Oil &Petrochemicals Monthly

Transcription

1 1 Demand pressure impacts Petchem prices Naphtha prices rise in tandem with crude prices: A gain in oil prices led to a 2.5% MoM increase in naphtha prices to USD 415 per ton. Naphtha prices rose in tandem with oil prices, which surged 2.5% MoM (Brent). PE derivative price continues to fall despite high naphtha prices: Although naphtha prices rose over the past couple of months, the prices of PE derivatives declined. The drop was primarily due to lower demand. LDPE prices fell the most (3.8% MoM), followed by HDPE (down 2.2% MoM) and LLDPE (down 1.3% MoM). PP and PS prices sharply decrease: PP prices fell 7.5% MoM due to declining imports from China, as it is increasingly becoming selfsufficient. Moreover, PS prices dropped 6.4% MoM, lower than the fall in feedstock prices (styrene) (down 11.6% MoM). PVC prices decreased 2.4% MoM. MEG declines on fall in ethylene prices: MEG prices fell 10.4% MoM, higher than the decline in ethylene prices (down 8.9% MoM). TiO2 prices marginally up in April: Weighted average TiO2 prices rose marginally MoM to USD 2,374 per ton in May from USD 2,358 per ton in April. Ammonia prices rise, but urea prices decline: Ammonia prices gained 1.5% MoM, while urea prices fell sharply by 7.0% MoM to USD per ton. DAP prices dropped 1.4% MoM to USD per ton. Several headwinds boost oil prices to USD 50 per bbl Canadian wildfires, unrest in Nigeria and Libya, economic issues in Venezuela propel oil prices: Wildfires in Canada s oil sands region, violent attacks against Nigerian and Libyan energy companies, and expected economic meltdown in Venezuela led to oil prices reaching the USD 50 per barrel (bbl) level in May. Spread between Brent and WTI narrows in May: Oil prices have surged by about 80% from their lows recorded in January to reach USD 50 per bbl. At the same time, the spread between Brent and WTI has narrowed. In May, Brent and WTI prices rose 2.5% MoM and 7.4% MoM, respectively, to USD 49.3 per bbl. Henry Hub natural gas prices remained flat MoM at USD 2.17 per mmbtu. OPEC members fail to reach agreement in Vienna: Crude oil futures weakened on last Thursday pressured by the lack of any agreement to curb production to bolster oil prices in the OPEC meeting. Although there was no agreement to cut production, Saudi Arabia promised not to shock the market with supply. Crude supplies expectedly increased 250 kbpd in April: According to the IEA s Oil Market Report (OMR), global oil supplies in April expectedly rose 250 kbpd to 96.2 mbpd, led by higher OPEC output, which was partially offset by lower non-opec output. EIA expects Brent to rebound to USD 76 per bbl in 2017: In its international outlook report, the EIA indicated oil prices may rebound to USD 76 per bbl in The increase would be primarily driven by higher consumption across the emerging economies in Asia, the Middle East, and Africa. OPEC s oil production reaches mbpd in April: According to OPEC s Monthly Oil Market Report (MOMR), OPEC s oil production increased to mbpd (according to secondary sources) in April. OECD commercial inventories were up 361 mn bbls from the latest fiveyear average, with a forward cover of 66.8 days compared with 66.4 days from the previous month. The EIA s Short-Term Energy Outlook April 2016 states non-opec oil production is expected to decline 0.7 mbpd in 2016 and 0.2 mbpd in US rig count rises for first time in 2016: In the week ended June 3th, the overall US rig count increased for the first time since Aug. 21, 2015 to 408 rigs ( 4-unit increase), which was bolstered by a 9-unit jump in oil-directed rigs. The US rig count seems at or near the bottom and a modest recovery is in store for the back half of 2016 Table 1: Petchem Prices May 2016 Name Price (USD pet ton) MoM % YTD % Naphtha % -1.2% Saudi Propane % -29.3% Ethylene 1, % 0.5% Propylene 0.0% 18.6% HDPE -2.2% 5.3% LDPE 1, % 7.6% LLDPE 1, % 6.3% PP % 12.1% Styrene % 6.7% Polystyrene 1, % 10.4% TiO2 2, % -0.7% PVC -2.4% 11.9% MEG -10.4% 2.6% Methanol % -13.1% DAP -1.4% -14.6% Urea -7.0% -13.0% Ammonia % -5.7% MTBE % 8.5% EDC % 16.7% Butyl-A % -11.0% BPA 1, % 28.0% PX-Asia % 2.7% Table 2: Economic Calendar Source: Argaam, Reuter Eikon, AlJazira Capital Research Date Country Event 01-Jun KSA Trade Balance 05-Jun KSA Saudi Arabia PMI 8-Jun to 15-Jun KSA Non-Oil Exports YoY 10-Jun to 15-Jun KSA May Cement Output YTD YoY 1-Jun, 8-Jun, 15-Jun, 22-Jun, 29-Jun United States Weekly Petroleum Status Report 12-Jun to 19-Jun KSA Consumer Price Index 07-Jun United States 09-Jun China CPI 14-Jun EIA Short-term Energy Outlook IEA Oil Market Report 16-Jun OPEC Monthly Oil Market Report 16-Jun US CPI YoY 20-Jun KSA April Crude Oil Exports 28-Jun KSA M1, M2, M3 Money Supply YoY 23-Jun to 29-Jun KSA Gross Domestic Product 28-Jun KSA SAMA Net Foreign Assets 01-Jun KSA Trade Balance Source: Bloomberg, IEA, EIA, OPEC Analyst Jassim Al-Jubran j.aljabran@aljaziracapital.com.sa

2 Key comments from international energy agencies IEA s Oil Market Report (OMR) Growth in global oil demand for 1Q2016 was revised upwards to 1.4 mbpd, led higher by strong gains in India, China, and Russia. OPEC s oil production rose 330 kbpd in April to average mbpd, primarily due to a -kbpd jump in Iranian flows and a boost in Iraqi and UAE supplies. Global oil supplies rose 250 kbpd to 96.2 mbpd in April. The OECD s commercial inventories fell 1.1 mn bbls in March. Global refinery throughput is estimated to be 79.6 mbpd in 2Q2016 (up 0.7 mbpd YoY), falling below the anticipated demand growth of 1.2 mbpd. OPEC s Monthly Oil Market Report Global oil demand in 2015 averaged mbpd, up 1.54 mbpd YoY. Oil consumption is expected to reach mbpd in In 2015, non-opec supplies averaged mbpd (revised from mbpd), up 1.47 mbpd YoY (revised from 1.46 mbpd). In April, OPEC s oil production increased 188 tbpd to average mbpd (as per secondary sources). Non-OPEC supplies are forecast to decline 0.74 mbpd to average mbpd in The OECD s oil and oil product inventories fell to 3,049 mn bbl in March. Its commercial inventories were up 361 mn bbl from the latest five-year average, with a forward cover of 66.8 days. The demand for OPEC crude is expected to average 31.5 mbpd in 2016, up by an estimated 1.8 mbpd from There is strong gasoline demand from the US, amid tightening sentiment due to some outages and maintenance. In Europe, the higher export opportunities for gasoline, ahead of the driving season, lent support to refinery margins. EIA s Short-Term Energy Outlook Brent prices are forecast to average USD 41 per barrel in 2016 and USD 51 per barrel in 2017, up USD 6 per barrel and USD 10 per barrel, respectively, from last month s estimates. WTI oil prices are expected to average slightly less than Brent in 2016 and to be the same as Brent in In 2015, US crude production is estimated to have averaged 9.4 mbpd. US crude production is projected to average 8.6 mbpd in 2016 and 8.2 mbpd in Initial estimates pegged average production at 8.6 mbpd for 2016 and 8.0 mbpd for US crude production averaged 9.0 mbpd in April, down 0.1 mbpd from March. In the last week of April, US natural gas inventories soared 49% YoY to 2,625 billion cubic feet (bcf). Global consumption of petroleum and other liquid fuels is expected to rise 1.4 mbpd in 2016 and 1.5 mbpd in 2017 (up 0.3 mbpd and 0.2 mbpd, respectively, from the previous month s estimates). Non-OPEC production is expected to decline 0.7 mbpd in 2016 and 0.2 mbpd in On an average, OPEC members produced 31.5 mbpd of crude in Crude production is expected to increase 0.9 mbpd in 2016 (up 0.3 mbpd from the previous month s estimate) and 0.7 mbpd in 2017 (up 0.2 mbpd from the previous month s estimate). OPEC s unplanned oil supply disruptions averaged 2.5 mbpd in April, up 0.2 mbpd from March. OECD inventories are forecast to rise to 3.11 bn bbl at the end of 2016 and are expected to remain thus at end Global oil inventories are expected to increase 1.0 mbpd in 2016 and 0.2 mbpd in

3 Figure 1: TASI versus Petrochemical Industries /01/16 10/01/16 17/01/16 24/01/16 31/01/16 07/02/16 14/02/16 21/02/16 28/02/16 06/03/16 13/03/16 20/03/16 27/03/16 03/04/16 10/04/16 17/04/16 24/04/16 01/05/16 08/05/16 15/05/16 22/05/16 29/05/16 TASI TASI Petrochemical Industries Figure 2: TASI versus Oil (Brent) Feb-15 Mar-15 Apr-15 Jun-15 Jul-15 Aug-15 Oct-15 Nov-15 Dec-15 Feb-16 Mar-16 Apr-16 Brent TASI Petrochemical Industries Table 3: World oil demand and supply (mbpd) E 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) 2,799 2,890 2,965 2,997 3,056 3,098 3,114 3,106 2,721 2,997 3,106 3,106 OPEC Surplus Crude Oil Prod. Cap Source: EIA STEO March 2016, AlJazira Capital Research The gap between crude demand and consumption is expected to narrow from 1.32 mbpd in 1Q2016 to 0.82 mbpd by 4Q2016. Crude inventories are expected to stabilize in 2017, ending the year at mn bbls. OPEC s surplus production capacity is expected to contract from 1.99 mbpd in 1Q2016 to 1.72 mbpd by 4Q

4 Table 4: OPEC monthly oil production Prod. ( 000bpd) Capacity Feb Mar Apr % MoM Chg. Algeria 1,150 1, % Angola 1,870 1,801 1,842 1, -2.3% Ecuador % Indonesia % Iran 3,000 3,100 3, 3, 9.4% Iraq 4, 4, 4, 4, % Kuwait 3,000 3,000 3,000 2, -3.3% Libya % Nigeria 2, 1,889 1,815 1, % Qatar % Saudi Arabia 12, 10, 10,190 10, % U.A.E. 3,150 2,980 2,890 2, % Venezuela 2, 2,451 2,440 2, % Total OPEC 36,657 33,026 33,090 33, % Source: Bloomberg Figure 3: OPEC April Oil Production Venezuela U.A.E. Saudi Arabia Qatar Nigeria Libya Kuwait Iraq Iran Indonesia Ecuador Angola Algeria 0 3,000 6,000 9,000 12,000 ('000 bpd) Source: Bloomberg Figure 4: US Weekly Crude Oil Stocks ( million Barrels) Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-14 Aug-1 Sep-1 mn bbls Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-15 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Apr-1 May-1 Source: US EIA, AlJazira Capital Research Figure 5: World oil production and forecast mbpd Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Source: Bloomberg 4

5 Corporate announcements Name of company Date Announcement Advanced Petrochemical Co. May 17 The company has recommended distribution of dividend worth SAR 123mn for 2Q2016. This represents 7.5% of the Face value of the share or SAR 0.75 per share. Rabigh Refining and Petrochemical Co. April 21 The ethane cracker unit of the Rabigh Phase II Project became fully operational on April 19, 2016, with an additional processing capacity of 30 million standard cubic feet per day. Cumulatively, ethane processing capacity has been ramped up from 95 million standard cubic feet per day to 125 million standard cubic feet per day. Thus, the unit s production capacity has increased to 1.6 million metric ton per year from 1.3 million metric ton per year. The new ethane cracker unit is projected to generate about SAR 750mn in revenues in 2016, subject to the availability of feedstock. Rabigh Refining and Petrochemical Co. May 20 Rabigh Refining & Petrochemical Company had faced a sudden disruption to electricity and steam supplies to its subsidiary Rabigh Arabian Water and Electricity Company, on May 18, The disruption resulted in the company halting its laboratories. Teams deployed by the company were able to activate the power supply. The company is estimating the financial impact of the disruption. Saudi Basic Industries Corp. April 12 The company has announced dividends worth SAR 16.5bn (SAR 3.0 per share), representing 55% of the share capital. Saudi International Petrochemical Co. April 28 Saudi International Petrochemical Company (Sipchem) announced scheduled turnaround maintenance at the following production units: 1.Carbon Monoxide of International Gases Company (IGC) 2. Acetic Acid of International Acetate Company (IAC) 3. Ethyl Acetate of Sipchem Chemicals Company (SCC) The scheduled maintenance would commence on May 1, 2016, and is expected to be completed in 15 days. Saudi International Petrochemical Company May 17 Saudi International Petrochemical Co. completed its scheduled maintenance activity at its Carbon Monoxide of International Gases Co., Acetic Acid of International Acetate Co., and Ethyl Acetate of Sipchem Chemicals Co. units; these units have resumed operations. The financial impact of this activity is estimated to be SAR 22.5mn and would be reflected in 2Q Saudi Kayan Petrochemical Company April 11 Saudi Kayan Petrochemical Company commenced operations at a factory (glycol ethylene/oxide ethylene) after the completion of scheduled maintenance and upgrades. Saudi Kayan Petrochemical Company May 22 Saudi Kayan Petrochemical Company awarded a project worth USD 116mn to Wison Engineering Services Co. Ltd for its ethylene oxide debottlenecking project in Jubail. The project is expected to be completed by 2H2017 and will be financed through local financial institutions. The trial run date and financial impact of the project will be announced after the completion of the project. Yanbu National Petrochemical Co. May 30 The company announced payment of dividends of SAR 1.5 per share for 1H2016. The total amount of distribution is SAR 843.8mn. Yanbu National Petrochemical Co. April 3 Announced of the distribution of SAR 562.5mn dividend to shareholders for 2H2015. This amount translates to SAR 1 per share, and represents 10% of the share capital. Source: Tadawul, AlJazira Capital Research 5

6 Oil and gas price trends Figure 6: Brent Crude (USD per Barrel) Figure 7: WTI Crude (USD per Barrel) ۲۸ ۹ Figure 8: OPEC Reference Basket Figure 9: Henry Hub Natural Gas (USD per mmbtu)

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

8 Figure 16: Propylene (USD per Ton) Figure 17: Polypropylene (USD per Ton) 1, 1, 1,440 1, 1, 1,560 1, 1, 495 Figure 18: Styrene (USD per Ton) Figure 19: Polystyrene (USD per Ton) 1, 1, 1,690 2,000 1, 1,815 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 820 1, Figure 20: EDC (USD per Ton) Figure 21: PVC (USD per Ton) 1, ,

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: TiO2 Europe Figure 27: TiO2 America 3, 3,260 3, 3,465 3, 3, 3, 3,000 3, 2, 3,100 2, 3,000 2, 2, 2, 2, 2,000 2,150 2, 2, 2, 2,645 9

10 Petchem spreads Figure 28: HDPE-Naphtha Figure 29: LDPE-Naphtha Figure 30: LLDPE-Naphtha Figure 31: PP-Naphtha Figure 32: HDPE-Ethylene 380 Figure 33: LDPE-Ethylene

11 Figure 34: LLDPE-Ethylene Figure 35: PP-Propane (Saudi) Figure 36: PVC-EDC Figure 37: Polystyrene-Propane 1,085 11

12 Table 5: Petchem Price Performance Name Price * (USD per ton) MoM % Chg. QoQ % Chg. YoY % Chg. YTD % Chg. Naphtha % 22.1% -28.4% -1.2% Ethylene % 12.1% -29.3% -29.3% Propylene 1, % 9.7% -21.5% 0.5% HDPE 0.0% 16.7% -30.3% 18.6% LDPE -2.2% -1.3% -19.4% 5.3% LLDPE 1, % 0.4% -22.6% 7.6% PP 1, % 0.5% -18.5% 6.3% Styrene % 6.3% -28.3% 12.1% Polystyrene % -5.5% -31.2% 6.7% EDC 1, % 6.4% -20.4% 10.4% PVC 2, % 0.2% -14.2% -0.7% MEG -2.4% 6.7% -11.1% 11.9% Tio2* -10.4% -9.1% -39.7% 2.6% Methanol % 3.9% -27.4% -13.1% DAP -1.4% -5.4% -27.1% -14.6% Urea -7.0% -9.1% -24.5% -13.0% Ammonia % 15.8% -18.5% -5.7% *Weighted average *Price as on 29 May 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 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 12

13 RESEARCH DIVISION Acting Head of Research Talha Nazar Analyst Sultan Al Kadi 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 & ADC Brokerage Abdullah Q. Al-Misbani 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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