Russia’s oil and gas production rose further in the first seven months of 2019, despite the impact of the oil pollution crisis and the recent decline in natural gas exports, the Russian Times reported on August 7.

According to data released by the CDU TEK Department of the German Ministry of Energy, Russian crude oil and condensate production increased by 2% from January to July this year, reaching 325 million tons (11.2 million barrels per day). However, in July, the mining output was 47.15 million tons, down 0.6% from the same period last year.

Millions of barrels of crude oil were found to be contaminated by organic chlorides, and exports through the Druzhiba pipeline were interrupted. Oil production fell by 10.7% in May to 11.11 million barrels a day. In early July, oil prices fell to a three-year low of 10.8 million barrels a day after Russian state pipeline operator Transneft stopped importing oil from Rosneft. The move is part of a larger controversy between the two companies in resolving the pollution crisis.

According to CDU TEK, oil supply rebounded in the second half of June, with total production reaching 47.15 million tons (11.15 million barrels a day) in July, but still down 0.6% from last July.

Rosneft produced 128 million tons in the first seven months of 2019, while Lukoil, the leading private oil company, and Surgutneftegaz produced 47.9 million tons and 35.1 million tons, respectively. Meanwhile, Russia’s gas production grew by 3% year-on-year from January to July, reaching 431.9 billion cubic meters. In July alone, production reached 54.66 billion cubic meters, an increase of 0.5% over the same period last year.

From January 1 to July 15, 2019, natural gas exports from Gazprom to countries outside the former Soviet Union dropped to 102.8 billion cubic meters, down 5.6% from the same period last year. The company’s output was unaffected by weak European sales, up 1.9% year-on-year to 294.5 billion cubic meters.

Novatek, Russia’s largest independent natural gas producer, produced 40.86 billion cubic metres of natural gas in the first seven months of this year, Rosneft 25.43 billion cubic metres, Lukoil 11.93 billion cubic metres and Surgutneftegaz 5.58 billion cubic metres.

According to the OGJ website on August 8, the U.S. Energy Intelligence Agency (EIA) said that as of August 2, the U.S. commercial crude oil stocks, excluding strategic oil reserves, had increased by 2.4 million barrels compared with the previous week.

EIA said in its weekly oil status report that oil stocks reached 438.9 million barrels, about 2% higher than the five-year average at this time of year.

It ended seven consecutive weeks of inventory decline. Many people were surprised by the increase in crude oil supply. Analysts and traders surveyed by the Wall Street Journal expect inventories to fall by 2.8 million barrels.

In September and October, the price of light, low-sulfur crude oil fell by more than $2.50 a barrel, the lowest settlement price for crude oil in recent months in New York since January. The September contract closed at $51.09 per barrel on August 7.

Total car gasoline inventories increased by 4.4 million barrels, 4% higher than the five-year average at this time of year. Stocks of finished gasoline and blended components increased. Distillate stocks increased by 1.5 million barrels, about 1% below the five-year average at this time of year.

Propane-propylene stocks increased by 2.9 million barrels in the week ending 2 August. It is about 8% higher than the five-year average for this season.

The capacity of American refineries was 96.4%, and the average input for the week ending August 2 was 17.8 million barrels per day, an increase of 786,000 barrels per day over the previous week’s average. Gasoline production increased, averaging 10.4 million barrels per day. Fractional fuel production increased, averaging 5.3 million barrels per day.

Crude oil imports rose to 7.1 million barrels a day in the week ending August 2. This is an increase of 485,000 barrels per day over the previous week. In the past four weeks, oil imports averaged 6.9 million barrels a day, a 14.9% decrease over the same period in 2018.

Total imports of gasoline, including blended components of refined gasoline and gasoline, averaged 1.2 million barrels per day last week and 253,000 barrels per day for distillate oil.

In its latest short-term energy outlook, the Energy Information Administration (EIA) predicts spot Brent crude oil prices will average $64 per barrel in the second half of this year and $65 per barrel in 2020. EIA’s expectations of relative equilibrium in the global oil market and its forecast of stabilizing crude oil prices combine the risk of disruption of oil supply and lower expectations of economic growth.

EIA predicts that global oil stocks will increase by 100,000 barrels per day this year and 300,000 barrels per day by 2020.

EIA expects the price of West Texas intermediate crude oil to be lower than Brent crude oil by an average of $5.50 per barrel in the fourth quarter of this year and 2020, narrowing the gap from $6.60 per barrel in July. The narrowed price gap reflects EIA’s prediction that transportation restrictions on crude oil pipelines from the Permian Basin to the Gulf Coast will be eased in the coming months.

However, this latest variance forecast is larger than last month’s $4/barrel spread forecast, as EIA revised its marginal cost forecast for crude oil pipelined from Cushing to the Gulf Coast.

WTI September crude oil futures closed Wednesday (August 7) down $1.32, or 2.46%, to $52.31 a barrel. U.S. oil plunged more than 5% to a seven-month low, continuing the recent slump, following an unexpected increase in U.S. crude oil inventories and fears that the escalation of Sino-U.S. trade problems will lead to shrinking demand.

EIA data bearish pressure on oil prices

Oil prices fell earlier on trade concerns and then continued to fall as U.S. government data showed that U.S. crude oil inventories increased by 2.4 million barrels last week, with analysts expecting a 2.8 million barrel reduction.

The U.S. Energy Information Agency (EIA) said U.S. crude oil inventories had fallen for seven consecutive weeks before last week’s increase, but were still about 2% higher than the five-year average; U.S. gasoline inventories increased by 4.4 million barrels and distillate oil by 1.5 million barrels last week, both of which hit record levels in the Gulf Coast region in the same period in history.

John Kilduff, partner of Again Capital LLC in New York, said that after seven consecutive weeks of falling oil prices, some people believed that today’s EIA inventory report would reverse the trend of oil prices, but supporters of this view were squeezed out of the market.

Andy Lipow, president of Lipow Oil Associates, said the data disappointed the market and increased inventories of crude oil and refined oil. As refineries increased productivity utilization, the United States entered the final sprint of the driving season, and the supply of refined oil was more than enough.

Since last week, oil distribution has fallen by nearly 14% as global stock markets tumbled.

Gene McGillian, vice president of market research at Tradition Energy, said the market continued to decline because of concerns about demand growth and the belief that economic growth might be affected by trade conditions; the market was only concerned about demand trends for the rest of the year.

Josh Graves, senior market strategist at RJO Futures, said that unless bearish sentiment changes, U.S. oil could fall to a low of about $40 a barrel, but U.S. oil production is still soaring, and stock markets hint at heightened concerns about the economic downturn. Graves points out that we can continue to follow this trend. Crude oil stocks are disappointing and the stock market is in a worrying range.

Iran has seized several oil tankers in the Strait of Hormuz in recent weeks, and tensions remain in the Middle East; the Strait is a fortress for oil transport; Saudi Energy Minister Falkh and U.S. Energy Minister Perry expressed common concern Tuesday about the threat to free maritime transport in the Gulf region.

Urea futures are coming on the market on Friday. Urea is in a state of weak overall fundamentals and tight partial equilibrium. According to statistics released by the National Bureau of Statistics, as of July 20, the average price of small granular urea in the national market was 1964.30 yuan/ton, down 27.4 yuan/ton from the same period last month, a decline of about 1.38%. The peak season of domestic agricultural fertilizer demand is from March to May. At present, urea prices have decreased significantly compared with the peak season of demand. Although there are still some orders to export to India in the near future, which has slowed down the decline, most manufacturers will export goods to port next week or end shipments one after another. Domestic agricultural market demand is slowly declining due to seasonal impact, industrial demand is also showing a downturn, and in a short period of time demand is difficult to show signs of warming up, market sentiment is generally pessimistic. According to our survey in Shanxi and Hebei provinces, the industry is generally not optimistic about the future market, urea prices have been expected to decline at least until October will not change.

Since the beginning of the year, domestic urea production has been rising oscillatively. In the first seven months of 2019, the cumulative domestic urea production was about 30.88 million tons, an increase of about 1.455 million tons, or about 4.94%. From the perspective of start-up rate, the start-up rate of domestic urea enterprises has basically stabilized at the front line of 68% in the last two months after experiencing a sharp increase in the first quarter. Recently, some enterprises have finished overhaul and started production: Shaanxi Shaanxi Shaanxi 1 million tons of production capacity, daily output increased by 3400 tons; Shanxi Yangfengxi 800,000 tons of production, daily output increased by 2500 tons; Hulun Bell Jinxin, Shandong Ruixing and Inner Mongolia broad field, and so on. In recent years, many plants have been shut down for overhaul or planned to shut down for overhaul. For example, the annual shutdown of Zhongying 800,000-ton plant in Anyang, Henan, affects the capacity of 2600 tons per day; Ordos Chemical and Shandong Hualu parts of the plant are also planned to shut down for overhaul in August, affecting the capacity estimated at 5800 tons per day. Due to the current environmental restrictions in China, especially the impact of sulfur dioxide quota in North China, it is difficult to approve new urea plants, and the probability of future capacity increase is not very large.

Most of the increased supply is assimilated by rising exports. According to the data of the General Administration of Customs, the cumulative export volume reached 17678,000 tons in January-June this year, up 10.641 million tons from 7037,000 tons in the same period last year, an increase of more than 151.20%. However, the import is affected by the increase of domestic output and the slow growth of demand, which shows a considerable decrease over the same period of last year. In the first six months of this year, the cumulative import volume was 1041,000 tons, down by 34,600 tons, or 24.96%. Especially in June, the import volume dropped to almost zero, and the import volume in the second half of this year is likely to continue the sluggish situation in the first half of this year. Overall, net exports increased significantly in the first half of this year, reducing the impact of supply growth on the domestic market.

At present, the domestic summer urea topdressing is basically over, and the demand for agricultural urea is gradually declining. In August, except for a small amount of fertilizer used in some southern markets, most areas of China will enter the off-season of agricultural urea fertilizer. The demand for urea for industrial use in China is also relatively low due to the pressure of environmental protection on the downstream industry. Taking plywood as an example, the purchasing managers’index of plywood has been declining since March, which is 20.63 points lower than the high of 58.07 in March. Linyi, Shandong Province, an important domestic plywood producing area, has recently been under unprecedented pressure of environmental protection and production restriction. It is understood that the Office of the Leading Group of the Air Pollution Prevention and Control Action in Linyi City has issued the Implementing Plan for Strengthening the Control and Control of Air Pollution in Key Industries in July. According to the requirements of the plan, the 50% steam limit for thermal users has been operated since 24:00 on July 14, 2019. Linyi is divided into four areas A, B, C and D, and shut down in turn for six days each time. Gas and power outages are directly taken in the areas where shutdown occurs. At present, production in Lanshan and Luozhuang districts has begun to stop. The plywood factories in Linyi region have begun to stop production, and this situation may last until the end of August or even later. Now it seems that the resumption of production of plywood plants in Linyi downstream is far away. If it lasts for 2-3 months, it will not only have a great impact on the local industrial urea demand and spot market, but also have a certain impact on the overall price of urea.

On the whole, the fundamentals of urea are not very optimistic. Supply growth is not enough under the pressure of off-season agriculture and industrial environmental protection. It is expected that the situation of urea market will not be optimistic, and spot prices will continue to bear pressure. After urea futures are listed, urea enterprises can use futures to carry out hedging operation, lock in the selling price and avoid the risk of price falling. The turning point of domestic urea market is the resumption of production of plywood plants in Linyi area and the improvement of international urea market. Once the production resumes, the plywood enterprises in Linyi will start full capacity production, and then the demand for urea will increase significantly. At the same time, India’s next round of urea import bidding or after September, if the winning price rebounds, it will have a greater impact on domestic urea exports, thereby affecting the mentality of domestic urea market operators, should also be given priority attention.

On August 7, the rare earth index was 374 points, up 1 point from yesterday, down 62.60% from the cyclical peak of 1000 points (2011-12-06), and up 38.01% from the lowest point of 271 on September 13, 2015. (Note: Period refers to 2011-12-01 to date).

The average price of Neodymium in rare earth metals increased by 1500 yuan/ton to 387,500 yuan/ton, dysprosium metal by 2.3 million yuan/ton and praseodymium metal by 700,000 yuan/ton. The average price of praseodymium and neodymium oxides in rare earth oxides increased by 4000 yuan/ton to 313,500 yuan/ton; the price of dysprosium oxide increased by 10,000 yuan/ton to 19,500 yuan/ton; the average price of praseodymium oxide was 390,000 yuan/ton; and the average price of neodymium oxide increased by 4,000 yuan/ton to 315,000 yuan/ton. The price of praseodymium and neodymium alloys in rare earth alloys increased by 1500 yuan/ton to 387,500 yuan/ton, and the average price of dysprosium ferroalloys increased by 10,000 yuan/ton to 19,400 yuan/ton.

Recently, the prices of some products in the rare earth market have risen continuously, the domestic rare earth market has risen, and the prices of some commodities in the rare earth market have temporarily stabilized. However, the prices of some products in the rare earth market have continued to rise, dysprosium metals have warmed up, praseodymium and neodymium series products have continued to rise in the near future, the market supply is normal, and the prices of light rare earths are near. Expectations are higher. The price fluctuation of rare earth market is related to environmental protection supervision in the whole country. Rare earth production has its particularity, especially the radiation hazard of some products, which makes environmental protection supervision stricter. Under strict environmental protection inspection, rare earth separating enterprises in many provinces have stopped production, resulting in a general market input of rare earth oxides, especially some mainstream rare earth oxides, with normal supply and rising prices in the rare earth market. Recently, large enterprise groups in the field are reluctant to sell, and the rare earth market is on the rise, but the pricing of products is still high. Major manufacturers are also cautious.

Recently, the State Environmental Protection Department has made no reduction in its stringent efforts, which has a greater impact on the rare earth industry. The rare earth industry has a low start-up and a cold market. At the recent press conference on macroeconomic operation held by the Development and Reform Commission, Meng Wei, spokesman of the National Development and Reform Commission (NDRC), answering reporters’questions on rare earth, said that on the basis of in-depth investigation and scientific demonstration, relevant policies and measures would be put forward to give full play to the special value of rare earth as a strategic resource. Due to the increasingly obvious regulatory effect, the supply of raw ore resources in the upstream of the rare earth industry has shrunk, the demand in the downstream is normal, and the trading market of the rare earth industry has increased.

Rare earth analysts of business associations expect that the domestic environmental stringency will not decrease in the near future, coupled with the domestic rectification of the order of the rare earth industry, Myanmar’s export restrictions and normal supply, but the recent increase in rare earth market transactions, rare earth market prices are expected to continue to rise.

According to the price monitoring of business associations, the price decline of PTA spot market in China slowed down on August 7, falling 0.21% from the previous trading day and 27.36% from the same period last year. Futures market shocks adjusted, the main futures (1909) closed at 5148 yuan/ton, up 2 yuan/ton from the previous trading day, an increase of 0.04%. In the import market, PTA US$offer refers to US$680-700 per ton, while the supplier of one-day tour source reports US$730-760 per ton. No public transaction has been heard yet.

Recent PTA device changes:

Enterprise Name, Capacity (10,000 tons) Device Dynamics
Livan polyester 70 July 27 Parking for reasons, restart pending
Jiaxing Petrochemical Company stopped short on July 27 and restarted in early August
Fuhua Chemical Trade Restarted on August 1, 450
Yizheng Chemical Fiber 35. 45 Days of Parking and Maintenance on August 1
Jialong Petrochemical Co. Ltd. Parking overhaul for 2 weeks on August 2
Hengli Petrochemical 220 plans to overhaul the No. 1 production line in August, and the overhaul time is about 15 days.

In August, PTA plant restart and overhaul coexist. Fuhua Chemical Trade 4.6 million tons, Jiaxing Petrochemical 1.5 million tons restart, Yizheng Chemical Fiber 350,000 tons, Jialong Petrochemical 600,000 tons stop and overhaul one after another. At present, PTA start-up load is maintained near 95%.

Cost side is still weak. The closing price of WTI main futures for international crude oil on August 6 was 53.63 US dollars per barrel, down 1.06 US dollars per ton from the previous trading day, and the closing price of BRENT main futures was 58.94 US dollars per barrel, down 0.87 US dollars per ton from the previous trading day. Domestic PX price trend is stable, maintained near 7000 yuan/ton. The Asian PX market closed at $773/ton for FOB Korea and $793/ton for CFR China, down $5/ton from the previous trading day.

Start-up Change of PTA Industry Chain Related Products

Downstream polyester cash flow improved, profits recovered, some parking plants restarted, start-up load increased to 84%, there is a short-term replenishment action. But the textile terminal orders are still cold, just need careful purchase. The comprehensive starting rate of looms in Jiangsu and Zhejiang is 62%. The production and marketing of polyester is low and preferential promotion is dominant. The prices of mainstream factories in Jiangsu and Zhejiang are reduced by 100-200 yuan/ton. Among them, polyester POY (150D/48F) is between 7600-7750 yuan/ton, polyester FDY (150D/96F) is between 7700-8200 yuan/ton, and polyester DTY (150D/48 yuan/ton). F low bomb) at 8950-9250 yuan/ton.

Business analyst Xia Ting believes that demand is expected to improve due to the slight increase in downstream polyester start-up, which will support PTA in the short term. However, the persistence of resumption needs to be verified, as well as factors such as weakness of cost side and uncertainty of macro environment, PTA prices will remain weak.

Price Trend

According to the monitoring data of business associations, as of August 6, the latest domestic price of cyclohexanone was 8,233 yuan/ton, rising by 3.35% annually and falling by 31.39% year on year. Domestic cyclohexanone market is weak.

II. Market Analysis

Products: Cyclohexanone market is weak, chemical fiber market demand is general, solvents just need to be purchased, market turnover is flat. The mainstream offer of cyclohexanone in North China market is delivered in cash from 8100 to 8200, the mainstream offer in East China market is delivered in cash from 8300 to 8400, and the mainstream offer in South China market is delivered in cash from 8700 to 8800.

Industry chain: pure benzene: pure benzene gravity center fell. Market information is less, the business people are more cautious, market trading is light, trading less. There was a lot of bullish sentiment on the spot, and the spot of pure benzene in East China fell to 5000-5040 yuan/ton. Shandong market and East China arbitrage window opened, but the overall delivery is still not smooth, downstream just need to pick up goods, high local refining inventory, prices fell to 4800-4850 yuan/ton. Caprolactam: Domestic caprolactam liquid spot market is cautious. The main liquid spot price in East China market is 12200-12400 yuan/ton, which is delivered by acceptance; part of Shandong’s price is 11700 yuan/ton, which is remitted out of the factory now. The pressure of aggregation cost is high, the demand downstream is not good, and the purchase of raw materials is cautious.

3. Future Market Forecast

Cyclohexanone analysts, business associations, predict that the domestic market for cyclohexanone will be weak in the short run.

Price Trend

According to the price monitoring of business associations, the average ex-factory price of sulphur market in East China is 810 yuan/ton, a decline of 5.81%. On August 6, the sulphur commodity index was 44.44, down 2.75 points from yesterday, down 57.20% from 103.84 points in the cycle (2011-11-02), up 27.41% from 34.88 points on October 23, 2016. (Note: Period refers to 2011-09-01 to date)

II. Market Analysis

Products: Domestic sulphur market prices have been sharply lowered, downstream demand performance is still weak, terminal purchasing enthusiasm is weak, in order to stimulate shipment, refineries in various regions have adjusted their prices. Eastern China market has dropped by 30-50 yuan/ton, the mainstream price of solid sulphur is about 680-740 yuan/ton, and the mainstream price of liquid sulphur is about 660-730 yuan/ton. The price of solid and liquid sulphur in Shandong market was reduced by 30-50 yuan/ton, the mainstream price of solid sulphur was around 870-880 yuan/ton, the mainstream price of liquid sulphur was around 710-770 yuan/ton, the mainstream price of solid sulphur was about 680-730 yuan/ton and the mainstream price of liquid sulphur was 650-690 yuan/ton in North China market.

Industry chain: The vulnerable sorting of sulphur market continues to decline. The downstream acid market currently has a cold trading atmosphere, obvious contradictions between supply and demand, prudent trading by businessmen, poor mindset of business operators, hard to find in real negotiations, and low prices are expected or will go down.

Industry: From the demand point of view, downstream stalemate, weak demand, difficult to change. Domestic port inventory is high, market turnover is still cold, real information is scarce, port storage consumption is slow, buyers and sellers wait for information guidance. Domestic sulphur market continued to decline, downstream demand has not improved, industry expectations of the future market is not high, look at the strong atmosphere.

3. Future Market Forecast

Business sulfur analysts believe that the current sulfur market lacks information guidance, no substantial positive factors, downstream demand has not improved temporarily, coupled with high Hong Kong deposits, the short-term sulfur market is expected to continue a weak downturn.

According to the price monitoring of business associations, domestic PTA spot market prices continued to decline on August 5, falling 2.99% from the previous trading day and 25.53% from the same period last year. Trading atmosphere is general, the focus of buying and selling in spot market is long-term, and the enthusiasm of buying is not good. In the futures market, the main futures (1909) closed at 5158 yuan/ton, down 140 yuan/ton, or 2.64% from the previous trading day. In the import market, PTA US dollar quotation refers to US$700-710 per ton, while the supplier of one-day tour source quotes US$730-760 per ton. There is no public transaction heard yet.

Enterprise Name, Capacity (10,000 tons) Device Dynamics

Jialong Petrochemical 60 plans to stop for two weeks on August 2

Fuhua Chemical Industry & Trade 450 discharged on August 1. The device has been shut down since July 9.

Yizheng Chemical Fiber 35. Stop and repair for 45 days from August 1

Livan polyester stopped at the end of July and restarted to be determined.

Sichuan Energy Chemistry 100 July 26 Short stop for 2 days

Jiaxing Petrochemical 150 malfunction stopped short on July 27 and restart time is to be determined

Hengli Petrochemical 220 plans to overhaul the No. 1 production line in August, and the overhaul time is about 15 days.

In terms of equipment, in August, the annual output of Yizheng Chemical Fiber is 350,000 tons. The PTA plant has been shut down for 45 days. Fujian Jialong Petrochemical Company produces 600,000 tons of PTA plant annually for two weeks. In addition, the 4.5 million tons plant of Fuhua Chemical Industry and Trade was restarted last week. The PTA start-up load increased to a high level near 95%, and the supply side boosted obviously.

On the cost side, the domestic PX price trend remained stable. On August 5, the domestic ex-factory price of p-xylene was 7,000 yuan/ton, down 15.66% year on year. Prices in Asia’s PX market weakened sharply, closing at $810 per ton CFR in China on August 2, down by $30 per ton from the previous day.

Although the downstream polyester cash flow has been repaired, the weaving industry is still facing great pressure. The polyester market is stable and declining. The quotation of some mainstream factories in Jiangsu and Zhejiang has been lowered by 50 yuan/ton. Among them, polyester POY (150D/48F) is 7800-8000 yuan/ton, polyester FDY (150D/96F) is 7850-8200 yuan/ton, and polyester DTY (150D/48F low elasticity) is 9150-9250 yuan/ton.

Business analyst Xia Ting believes that the current PTA processing error compression, planned maintenance devices increased, but the large device restart, weakening the effect of other equipment maintenance, and part of the maintenance plan is yet to be implemented. In addition, Fuhai Chuang 1.6 million tons of PX device has been restarted, Sinochem Hongrun new device has been put into operation, the cost side will continue to move down. The downstream terminal orders are insufficient, and the off-season characteristics will become more obvious. The trend of upstream and downstream is weak, and the short-term weakness of the fundamentals is difficult to change. It is expected that PTA will continue to decline more likely.