rongsheng refinery 2019 quotation

SINGAPORE, Oct 14 (Reuters) - Rongsheng Petrochemical, the trading arm of Chinese private refiner Zhejiang Petrochemical, has bought at least 5 million barrels of crude for delivery in December and January next year in preparation for starting a new crude unit by year-end, five trade sources said on Wednesday.

Rongsheng bought at least 3.5 million barrels of Upper Zakum crude from the United Arab Emirates and 1.5 million barrels of al-Shaheen crude from Qatar via a tender that closed on Tuesday, the sources said.

Rongsheng’s purchase helped absorbed some of the unsold supplies from last month as the company did not purchase any spot crude in past two months, the sources said.

Zhejiang Petrochemical plans to start trial runs at one of two new crude distillation units (CDUs) in the second phase of its refinery-petrochemical complex in east China’s Zhoushan by the end of this year, a company official told Reuters. Each CDU has a capacity of 200,000 barrels per day (bpd).

Zhejiang Petrochemical started up the first phase of its complex which includes a 400,000-bpd refinery and a 1.2 million tonne-per-year ethylene plant at the end of 2019. (Reporting by Florence Tan and Chen Aizhu, editing by Louise Heavens and Christian Schmollinger)

"Chinese independent refineries, including two mega projects Hengli and Rongsheng, stepped up purchases before year-end to maximize the utilization of crude import quotas," said Chen Jiyao, oil consultant at FGE.

Hengli Petrochemical and Zhejiang Petrochemical Corp, controlled by Zhejiang Rongsheng Holdings, each added 400,000 bpd in processing capacity, mainly focused on petrochemical output. That boosted China"s crude oil imports notably from Saudi Arabia, helping the kingdom reclaim its title from Russia as China"s top crude supplier.

Tuesday"s data also showed China"s refined fuel exports in 2019 rose 14.1% from a year earlier to a record 66.85 million tonnes as refinery throughput outpaced domestic fuel demand growth. December exports were 6.79 million tonnes.

The new batch raises the total export quotas for refined oil products to 48.15 million tonnes in 2019. That compares to 43 million tonnes through the same period last year.

Hengli owns a 400,000-barrels-per-day refinery and was trying to be China"s first private exporter of jet fuel as it expects to churn out 5 million tonnes, or about 40 million barrels, of refined products by the end of 2019.

2021 marked the start of the central government’s latest effort to consolidate and tighten supervision over the refining sector and to cap China’s overall refining capacity.[14] Besides imposing a hefty tax on imports of blending fuels, Beijing has instituted stricter tax and environmental enforcement[15] measures including: performing refinery audits and inspections;[16] conducting investigations of alleged irregular activities such as tax evasion and illegal resale of crude oil imports;[17] and imposing tighter quotas for oil product exports as China’s decarbonization efforts advance.[18]

Yet, of the three most recent major additions to China’s greenfield refinery landscape, none are in Shandong province, home to a little over half the country’s independent refining capacity. Hengli’s Changxing integrated petrochemical complex is situated in Liaoning, Zhejiang’s (ZPC) Zhoushan facility in Zhejiang, and Shenghong’s Lianyungang plant in Jiangsu.[21]

As China’s independent oil refining hub, Shandong is the bellwether for the rationalization of the country’s refinery sector. Over the years, Shandong’s teapots benefited from favorable policies such as access to cheap land and support from a local government that grew reliant on the industry for jobs and contributions to economic growth.[22] For this reason, Shandong officials had resisted strictly implementing Beijing’s directives to cull teapot refiners and turned a blind eye to practices that ensured their survival.

In 2016, during the period of frenzied post-licensing crude oil importing by Chinese independents, Saudi Arabia began targeting teapots on the spot market, as did Kuwait. Iran also joined the fray, with the National Iranian Oil Company (NIOC) operating through an independent trader Trafigura to sell cargoes to Chinese independents.[27] Since then, the coming online of major new greenfield refineries such as Rongsheng ZPC and Hengli Changxing, and Shenghong, which are designed to operate using medium-sour crude, have led Middle East producers to pursue long-term supply contracts with private Chinese refiners. In 2021, the combined share of crude shipments from Saudi Arabia, UAE, Oman, and Kuwait to China’s independent refiners accounted for 32.5%, an increase of more than 8% over the previous year.[28] This is a trend that Beijing seems intent on supporting, as some bigger, more sophisticated private refiners whose business strategy aligns with President Xi’s vision have started to receive tax benefits or permissions to import larger volumes of crude directly from major producers such as Saudi Arabia.[29]

The shift in Saudi Aramco’s market strategy to focus on customer diversification has paid off in the form of valuable supply relationships with Chinese independents. And Aramco’s efforts to expand its presence in the Chinese refining market and lock in demand have dovetailed neatly with the development of China’s new greenfield refineries.[30] Over the past several years, Aramco has collaborated with both state-owned and independent refiners to develop integrated liquids-to-chemicals complexes in China. In 2018, following on the heels of an oil supply agreement, Aramco purchased a 9% stake in ZPC’s Zhoushan integrated refinery. In March of this year, Saudi Aramco and its joint venture partners, NORINCO Group and Panjin Sincen, made a final investment decision (FID) to develop a major liquids-to-chemicals facility in northeast China.[31] Also in March, Aramco and state-owned Sinopec agreed to conduct a feasibility study aimed at assessing capacity expansion of the Fujian Refining and Petrochemical Co. Ltd.’s integrated refining and chemical production complex.[32]

Meanwhile, though, enticed by discounted prices Chinese independents in Shandong province have continued to scoop up sanctioned Iranian oil, especially as their domestic refining margins have thinned due to tight regulatory scrutiny. In fact, throughout the period in which Iran has been under nuclear-related sanctions, Chinese teapots have been a key outlet for Iranian oil, which they reportedly unload from reflagged vessels representing themselves as selling oil from Oman and Malaysia.[38] China Concord Petroleum Company (CCPC), a Chinese logistics firm, remained a pivotal player in the supply of sanctioned oil from Iran, even after it was blacklisted by Washington in 2019.[39] Although Chinese state refiners shun Iranian oil, at least publicly, because of US sanctions, private refiners have never stopped buying Iranian crude.[40] And in recent months, teapots have been at the forefront of the Chinese surge in crude oil imports from Iran.[41]

Textile giants Rongsheng and Hengli have shaken up China"s cozy, state-dominated oil market this year with the addition of close to 1mn b/d of new crude distillation capacity and vast, integrated downstream complexes. Petrochemical products, rather than conventional road fuels, are the driving force for this new breed of private sector refiner. And more are on their way.

Tom: And today we are discussing the advent of petrochemical refineries in China, refineries that have been built to produce mainly petrochemical feedstocks. Just a bit of background here, these two big new private sector firms, Rongsheng and Hengli, have each opened massive, shiny new 400,000 b/d refineries in China this year. Hengli at Changxing in Northeast Dalian and Rongsheng at Zhoushan in Zhejiang Province on the East coast. For those unfamiliar with Chinese geography, Dalian is up by China"s land border with North Korea and Zhoushan is an island across the Hangzhou Bay from Shanghai. And the opening of these two massive new refineries by chemical companies is shaking up China"s downstream market. But China is a net exporter of the core refinery products, gasoline, diesel, and jet. So, building refineries doesn"t sound like a purely commercial decision. Is it political? What"s behind it? How will it affect the makeup of China"s petrochemical product imports?

Chuck: And clearly, the driver here for Rongsheng and Hengli, who as Tom mentioned, are chemical companies, they are the world"s largest producers of purified terephthalic acid, known as PTA, which is the main precursor to make polyester, polyester for clothing and PET bottles. And each of them were importing massive amounts of paraxylene, paraxylene being the main raw material to make PTA. And paraxylene comes from the refining of oil. And really the alternate value for paraxylene or its precursors would be to blend into gasoline to increase octane. So, when looking to take a step upstream in terms of reverse or vertical integration, they"ve quickly found themselves not just becoming paraxylene producers, but in fact becoming refiners of crude to begin with, which of course, is quite complex and it involves all kinds of co-products and byproducts. And as many know, the refining of oil, the primary driver there, as Tom has mentioned, is to produce motor fuels. So, we"re reversing this where the petrochemicals become the strategic product and we look to optimize or maybe even limit the amount of motor fuels produced.

Chuck: And margins, of course, as well because no one wants to shut down their unit just to accommodate the new Chinese production. And what remains to be seen is global operating rates for these PX units will be reduced to maybe unsustainable levels. And as margins come down, they"ll be down for everyone, but the most efficient suppliers or producers will be the ones that survive. And in the case of Hengli and Rongsheng, low feedstock costs, if you"re driving down the cost of paraxylene, you take the benefit on the polyester side because now you have very competitive or very low-priced feedstock.

Tom: That"s a really interesting point actually. Looking at it from a refining economics point of view, if you were trying to diversify your revenue stream, for example, you probably wouldn"t want to increase your gasoline production. And gasoline margins in Europe are barely breaking even, they"re about $4 a barrel. In China, gasoline crack spreads are actually negative. So, fine, they"re self-sufficient in the paraxylene they need for weaving, but are they just... the refiners themselves, Hengli and Changxing, are they now just soaking up losses from the sales of their transport fuels? I think they may be initially, but they"re not just giving their gasoline away, obviously, these refineries were conceived as viable commercial concerns. Hengli anticipates profits, I think, of around 12 billion Yuan per year from its Changxing refinery giving a payback period on that investment of around five years. And each company, interestingly enough, has a distinct marketing strategy for their transport fuel.

Rongsheng is trying to build itself into a retail brand around Shanghai and the Zhejiang area. And Hengli is trying to muscle into the wholesale market on a national level, so it"s gonna be selling products across China. And in that respect, as we were discussing earlier, in fact, Rongsheng appears to have an advantage because where it"s located on the East Coast of China, that region is net short still of transport fuels, but Hengli in the Northeast, that"s a very competitive refining environment. It"s a latecomer to an already pretty saturated market: PetroChina, a state-owned oil giant, is a huge refiner up in Northeast China with its own oil fields, so a ready-made source of low-cost crude. And it"s also very close to the independent sector refining hub in Shandong Province, which is the largest concentration of refineries in China. So, I think there are definite challenges for them on the road fuel front, even if it sounds like they"re going to be pretty competitively placed further downstream in the paraxylene market.

Tom: Well, that"s one of the peculiarities of the Chinese market. As private sector companies, neither Rongsheng nor Hengli are allowed currently to export transport fuels. That"s a legacy concern of the Chinese government to ensure energy self-sufficiency downstream to make sure there"s adequate supply on the domestic market of those fuels. So, that is a real impediment for them. And when they ramp up production of gasoline, diesel, and jet, they are driving down domestic prices and they are essentially forcing product into the seaborne market produced by other refineries. So, in that respect, the emergence of Hengli in Northeast China on PetroChina"s doorstep has created a huge new sense of competition for PetroChina in particular. And I think certainly when you look at their recent financial data, it"s quite clear that they are struggling to adapt to the new environment in which it"s essentially export or die, because these new, massive refineries are crushing margins inside China.

Chuck: And going back specifically to the Hengli and Rongsheng projects, it"s interesting to note, again, going to an order of magnitude or perspective, Hengli is producing or has capacity to produce 4.5 million tons of paraxylene. And in phase one, Rongsheng will have capacity to produce 4 million tons. And I know those are just large numbers, but again, bear in mind that last year, global demand was 43.5 million. So, effectively, these two plants, they could account for 20% of global demand. Just these two projects themselves to give you an idea of just how massive they are and how impactful they can be. Impactful or disruptive, it remains to be seen.

Tom: A sign it doesn"t do things by halves. Although that said, one of the interesting things they have done is essentially halved their transport fuel yields. So, where in a conventional refinery, your combined output of gasoline, diesel, and jet, those core products, might be in the region of 80%, when you look at these new refineries, they"ve really cut that back down to 40% or 50%. And there are new petrochemical refineries springing up, and it"ll be very interesting to see how disruptive those are to the petrochemical market. But in the conventional refining market, they are, I think under pressure to do even more to reduce their exposure to already weakened gasoline and diesel markets. I mean, Shenghong — this new textile company who"s starting up another massive new conventional refinery designed to produce petrochemical products in 2021, I think — they"ve managed to reduce that combined yield to around 30%. They"ve reduced that from an original blueprint.

Chuck: It"s remarkable, but just a note of caution, there have been other petrochemical and refinery projects built recently in Saudi Arabia and in Malaysia, in particular, with established engineering and established chemical and refining companies. And they"ve had trouble meeting the targeted dates for startup and it"s one thing to be mechanically complete, it"s another thing to be operationally complete. But both Hengli and Rongsheng have amazed me at how fast they were able to complete these projects. And by all reports so far, they are producing very, very effectively, but it does remain to be seen why these particular projects are able to run whereas the Aramco projects in Malaysia and in Rabigh in Saudi Arabia have had much greater problems.

Tom: It sounds like in terms of their paraxylene production, they are going to be among the most competitive in the world. They have these strategies to cope with oversupplied markets and refined fuels, but there is certainly an element of political support which has enabled them to get ahead of the pack, I guess. And suddenly in China, Prime Minister Li Keqiang visited the Hengli plant shortly after it came on stream in July, and Zhejiang, the local government there is a staunch backer of Rongsheng"s project. And Zhoushan is the site of a national government initiative creating oil trading and logistics hub. Beijing wants Zhoushan to overtake Singapore as a bunkering location and it"s one of the INE crude futures exchanges, registered storage location. So, both of these locations in China do enjoy a lot of political support, and there are benefits to that which I think do allow them to whittle down the lead times for these mega projects.

Now fresh demand from new refineries starting up in 2019 could increase China"s Saudi oil imports by between 300,000 barrels per day (bpd) and 700,000 bpd, nudging the OPEC kingpin back towards the top, analysts say.

Saudi Aramco said last week it will sign five crude supply agreements that will take its 2019 contract totals with Chinese buyers to 1.67 million bpd.

"With the recent crude oil supply agreements and potential increase of refinery capacity, the Saudis could overtake the Russians and reclaim (the) crown as the biggest crude exporter to China," Rystad Energy analyst Paola Rodriguez-Masiu said.

"We expect Chinese imports of Russian crude to remain at a similar rate in 2019 as a large share of these Russian barrels are imported via pipeline," Refinitiv analyst Mark Tay said.

The contracts include 130,000 bpd to Dalian Hengli Petrochemical and up to 170,000 bpd to Zhejiang Petrochemical Corp, each of which has a 400,000-bpd refinery.

Beijing-based consultancy SIA Energy expects Saudi crude imports to rise by just 300,000 bpd in 2019, raising its market share to 13.7 percent, but leaving it behind Russia.

"We expect lower Saudi crude demand from Hengli and Rongsheng as it is unlikely for them to run their refineries at full rate in 2019," analyst Seng Yick Tee said.

Hengli is designed to process 90 percent Saudi crude, a mix of Arab Medium and Arab Heavy, while the remaining 10 percent is Brazilian Marlim crude. Rongsheng"s plant is identical to Hengli, the industry sources said.

Aramco is also supplying PetroChina"s refinery in China"s southwestern Yunnan province with about 4 million barrels a month of crude via a pipeline from Myanmar between July and November, Eikon data showed, although sources said talks for Saudi Arabia to acquire a stake in the refinery have stalled.

Saudi Aramco will supply up to 70 percent of the oil required at its 300,000-bpd joint venture refinery in Malaysia with Petronas. Between China and Malaysia alone, Saudi Arabia will have to increase exports to Asia by more than 500,000 bpd next year.

China concentrates most of the refinery projects scheduled to start operation between 2022 and 2023 in the Asian and Middle East region. In terms of refining capacity, Kuwait"s Al Zour refinery is estimated to be the largest project, at 615,000 barrels per day. This is followed by the Jieyang and Rongsheng refineries, both located in China and each with a refining capacity of 400 thousand barrels daily. Meanwhile, the refining capacity worldwide is forecast to expand by one million barrels per day in 2022, with an additional expansion of 1.6 million barrels daily in the following year.Read moreRefining projects scheduled to begin operation in Asia and the Middle East in 2022 and 2023, by refining capacity(in 1,000 barrels per day)CharacteristicRefining capacity in thousand barrels per day--

The newly-built highly-integrated mega Chinese refinery-cum-petrochemical complexes are immensely more efficient than the 50-60 year-old clunkers that they are replacing across the globe spanning from the U.S. west coast to the Philippines, bringing a new paradigm to the oil market, they said.

So far in Asia, Royal Dutch Shell announced the closure of its 60-year-old 110,000 b/d Tabangao refinery in the Philippines and plans to cut capacity by half at its biggest 500,000 b/d facility in Singapore. Shell said it aims to have just six integrated refineries by 2025.

BP Australia earlier said it would convert its 152,000 b/d Kwinana refinery in Western Australia into an import terminal. Ampol said Oct. 8 it is studying a similar conversion of its 109,000 b/d Lytton site, echoing a statement by Refining NZ, the sole operator in New Zealand. The Australian government last month announced plans to subsidize refiners as long as they maintain operations in Australia, days after Viva said it may shut the 120,000 b/d Geelong site.

One of the export quota recipient, Zhejiang Petrochemical Corp. (ZPC) was given 1 million mt. The company, which is majority owned by Rongsheng Petrochemical Co., is in the final stages of getting the second phase of its 800,000 b/d refinery up and running.

Oil product consumption in Asia may recover to 2019 levels next year following the discovery of a COVID-19 vaccine with optimism driven by the robust demand growth already seen in India and China but an immediate boost is unlikely with global demand lagging behind and time needed for a global inoculation program.

Mobility curbs delayed the commissioning of new plants while supply of propylene from refinery sources was curtailed as refiners cut runs, according to Asia Light Olefins World Analysis - Propylene.

A bumper 10 million-barrel spot crude oil purchase by Rongsheng Petrochemical suggests it is keen to get the second phase of its massive 40 million mt/yr, or 800,000 b/d, refinery and chemical project at subsidiary Zhejiang Petrochemical Co. Ltd (ZPC) running in the coming months, trading sources said.

Rongsheng announced in August plans to begin trial runs at the second 400,000 b/d tranche of the project in the fourth quarter of 2020 and looks set to achieve this aim despite COVID-19-related construction delays due to social distancing restrictions earlier in the year.

Market participants said Rongsheng was absent from the spot market for a couple of months and returned this week to buy the medium-sour Middle East cargoes, which led some to believe it was restocking but added that the scale of the purchase does point to some use in the new facility.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with the OPIS Asia Naphtha & LPG Report.

Continuing low refinery runs coupled with the autumnal turnaround season has tightened supplies from across the European barrel since September, creating backwardation in naphtha and gasoline and causing middle distillate differentials to strengthen versus distillate futures, according to OPIS and Intercontinental Exchange pricing.

Demand for flying was recovering from the nadir of April until the peak demand month of August, where it reached around half the levels recorded for 2019. But the recovery has since stalled, and by next January, demand is forecast to deteriorate to 60% of January 2020 levels, according to Eurocontol, a pan-European air traffic management agency.

Refinery runs at the world"s third largest crude oil importer are forecast to increase to 90% in November from around 80-85% in October with further hikes anticipated in December, with one source adding that it could reach 100% due to the combination of renewed diesel and strong gasoline demand.

India reduced refinery throughput in August to 16.1 million mt, or 3.82 million b/d, down a hefty 26.4% from a year ago, according to data from the Petroleum Planning & Analysis Cell (PPAC). This works out to 76% of the country"s nameplate 5.02 million b/d capacity and 73.6% of the 5.19 million b/d processed a year ago, the data showed.

There are no major refinery turnarounds planned in the fourth quarter aside from the month-long shutdown of the 400,000 b/d Vadinar facility in October.

“The crack may not be able to reach half of the values in 2019 as year-end tourism is usually the main driving force behind kerosene and jet fuel,” one of the traders said.

Any improvement in kerosene demand this winter would be a welcome change for sellers compared with last year when milder temperatures weighed on the country’s buying appetite for the heating fuel.Japanese kerosene imports in December 2019 to February 2020 dropped to an average of 3.66 million bbls per month, down by 6.4% from 3.91 million bbls over the same period in 2018-19, data from the Petroleum Association of Japan (PAJ) showed.

Egypt"s Middle East Oil Refinery (MIDOR) company, located in Alexandria, has issued a tender to buy 90,000 metric tons of gasoil for October and November delivered into El Dekheila Port, according to a document seen by OPIS amid better-than-expected recovery in the region.

With the largest oil product market in Africa, Egyptian total inland product demand has grown at an annual average rate of 2.4% since 2012, reaching an estimated 916,000 b/d in 2019, reports IHS Markit, the parent company of OPIS." Before the COVID-19 crisis, the net gasoil import balance in Egypt was around 150,000 b/d on average; our base case scenario estimates the gasoil deficit to decrease to at least 100,000 b/d in 2020," Boularas said.

MIDOR delivers refined products to the national oil company, EGPC, and the local market. Its refinery has a crude distillation capacity of 100,000 b/d and is one of the newest and most sophisticated of Egypt"s nine operating refineries, according to IHS Markit data. Egypt has a total atmospheric distillation capacity of 737,000 b/d.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with the OPIS Asia Naphtha & LPG Report.

Turnarounds at the nearby 210,000-b/d Petronineos-operated refinery and the petchem plant were originally scheduled for April this year, but the onset of the COVID-19 pandemic scotched those plans.

One source told OPIS that a short period of maintenance work on a 110,000-b/d crude distillation unit at the refinery was about to end, and so many workers engaged in that project will be redeployed to work on the forthcoming petchems plant shutdown.

India, the second-largest crude oil importer in Asia, reduced refinery throughput in August to 16.1 million mt, or 3.82 million b/d, down a hefty 26.4% from a year ago, according to data from the Petroleum Planning & Analysis Cell (PPAC). This works out to 76% of the country"s nameplate 5.02 million b/d capacity and 73.6% of the 5.19 b/d processed a year ago, the data showed.

Total petroleum products consumption in August 2020 was at 83.8% of year-ago volume at 14.4 million mt versus 17.2 million mt in August 2019, according to the PPAC data. This is down 7.5% from 15.56 million mt in July.

"We expect the demand recovery to continue and that would support higher refinery runs in October/November. However, from a year-on-year point of view, there is still a long a way to go to reach the 2019 level," said Premasish Das, IHS Markit research and analysis director.

IHS Markit estimates September refinery runs at 4.1 million b/d, rising to 4.4 million b/d in October/November, Das said, adding that the forecast may be slightly on the optimistic side.

In August, IOC processed 3.9 million mt versus 6 million mt a year ago and over the same period Reliance churned through 1.4 million mt at its export-oriented site compared with 3.2 million in 2019 due to maintenance works, the PPAC data showed.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with the OPIS Asia Naphtha & LPG Report.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with the OPIS Asia Naphtha & LPG Report.

Saudi Aramco reduced its October liquefied petroleum gas (LPG) term supplies, on a voluntary basis, amid regional demand lulls after keeping allocations in line with nominations for two months amid higher overall term contract volumes for the full year from 2019, according to sources.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with the OPIS Asia Naphtha & LPG Report.

However, they were quick to add that current exceptionally cheap freight makes such a punt worth exploring as participants work to bring down their storage costs with some taking additional shipping length in the chance that a contango play develops. Such plays have earned trading outfits billions in profits and were also responsible for hefty earnings in the past quarter as oil companies grapple with low prices and poor margins due to the coronavirus disease 2019 (COVID-19)-led fuel demand destruction.

"Marketing adjusted EBIT of $2 billion (H1 2019, $1 billion) reflected oil, in particular, benefiting from the volatile and structurally supportive marketing environment," Glencore said in its first-half results, adding that this allowed the company to raise full-year guidance to the top end of its long-term $2.2-$3.2 billion range.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with the OPIS Asia Naphtha & LPG Report.

Aramco is forecast to cut its Arabian Extra Light by a bigger $1.30-$1.40/bbl due to continued weakness in the gasoline and even naphtha markets as driving was curbed by fresh outbreaks of the coronavirus disease 2019 (COVID-19) despite seasonal peak demand in the northern hemisphere. In September, the OSP was also reduced by a larger $0.50/bbl, a pricing list showed.

Demand in India will increase as two massive crude units, the Indian Oil Corp. 300,000 b/d Paradip refinery and a 380,000 b/d unit at the mega Reliance Industries Jamnagar site begin operations after around a three-week maintenance.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with the OPIS Asia Naphtha & LPG Report.

Chinese state-owned refining majors plan to export the biggest volume of clean oil products since the depths of the coronavirus disease 2019 (COVID-19) pandemic in April as higher summer runs led to brimming local tanks forcing many to turn to the overseas market, trading sources said.

Asia naphtha demand as a petrochemical feedstock will continue to grow as new crackers begin operations even as below-capacity refinery utilization rates in some countries squeeze supply further, they said.

Refinery run rates in Asia and the Middle East are expected to improve to 74% this month and reach 82% by January 2021, from below 70% in April during the depth of coronavirus disease 2019 (COVID-19) lockdowns, said April Tan, IHS Markit associate director in Singapore.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with theOPIS Asia Naphtha & LPG Report.

A Royal Dutch Shell refinery in the Philippines became the first Asian casualty of the fuel demand destroying coronavirus disease 2019 (COVID-19) pandemic as other sites in the region brace themselves for similar fallouts in the face of new virus outbreaks and poor refining margins while more sites come onstream in China.

Pilipinas Shell Petroleum Corp said on Thursday that its near 60-year-old 110,000 b/d Tabangao refinery in Batangas province was no longer economically viable and would be turned into an import terminal.

“Due to the impact of the COVID-19 pandemic on the global, regional and local economies, and the oil supply-demand imbalance in the region, it is no longer economically viable for us to run the refinery,” Pilipinas Shell President and CEO Cesar Romero said in the statement.

Refining margins in Asia are under tremendous pressure due to the sharp drop in fuel demand with the benchmark Singapore complex gross margin dropping to minus $3.78/bbl in May/June, according to an update by Refining NZ, which is studying the possibility of converting its refinery in New Zealand to an import terminal.

“This is not a surprise. We are working on a list of refineries in Asia that are vulnerable because of COVID-19 and this refinery keeps coming up in many of the criteria,”said Premasish Das, IHS Markit downstream research and analysis director, adding that there are sites in Japan, Australia, New Zealand and even in Singapore that face uncertain futures.

“Recovery will be gradual amid change in consumption patterns and fears over a second wave of infections. Regional oil demand is not expected to recover to 2019 levels on a quarterly basis through second quarter 2021,” Das said.

Asia gasoline is set to slump with the benchmark Singapore 92 RON crack, or refining margin, on the verge of turning negative in the face of rising supply and demand recovery losing its momentum amid new coronavirus disease 2019 (COVID-19) cases and floods in India and China, traders said.

RIL brought forward the turnaround of a 380,000 b/d CDU at the export-oriented 705,200 b/d Jamnagar refinery to this week from the initial schedule of Oct. 15, according to sources. The works were expected to finish in three to four weeks.

"Chinese refiners probably saw a good opportunity from the slump in oil prices and expectations that the domestic economy will recover after the imposed coronavirus disease 2019 (COVID-19) lockdowns were lifted," a trade analyst said.

U.S. refined product output capacity that has been chasing significantly weaker demand since April due to the economic fallout of coronavirus disease 2019 (COVID-19) is about to lose another refinery to temporary shutdown, market sources report.

When operating at or near full capacity, the Calcasieu refinery supplies a considerable amount of heavy naphtha and low-sulfur vacuum gasoil (LSVGO) into the U.S. Gulf Coast spot market. Figures from the U.S. Energy Information Administration show the refinery as having 36,000 b/d of vacuum distillation capacity (hence the VGO output) but nothing in the way of fluid catalytic cracking (FCC) capacity or catalytic reforming capacity.

A testament to the Calcasieu refinery"s length on intermediate feedstocks is the fact that Calcasieu-quality LSVGO and Calcasieu-quality heavy naphtha were both seen on offer in the U.S. Gulf Coast spot market last week.

Other U.S. refineries shelved during the pandemic are Marathon Petroleum"s 166,000-b/d plant in Martinez, Calif., and its 28,000-b/d refinery in Gallup, N.M. (both in April). As reported by OPIS on June 16, restart of at least the Martinez refinery is not likely in 2020, according to some large unbranded wholesale customers who were privately informed by company sales executives.

Another U.S. refinery -- HollyFrontier"s 52,000-b/d refinery in Cheyenne, Wyo. -- is also soon to exit the petroleum-processing business. As previously reported, the refinery is expected to halt refining operations by Aug. 1 in order to begin the process of converting the facility to renewable diesel production by the first quarter of 2022.

Many of those concerns have faded inversely with rising coronavirus disease 2019 (COVID-19) numbers, but an assessment issued this month by the Environmental Protection Agency suggests there is still cause for concern. EPA released its tabulation for sulfur compliance in 2019, and the data showed that the average sulfur level in gasoline last year was still a relatively hefty 17.5 parts per million. That is down just 3 ppm from the 2018 assessment, and some 75% above the actual requirement of 10 ppm for 2020.

But despite the EPA"s recent measurement of refiners behind the curve in 2019, counterparties in the sulfur credit trading arena have let those compliance instruments slip in value. The drops are attributable to the demand destruction that has changed the dynamic for gasoline supply balances and octane differentials across the country.

Lower refinery utilization and the COVID-inspired drop in U.S. demand have also dismissed octane worries for the moment. The best means of addressing tough Tier 3 sulfur standards this year would have required running catalytic reformers at very high rates, and that might have limited output of high- octane components. But the lowest refinery runs of the 21st century have left plenty of spare capacity in refining complexes and kept octane spreads in check.

Still, it would be helpful if there was some contemporary discovery on how refiners might be complying with Tier 3 regulations so far in 2020. Sulfur credits were cheap in 2019 and gasoline manufacturers might have relied on purchasing credits and mixing in higher-sulfur hydrocarbons that offered better economics. There"s another working theory that holds that most operators can match or exceed the 10-ppm threshold this year.

But the biggest question mark is likely to be gasoline demand. Coming in to 2020, most predictions called for annual demand of about 9.3 million b/d, which would essentially match consumption trends witnessed in 2017, 2018 and 2019.

Pirate attacks on shipping have increased this year as the number of vessels chartered to store oil while anchored offshore has soared following a demand slump due to the spreading coronavirus disease 2019 (COVID-19) pandemic, according to the Allianz Group.

The Gulf of Guinea region, which borders some 3,700 miles of the coastline of West Africa, accounted for 90% of global kidnappings reported at sea in 2019, with the number of crew taken increasing by more than 50% to 121, according to data from the IMB.

But coronavirus disease 2019 (COVID-19) and incredibly cheap gasoline prices intervened. For a substantial portion of May and June, markets often saw wholesale prices for ethanol that were 30-60cts/gal above the price of conventional blendstock (CBOB). Even a rally in prices for 2020 D6 ethanol Renewable Identification Numbers (RINs) wasn"t enough to motivate many retailers to offer E15 at the pumps earlier this driving season.

There was a time when hurricanes were the biggest disrupters to U.S. refining operations, but the coronavirus disease 2019 (COVID-19) pandemic has changed that.

U.S. refinery utilization has averaged less than 83% of capacity for 15 weeks, including a number of plants at minimum rates or idled (Marathon Petroleum"s refineries in Martinez, Calif., and Gallup, N.M).

The outbound flow of diesel cargoes loading from India has tilted increasingly eastward since the outbreak of the coronavirus disease 2019 (COVID-19) pandemic earlier this year, with fewer shipments heading West of Suez, according to IHS Markit"s Commodities at Sea data.

Over 40% of diesel cargoes tracked loading from India"s ports of Sikka, New Mangalore and Vadinar discharged into southeast Asian terminals in June, while northwest European ports took little more than 5% of the total flow. This marks a reversal from June 2019, when around 30% of diesel shipments which loaded from the west coast of India unloaded at northwest European ports, with no diesel cargoes tracked discharging in southeast Asia, Commodities at Sea data showed.

Flaring occurred Tuesday at the Shell-operated 404,000-b/d Pernis refinery near Rotterdam in the Netherlands, according to eyewitnesses, with market sources saying Europe"s largest plant is becoming fully operational after a turnaround.

The trader had previously suggested that some units at Pernis, including those maximising the refinery"s middle distillates production, would not be operational until the middle of July, even though other units came back online last month.

The loss of production offered support to northwest European refining margins at a time of oversupply when demand for products slumped as governments enforced lockdowns to combat the coronavirus disease 2019 (COVID-19) pandemic.

It went below $20/bbl in late-April as the coronavirus disease 2019 (COVID-19) spread across the globe and decimated fuel demand, leading to record consumption drops of as much as 18 million b/d at its height in the second quarter. Prices have since recovered to around the $40/bbl mark following a new OPEC+ output cut pact and budding oil demand recovery.

The purchases well exceed Chinese refinery runs, especially in the second quarter when the nation was in the grip of COVID-19, leading most participants to agree that a lot of the oil has gone into storage, the capacity of which many had underestimated, according to Feng.

However, shipments have picked in July as seen in recent shipping fixture reports but are still well short of typical levels due to COVID-19, which may lead to reduced refinery runs resulting in a longer period of lower imports, trading sources said.

If you operated fuel sites in the United States during the three days preceding July 4 this year, that period may very well represent the peak of this driving season unless coronavirus disease 2019 (COVID-19) suddenly disappears.

Outright demand numbers for the entire week will be gathered by OPIS in the coming days, but some states have seen percentage losses from 2019 double or even triple in the last seven days.

Alabama, for example, had staged a steady recovery to nearly 90% of 2019 volumes, but sales this week are closer to 75% of normal. Arizona, which is seeing COVID-19 cases rise at a rate higher than any foreign country, was back to about 90%-93% of normal before July 4. More recently, sales are at about 85% or less than the same period last year.

Accordingly, that suggests the second EIA gasoline demand number of July 2019 may set the industry up for a very disappointing Weekly Statistical Bulletin next Wednesday. The gasoline demand reading in that slot last year was just 9.214 million b/d, by far the poorest measurement in June, July or August. If this year"s assessment comes in at 80% of that number, we are looking at a demand reading of less than 7.4 million b/d.

Asian naphtha markets strengthened with the CFR Japan price on Monday reaching a four-month high of $406.500/mt, according to OPIS data, supported by healthy petrochemical demand, tight supply and increased gasoline consumption following relaxations of lockdowns over the coronavirus disease 2019 (COVID-19).

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with theOPIS Asia Naphtha & LPG Report.

Supply of all naphtha grades tightened as refiners worldwide operated at below capacity to counter the loss in fuel demand stemming from coronavirus disease 2019 (COVID-19) mobility restrictions. At the same time, resilient petrochemical demand kept Asia cracker run rates at more than 85%, widening the supply shortfall, they said.

The freeing up of tankers from earlier use as floating storage at the start of COVID-19 lockdowns, along with below-capacity refinery utilization, curtailed liquidity in oil product trades and led to the slump in freight, he added.

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Italy"s Eni joins fellow majors BP and Royal Dutch Shell in lowering its long-term price assumptions for Brent crude and writing-off asset values through impairment charges amid weak demand for oil and gas due to the coronavirus disease 2019 (COVID-19) pandemic, it said Monday.

The shape of this curve strengthened considerably from a month ago on the back of the supply cuts and a resurgence of demand as nations eased their coronavirus disease 2019 (COVID-19) lockdown measures.

Prices of naphtha and gasoline rose on the back of easing coronavirus disease 2019 (COVID-19) lockdown measures that rekindled road transportation fuel demand, with naphtha buoyed by both stable intake as a petrochemical feedstock and its diversion into the gasoline pool as a blendstock, they said.

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Another explanation posed by market sources has been the collapse of diluent demand in Canada, as a result of the fallout from coronavirus disease 2019 (COVID-19).

IHS Markit has revised its US NGL supply outlook down by 1 million b/d to around 5.2 million b/d in 2023 as the ensuing oil price crash from the coronavirus disease 2019 (COVID-19) pandemic slows down US upstream crude and associated gas production, of which 70% of NGL supply is sourced.

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CPC Corp. is seeking gasoline in a surprise move following the closure of a 50,000 b/d residue fluid catalytic cracker (RFCC) at its Taoyuan refinery in Taiwan for turnaround amid growing demand as governments relax lockdown measures to curb the coronavirus disease 2019 (COVID-19).

The tender came as CPC Corp. shut the RFCC at its 200,000 b/d Taoyuan refinery on May 7 for maintenance works that are expected to last until around Aug. 20, as reported earlier.

"We may see some demand from countries where refinery runs were slashed. They have not raised runs fast enough yet to meet demand recovery," the trader said.

China raised retail gasoline and diesel prices for the first time this year as crude oil rebounded to stay above the $40/bbl floor amid fresh concerns over the local demand recovery as pockets of coronavirus disease 2019 (COVID-19) outbreaks raised fears of a second wave.

In May, China"s gasoline exports tumbled 64.2% from the previous month to 680,000 mt, the lowest since February 2019, according to its General Administration of Customs. Gasoil exports plunged 43.6% to 1.45 million mt.

Supply of all naphtha grades tightened because of lower global refinery runs due to fuel demand loss stemming from coronavirus disease 2019 (COVID-19) mobility restrictions. At the same time, resilient petrochemical demand has kept Asia cracker run rates at more than 85% in recent months, widening the supply shortfall, they said.

"Asia was awash with arbitrage barrels in May and June because there was no gasoline blending demand. Now gasoline demand has returned, cracker demand is still there, but refinery runs are recovering at a slow pace because middle distillate margins remain weak," said a northeast Asian buyer.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with theOPIS Asia Naphtha & LPG Report.

Intermittent power outages in Karachi has forced Pakistan to import high sulfur fuel oil (HSFO) for the first time in more than a year amid insufficient liquefied natural gas (LNG) and a rebound in economic activity as coronavirus disease 2019 (COVID-19) restrictions are loosened, a Karachi-based trader and market sources said.

PSO imported 79,800 b/d of residual fuel oil in 2018 and 20,000 b/d in 2019, according to IHS Markit data. Over the past three years, Islamabad has been trying to replace fuel oil with the cleaner-burning LNG, partly through bans on fuel oil imports that were implemented intermittently.

Pakistan imported 3.14 million mt of LNG from January to May this year, 16% less on-year due to demand destruction from COVID-19, shipping data from IHS Markit showed. It bought 8.5 million mt in 2019, 24.3% more than a year ago, raising hopes that the country could triple its import of the super chilled gas within the next five years.

Global commodities trader Gunvor is mothballing its 107,500-b/d Antwerp refinery in Belgium following the cratering of European refining margins during the coronavirus disease 2019 (COVID-19) pandemic, the company"s CEO Torbjorn Tornqvist has announced.

Gunvor"s Antwerp refinery has a much lower potential output than several other refineries in Europe"s key Amsterdam-Rotterdam-Antwerp refining hub, and its size is one of several factors adversely affecting its strength, IHS Markit refining and marketing consulting director Hedi Grati told OPIS.

"Gunvor"s refinery in Antwerp is smaller and less complex than its peers in the port and across the border in nearby Rotterdam. Additionally, there is less integration with marketing activities such as fuels retail, which would otherwise provide some more security of demand," said Grati.

"The continued strength of Urals crude, at a premium to dated Brent, must have seriously weighed on the refinery"s bottom line," Grati added. The refinery was designed to process medium-sulfur crude oil, such as the Urals grade.

The European refining sector is expected by most analysts to see rationalization over the coming decade, with IHS Markit consequently forecasting crude runs in Europe falling 1.8 million b/d from 2019 levels to 10.8 million b/d by 2025.

The refinery, in the southern Malaysian Johor state, was shut after a massive fire and explosion on March 15 that killed five people. The incident, the second in a year, occurred at a Diesel Hydro Treating Unit (DHT), the company said in a March 16 statement.

The facility was originally due to resume operations in August, however, lockdown measures taken by Malaysia to curb the spread of the coronavirus disease 2019 (COVID-19) led to manpower shortages similar to that faced by refiners elsewhere in Asia during this period, the sources said.

The refinery was saddled with issues since it began production last year. In April 2019, another massive fire and explosion almost completely destroyed an atmospheric residue desulphurizer (ARDS), crippling operations as the site was no longer able to process intended sour crudes.

The ARDS, one of two 70,000 b/d units at the site, that was destroyed in the 2019 explosion provides low-sulfur residue feedstock to a 140,000 b/d residue fluid catalytic cracker (RFCC). The other ARDS was shut due to emission issues, according to local media at that time.

Consequently, the refinery as a whole, and the RFCC in particular, was running at very low rates, market sources said. The fire-hit ARDS was due to restart in the middle of this year, Petronas said in a quarterly report.

The refinery is designed to produce 98,000 b/d of gasoline, 28,000 b/d of jet fuel, 88,000 b/d of diesel, 5,000 b/d of fuel oil and 458,000 mt/year of slurry sulfur. Its gasoline and diesel meet Euro 5 specifications.

The refinery also provides feedstock to an integrated petrochemical complex with a nameplate capacity of 3.3 million mt/year. The cracker has a capacity to produce 1.26 million mt/year of ethylene, 600,000 mt/year of propylene and 180,000 mt/year of butadiene, according to IHS Markit data.

European imports have slumped in Q2 due to a cave-in for demand following lockdowns in Europe to slow the spread of the coronavirus disease 2019 (COVID-19) pandemic. Propane imports were 345,000 mt in March, and fell to 180,000 mt in April, 80,000 mt in May and 114,000 tons in June to date.

California refined products margins are better than they were when Marathon temporarily idled its 161,000-b/d Martinez refinery in April, but fuel demand has not improved to where a restart of the complex is likely in 2020, sources said.

Some large unbranded wholesale customers told OPIS that they have been privately informed by Martinez sales executives that a restart in 2020 appears out of the question. But the Bay Area refinery is not a candidate for permanent closure, given its complexity and the eventual return of demand for transportation fuel in a post-coronavirus disease 2019 (COVID-19) environment.

A Marathon spokesperson declined to comment on Martinez refinery operations in the rest of 2020, emphasizing that top brass was constantly evaluating conditions with an intent to restart when "demand warrants."

In comparison, the five-year average of mid-June weekly prices for S.F. CARBOB and S.F. CARB diesel between 2015 and 2019 was $1.85/gal and $1.82/gal, respectively, according to OPIS historical spot pricing data. Even so, Northern California current market values are about 62cts/gal stronger than when the Martinez refinery was idled on April 27.

Bringing back a 161,000-b/d refinery might tighten up the crude market but could tilt gasoline back into the "sloppy" category that prevailed for the first part of 2020.

The U.S. West Coast PADD5 region represents perhaps the most disciplined refining area of the country. Before the COVID-19-inspired demand destruction, refiners were operating at about 87% of capacity, according to statistics compiled by the U.S. Energy Information Administration (EIA). Regional run cuts and the idling of Martinez pulled refinery utilization rates to just above 61% of capacity for the week ending June 5, according to EIA. A cursory glance at other regions finds the East Coast with a lower rate of 51.3%, but that"s only because the closed-for-good Philadelphia Energy Solutions refinery"s 336,000-b/d is still counted in the base capacity. PADDs 2, 3 and 4 have seen refinery runs rebound to over 75% utilization.

The Martinez refinery could be restarted in relatively short order if demand warranted, with the plant capable of returning to normal operations within two weeks, a spokesperson told OPIS.

Longer term, the refinery is viewed as a keeper, although Marathon might have to make substantial investments in the state in renewable diesel. Refinery experts who have analyzed all of California"s refineries list Valero"s Wilmington plant as the most likely candidate for eventual closure, and they are also keeping an eye on Phillips 66"s coupled plants in Rodeo and Santa Maria.

Marathon"s Martinez plant isn"t the only refinery likely to remain on the shelf for months. The refiner also idled its 26,000-b/d refinery in Gallup, N.M., and a restart there does not appear imminent.

Meanwhile, sources believe that the ex-HOVENSA plant in St. Croix in the U.S. Virgin Islands that was originally expected to run up to 200,000 b/d of crude in early 2020 in January will not be manufacturing gasoline or diesel this summer. There is no word on when the 135,000-b/d Come-by-Chance refinery in Newfoundland will be resurrected by new owner Irving, and a deal to refurbish and restart a 335,000-b/d Curacao refinery by Klesch Group has been delayed by COVID-19. Demand concerns are also the probable rationale behind the delayed target date for the expansion of ExxonMobil"s Beaumont, Texas, refinery from 350,000 b/d to 600,000 b/d.

The lower premiums likely reflect shifting supply and demand fundamentals as refiners ramp up runs to meet post-coronavirus disease 2019 (COVID-19) fuel demand recovery, said April Tan, IHS Markit downstream associate director in Singapore.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with theOPIS Asia Naphtha & LPG Report.

The 404,000 b/d Pernis refinery near Rotterdam in the Netherlands, Europe"s largest refinery, is scheduled to come back from its largest turnaround in several years by the end of this month, market sources said today.

Refinery operator Royal Dutch Shell has started offering diesel to load from Pernis before the end of the month, according to two European diesel market sources. Shell is also offering marine gasoil, known as DMA, for loading at Pernis in July, said a marine fuel market source.

The entire refinery with two 200,000-b/d CDUs went offline for a turnaround in the middle of April, and sources in the area said maintenance would last throughout May and June. The refinery is set come back online at a moment when European refining margins remain low but have started to creep up.

Northwest European diesel and jet FOB barge cracks were assessed at $4.35/bbl and $0.84/bbl on Friday. The diesel crack, an approximate measure of refining profitability, hit a low of $0.27/bbl on May 7 and jet cracks reached a bottom of minus $8.88/bbl on May 5, as oil product demand was crushed by authorities restricting travel at the onset of the coronavirus disease 2019 (COVID-19) pandemic.

The UK Government decreed that all passengers arriving to the United Kingdom from overseas, with the exception of Ireland, will have to quarantine for 14 days from 8 June onwards to stem the potential spread of the coronavirus disease 2019 (COVID-19). The three airlines argue that the rule is ineffective and will have a devastating effect on the British aviation industry.

Northwest Europe naphtha values strengthened against the refinery complex in April and May, with support coming from higher arbitrage flows to Asia alongside burgeoning petrochemical feedstock demand, while other refined products in Europe saw demand crumple due to the confinement measures brought about by the coronavirus 2019 disease (COVID-19).

Demand recovery and refinery run rates are the two uncertainties trading sources consistently raise when discussing Asian crude oil imports in the coming months and its impact on prices now that the OPEC+ group have got a handle on supply.

However, whether the OSP increase and possible reluctance among term buyers to take full contractual volumes would draw out crude oil currently in storage as part of the contango trading strategy or even flush out clean products on board vessels in place of higher refinery runs is still a big unknown, they said.

IHS Markit estimates that at the height of the coronavirus disease 2019 (COVID-19) global oil demand shrank by a massive 18 million b/d in the second quarter with consumption forecast to fall an average 9.5 million b/d this year.

“By how much 2H 2020 imports will pull back depends on refinery runs (which in turn depends on oil demand recovery in domestic and overseas markets) and availability of storage capacity. All these factors are 2020 specific and may not be directly comparable to 2018,” said Feng Xiaonan, IHS Markit analyst in Beijing.

The oil tanker IDI is shipping a jet fuel cargo to the US from Italy in a rare reverse trade amid a supply glut on falling demand across Europe, as demand slumps following travel restrictions to slow the coronavirus disease 2019 (COVID-19) pandemic.

Overall demand in the April-June period is currently predicted to fall 480,000 b/d from a year earlier compared with the earlier forecast of a 487,000 b/d drop. In the third quarter, the decline is forecast to slow down to 299,000 b/d. Refiners across Asia are increasing runs as authorities relaxed lockdown measures to contain the coronavirus disease 2019 (COVID-19).

Chinese refinery runs in May were estimated to see more month-on-month improvement to 70% from 55 % in February, according to the IHS Markit China Refining and Marketing Short-Term Outlook report published on May 29.

Refined oil product output in France is rising as demand returns, with the Total-operated Grandpuits refinery coming back online and two ExxonMobil-operated refineries boosting runs.

The 100,000-b/d Grandpuits facility, located near Paris, was initially due back online in March after a month-long maintenance period, but the refinery remained offline due to slumping demand as France undertook its lockdown to combat the coronavirus disease 2019 (COVID-19) pandemic.

ExxonMobil"s 120,000-b/d Fos refinery, based in the south of France, has joined the company"s 233,000-b/d Gravenchon plant in "adapting to the demand" for oil products in the country, where lockdowns are easing and consumption increases, according to a company spokeswoman.

The Gravenchon refinery increased runs last week as the company informed local residents that units were being brought back into operation. ExxonMobil declined to offer figures regarding exact throughput at the refineries.

Total"s 100,000-b/d Feyzin refinery is seeing more worker activity on site but remains offline, local sources said. The French oil major began a big turnaround at Feyzin on February 14, with the work scheduled to last several weeks at a cost of 80 million euros, but maintenance was stopped on March 20 due to the COVID-19 pandemic.

Refinery maintenance scheduled before the COVID-19 pandemic could encourage some operators to boost output, according to IHS Markit principal downstream research analyst Eleanor Budds.

"Refineries are ramping up, not just in France, and yet margins and crack spreads are very low," said Budds. "French refineries may have more leeway than in some other countries, as several were shut for maintenance or outages even pre-COVID crisis, so storage tanks may not be as full as elsewhere. We expect gasoline and passenger diesel demand to be at around 10% lower than 2019 levels for July-August, mainly due to increased home working and job losses. Road travel will benefit from less flying this summer, and from more discretionary driving to avoid public transport use."

The recovery in driving activity coincided with the end of Mexico"s Safe Distancing Campaign to contain coronavirus disease 2019 (COVID-19), and the start of new normality with restricted economic activity under a traffic light system.

Around 412,000 metric tons of LPG cargo was imported by coastal crackers last month in northwest Europe, dropping 20% from 513,000 mt in April and 35% from 630,000 mt in March, in addition to a 26% decline from May 2019 at 554,000 mt, according to OPIS tracking. Only 30,000 mt of U.S. LPG was imported into northwest Europe last month, compared with 10 times that volume at the same time last year.

CIF ARA propane prices extended its two-month run holding a premium to CIF NWE naphtha, with propane/naphtha trading at +$53/mt at the start of May, down from a high of +$131/mt recorded on April 21, but still atypical going into the summer months when propane usually trades at a discount due to the lack of heating demand. By comparison, the propane/naphtha spread was minus $139/t in May 2019. A petrochemical producer with feed-flexible coastal facilities in the Netherlands and Spain made repeated propane cargo resale attempts last month.

Demand attrition for finished goods in the petrochemical chain due to coronavirus disease 2019 (COVID-19) gathered pace in May, with Dow Chemical among other producers announcing the idling of some downstream chemical units (see OPIS alert April 30, 2020).

Naphtha cracking economics were better than LPG with the propane/naphtha ratio assessed at 99.1% on June 4, according to OPIS data. The ratio on April 15 shoot up to 179.3% on April 15, the highest on the data, cutting LPG cracking, as strong demand from India and Indonesia on lockdown measures to curb coronavirus 2019 (COVID-19) lifted gas prices.

Strong naphtha demand, as well as tight supply with lower arbitrage flows and refinery turnarounds, will support prices. CFR Japan on June 3 rose to $343.750/mt, the highest since March 6.

Gain greater transparency into Asia-Pacific markets for more strategic buy and sell decisions on refinery feedstocks, LPG and gasoline with theOPIS Asia Naphtha & LPG Report.