi Arabia Iraq Iran U.A.E. Kuwait Venezuela Nigeria Angola Algeria Libya Qatar Ecuador Gabon Equatorial Guinea -1, 1, 4, 7, 10, ('000 bpd) Source: Bloomberg Figure 4: US Weekly Oil Inventories 457 mn bbls 350 Feb-14 May-14 Aug-14 Oct-14 Jan-15 Feb-15 Apr-15 May-15 Jul-15 Sep-15 Dec-15 Jan-16 Mar-16 Apr-16 Jun-16 Dec-16 Mar-17 Jun-17 Aug-17 Source: US EIA, AlJazira Capital Research Figure 5: World Oil Production and Forecast May-14 Jul-14 Nov-14 Jan-15 May-15 Jul-15 Sep-15 Jan-16 Mar-16 Sep-16 Mar-17 May-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 mbpd Source: Bloomberg 4

5 Corporate announcements Name of company Date Announcement Saudi Arabian Mining Company (Maaden) Saudi Arabian Mining Company (Maaden) July 10, 2017 July 31, 2017 The company announced the commencement of initial production at its subsidiary Maaden Waad Al Shamal Phosphate Company (MWSPC). The production is expected to be gradually increased until it reaches 3mn tons production capacity. Maaden s subsidiary, Maaden Waad Al Shamal Phosphate Company (MWSPC), has signed two financing agreements worth SAR 2.1bn with the Saudi Industrial Development Fund (SIDF). The first loan facility worth SAR mn will be used to finance the construction of MWSPC s phosphoric acid plant and phosphate concentrate plant in the city of Waad Al Shamal, whereas the second loan facility of SAR mn will be used to finance construction of MWSPCs ammonia plant in Ras Al-Khair (RAK) Saudi Basic Industries Corp. (SABIC). July 09, 2017 Saudi Basic Industries Corp. (SABIC) Aug 16, 2017 Saudi Basic Industries Corp. (SABIC) Sept 10, 2017 Saudi Basic Industries Corp. (SABIC) Oct 26, 2017 SABIC commenced operations at its synthetic rubber ethylene-propylene-dienemonomer unit, and its thermoplastic specialty polymers and halobutyl rubber units in Al-Jubail Petrochemical Co., SABIC s JV with Exxon Chemical Arabia. The financial impact of this will be reflected in 3Q2017 s financial statements. SABIC announced the latest development on its acquisition of Shell Chemical Arabia L.L.C. shares in Saudi Petrochemical Company. The financial impact of the transaction would be reflected in SABIC s results for 3Q2017. SABIC obtained 45,000 metric tons (MT) of CFR China spot methanol cargoes to insure against production losses from the shutdown of the Ar-Razi plant in Jubail. The fixing of Ar-Razi s methanol units 2, 3, and 4 is expected to take another month, implying a production loss of up to 190,000 MT. Saudi Basic Industries Corporation (SABIC) announced that a SAR 6.38bn polycarbonate complex will commence operations by 2020, after it awards the construction and engineering works contract to Sinopec Engineering Incorporation and Sinopec Shanghai Engineering Co. Limited. The new complex will have an annual production capacity of 260,000mn tons. Saudi International Petrochemical Co. (Sipchem) July 02, 2017 Saudi International Petrochemical Co. announced that it resumed operations at the carbon monoxide plants of its subsidiaries, International Gases Co. and International Acetyl Co. and at the vinyl acetate monomer plant at International Vinyl Acetate Co. Saudi International Petrochemical Co. (Sipchem) July 18, 2017 The company signed a long-term agreement with Saudi Aramco Shell Refinery Co. (SASREF) to supply its subsidiary the International Methanol Co. (IMC) with carbon dioxide. The financial impact of the deal is expected to reflect on 1Q2019 results. Saudi Kayan Petrochemical Co. Aug 08, 2017 Saudi Kayan Petrochemical Co. Nov 08, 2017 Saudi Kayan Petrochemical Company announced the signing of an agreement with the National Commercial Bank to reschedule an existing loan and to obtain additional facilitation. Saudi Kayan Petrochemical Co. will close some production units, starting November 11, to commence its debottlenecking project and perform scheduled maintenance. A financial impact of SAR 425mn is expected during 4Q2017 due to the shutdown. The olefins plant will remain shut for 41 days for the debottlenecking process to raise the ethylene production output to a minimum of 93,000 tons annually. Rabigh Refining and Petrochemical Co. (Petro Rabigh) Oct 04, 2017 Rabigh Refining will close its vacuum gas oil hydro treatment unit for 32 days to change the intermediate catalyst for interaction. The planned shutdown is expected to continue until November 4, This will not have any financial impact on the company. Rabigh Refining and Petrochemical Co. (Petro Rabigh) Oct 26, 2017 Maintenance work at Petro Rabigh s vacuum gas oil (VGO) hydro-treating unit has been completed. The division resumed normal operations before schedule 5 Source: Tadawul, AlJazira Capital Research

6 Oil and gas price trends Figure 6: Brent Crude (USD per Barrel) Figure 7: WTI Crude (USD per Barrel) Sep-15 Dec-15 Mar Sep-15 Dec-15 Mar Figure 8: OPEC Reference Basket Figure 9: Henry Hub Natural Gas (USD per mmbtu) Apr-14 Jul-14 Oct-14 Jan Apr-15 Jul-15 Oct-15 Jan-16 Apr

7 Petchem price trends Figure 10: Naphtha (USD per Ton) Figure 11: Ethylene (USD per Ton) 980 1, 1, , , 1, 1,620 1, 1, 1, 1,045 1, 1, 1,610 1, 1, 1, 1,040 Figure 12: HDPE (USD per Ton) Figure 13: LDPE (USD per Ton) 1, 1, 1,720 1, 1, 1, 1, 1,050 Figure 14: LLDPE (USD per Ton) Figure 15: MTBE (USD per Ton) 1,130 7

8 Figure 16: Propylene (USD per Ton) Figure 17: Polypropylene (USD per Ton) 1, 1, 1,440 1, 1, 1, 1, 1, Figure 18: Styrene (USD per Ton) Figure 19: Polystyrene (USD per Ton) 1, 1, 1, 1, 1, 1, 1, , 1, 1, 1, 1, 1, 1, 1,815 1, Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Figure 20: EDC (USD per Ton) Figure 21: PVC (USD per Ton) ,

9 Figure 22: Methanol (USD per Ton) Figure 23: DAP (USD per Ton) Figure 24: Urea (USD per Ton) Figure 25: Ammonia (USD per Ton) Figure 26: TiO 2 Europe Figure 27: TiO 2 America 3, 3, 3,000 3,260 3, 3, 3, 3, 3,465 2, 3,100 2, 3,000 2, 2, 2, 2, 2,000 2,150 2, 2, 2, 2,645 9

10 Petchem Spreads Naphtha prices averaged USD 531 per ton in October, up from USD 503 in September. Polypropylene prices fell to USD 1,130 per ton in October from USD 1,145 per ton in September. The HDPE-naphtha spread contracted to USD 662 per ton in October from USD 680 per ton in September. The PP-naphtha spread narrowed to USD 599 per ton from USD 643 per ton. The LDPE-naphtha and LLDPE-naphtha spreads tightened to USD 705 per ton and USD 641 per ton, respectively, in October. The PP-propane and PP-butane spreads fell to USD 555 per ton and USD per ton, respectively, in October. The negative spreads of HDPE-ethylene, LDPE-ethylene, and LLDPE-ethylene decreased to USD 75, USD 32, and USD 96 per ton, respectively, in October. The PVC-EDC spread reduced to USD 701 per ton in October from USD 714 per ton in September. Figure 28: HDPE-Naphtha LDPE-Naphtha Figure 29: LDPE-Naphtha Figure 30: LLDPE-Naphtha PP-Naphtha Figure 31: PP-Naphtha

11 Figure 32: HDPE-Ethylene Figure 33: LDPE-Ethylene LDPE-Ethylene LLDPE-Ethylene Figure 34: LLDPE-Ethylene Figure 35: PP-Propane (Saudi) Figure 36: PVC-EDC Figure 37: Polystyrene-Propane , Jul-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan Apr-16 11

12 Table 5: Petchem Price Performance Name Price * (USD per ton) MoM % Chg. QoQ % Chg. YoY % Chg. YTD % Chg. Naphtha % 22.0% 24.7% 14.4% Saudi Propane % 66.7% 69.1% 51.3% Saudi Butane % 58.9% 56.8% 38.1% Ethylene % 26.3% 18.8% 10.1% Propylene-Asia % 10.5% 22.7% 12.5% HDPE % 13.8% 7.8% 6.9% LDPE % 10.1% -2.0% -3.5% LLDPE % 10.2% 5.3% 2.6% PP-Asia % 10.6% 10.6% 7.0% Styrene-Asia % 3.5% 13.0% -2.5% Polystyrene-Asia % 4.7% 15.5% 1.5% TiO % 0.2% 25.5% 25.4% PVC-Asia -4.8% 1.1% -3.2% -1.1% MEG % 4.0% 34.1% 5.2% Methanol 14.3% 25.0% 29.0% 14.3% DAP-Gulf % 5.8% 21.7% 12.3% Urea-Gulf % 55.3% 40.5% 20.4% Ammonia-Gulf % 48.7% 75.8% 41.5% MTBE-Asia % 4.0% -0.8% -5.1% EDC % -8.5% -17.3% -27.1% Butyl-A % 10.1% 32.3% -4.4% BPA % 1.7% 9.9% 8.9% PX-Asia % 3.1% 5.7% -0.6% EVA 1 3.4% 16.3% 11.9% 2.4% *Weighted average Note: : *Prices as of October 29, 2017 Table 6: Petrochemical Products by Saudi Petrochemical Companies Company Finished Products SABIC Polyethylene, polypropylene, poly styrene, ethylene glycol (MEG), methyl tert-butyl ether (MTBE), benzene, urea, ammonia, PVC, and PTA 12 SAFCO YANSAB Tasnee Saudi Kayan Petro Rabigh Petrochem Sahara Petrochemicals Saudi Group Sipchem Advanced Alujain CHEMANOL NAMA MAADEN 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 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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