Oil & Petrochemicals Monthly

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Petrochemical prices moved largely upwards in September, while crude oil was down. Aramco increased propane and butane prices for October.

• Naphtha, propane prices were steady; while butane increased slightly: Prices of naphtha and propane remained unchanged at USD 405 and USD 365 per ton, while butane prices increased 2.9% to USD 355 per ton in September. Aramco slightly raised propane and butane prices to USD 375 per ton and USD 380 per ton, respectively, for October.

• Basic, end products and intermediates prices were up in September:

PP prices increased 3.3% M/M to USD 950 per ton in September.

Propylene prices rose 8.0% M/M to USD 880 per ton. HDPE prices gained 2.2% to 940 per ton, while LDPE prices jumped 9.0% to USD 1,090 per ton. Polystyrene prices were up 2.6% to USD 980 per ton in September, as Styrene prices rose 3.9% to USD 665 per ton. Meanwhile, PVC prices increased 12.8% to USD 970 per ton, while MEG (Asia) prices edged up 2.2% to USD 470 per ton. Ethylene prices surged 20.0% M/M to USD 840 per ton. Methanol-China prices rose 13.9% to USD 205 per ton. Titanium dioxide’s weighted average price inched up by 0.3% M/M to USD 3,158 per ton. Ammonia prices were flat at USD 245 per ton, while urea prices decreased 3.6% to USD 265 per ton in September. DAP prices rose 4.7%

to USD 335 per ton in September.

Demand concerns, addition of supply from Libya pulled crude oil prices down, partly offset by expectations of better OPEC compliance and impact of hurricane sally;

prices were down in early October

• Crude oil prices witnessed a drag in September: In first week of September, oil prices declined due to concerns over weaker demand in the US and China coupled with expectation of higher supplies. In the second week, downtrend continued with rise in the US stockpiles amid subdued demand due to rising COVID-19 cases. However, oil prices recovered in the next week on expectation of better compliance from OPEC members post the cartels meeting during the week, further supported by supply disruptions due to hurricane Sally. Towards the end of the month, oil again declined due to resumption of Libyan supply amid continued demand concerns.

• Brent-WTI fell in September: Brent and WTI prices decreased 6.9%, and 6.3% M/M, ending at USD 41.9 and USD 40.3/ bbl, respectively. The Brent-WTI spread decreased to USD 1.7/ bbl in September from USD 2.1/

bbl in August. Natural gas prices at Henry Hub fell 19.5% M/M to USD 2.1/

mn British thermal units (mmBtu).

• Crude down in early October: In early October, oil prices declined as the US President infected by COVID-19, causing fear and uncertainty among investors. However, price showed some recovery post improvement in the President’s health.

Table 1: Petchem Prices – September FY20

Name Price

(USD pet ton) M/M % YTD %

Naphtha 405 0.0% -31.4%

Saudi Propane 365 0.0% -17.0%

Butane-Saudi 355 2.9% -22.0%

Ethylene 840 20.0% 15.1%

Propylene-Asia 880 8.0% 14.3%

HDPE 940 2.2% 11.9%

LDPE 1,090 9.0% 23.9%

LLDPE 900 7.1% 8.4%

PP-Asia 950 3.3% 3.3%

Styrene-Asia 665 3.9% -23.6%

Polystyrene-Asia 980 2.6% -6.7%

TiO₂* 3,158 0.3% -0.7%

PVC-Asia 970 12.8% 15.5%

MEG (Asia) 470 2.2% -16.1%

Methanol-China 205 13.9% -8.9%

DAP-Gulf 335 4.7% 8.1%

Urea-Gulf 265 -3.6% 10.4%

Ammonia-Gulf 245 0.0% 8.9%

MTBE-Asia 425 0.0% -38.8%

EDC 340 28.3% 13.3%

Butyl-A 1,275 17.0% 8.1%

BPA 1,375 21.7% 22.8%

Acetic Acid-AA 365 9.0% 9.0%

EVA 1,550 20.6% 7.6%

Vinyl Acetate Monomer-VAM 735 4.3% -13.5%

Source: Argaam, Reuters Eikon, AlJazira Capital Research

*The weighted average price of TiO₂

Table 2: Economic Calendar

Date Country Event

October

07,15,21,28 US Weekly Petroleum Status Report 22-Oct US Initial Jobless Claims

28-Oct KSA SAMA Net Foreign Assets SAR 28-Oct KSA M3 Money Supply YoY 29-Oct US GDP Annualized QoQ 3-Nov KSA IHS Markit Saudi Arabia PMI

4-Nov US Trade Balance

06-Nov US Unemployment Rate

10-Nov EIA Short-term Energy Outlook 11-Nov OPEC Monthly Oil Market Report 12-Nov IEA Oil Market Report

13-Nov US Monthly Budget Statement

15-Nov KSA CPI YoY

30-Dec KSA GDP Constant Prices YoY 31-Dec KSA Unemployment Rate (Saudis)

Source: Bloomberg, IEA, EIA, OPEC

Senior Analyst Jassim Al-Jubran +966 11 2256248

[email protected]

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IEA – Oil Market Report (Published on October 14)

• Global demand is forecast to reduce by 8.4 mbpd Y/Y in FY20 (unchanged from earlier estimate), first decline since FY09. Global oil demand in FY21 is expected to grow by 5.5 mbpd to 97.2 mbpd (unchanged from previous month’s estimate).

• The global oil supply decreased by 0.6 mbpd in September to 91.1 mbpd, due to decrease in output by UAE and maintenance cut in the North Sea and Brazil.

• Global refining throughput witnessed strong growth in July, while it was comparatively steady in August and September.

• OECD industry stocks decreased 22.1mn barrels M/M to 3,194mn barrels in August. As per preliminary data, crude stocks fell in the US (-6.5mn barrels) and Japan (-1.3mn barrels), while rose in Europe (+3.3mn barrels) in September.

OPEC – Monthly Oil Market Report (Published on October 13)

• Oil consumption is expected to decline by 9.5 mbpd in FY20 (unchanged from the previous month’s estimate). In FY21, oil consumption is expected grow by 6.5 mbpd (0.08 mbpd lower than the previous month’s estimate).

• OPEC’s oil production decreased 0.05 mbpd M/M to average 24.11 mbpd in September, according to secondary sources.

• Non-OPEC supplies forecast in FY20 is revised up by 0.31 mbpd from the previous month’s estimate, due to better-than-expected recovery seen in the US liquid production.

• OECD’s commercial oil stocks decreased 20.7mn barrels M/M to 3,204mn barrels in August; 219.3mn barrels above the latest five- year average with a forward cover of 71.9 days.

• For FY20, demand is estimated at 22.4 mbpd (7.0 mbpd lower than FY19), revised down by 0.3 mbpd from previous month’s estimate. FY21 OPEC demand is forecast at 27.9 mbpd, revised down by 0.2 mbpd.

EIA – Short-Term Energy Outlook (Published on October 06)

• EIA forecasts Brent spot prices will average USD 42 per barrel in Q4-20 and increase to an average of USD 47 per barrel in FY21.

• EIA projects Henry Hub’s natural gas spot prices to average USD 2.07/mmBtu in FY20, down USD 0.09/mmBtu from earlier estimate. EIA forecasts the spot prices to increase to average of USD 3.13/mmBtu in FY21.

• Natural gas inventories in the US forecasted to reach to more than 4.0tn cubic feet by the end of October at a record high level.

• OPEC average crude production is expected to decrease to 25.8 mbpd in FY20 from 29.3 mbpd in FY19.

• Global consumption of petroleum and other liquid fuels is projected to decrease by 8.6 mbpd in FY20 to 92.8 mbpd (down 0.3 mbpd from the previous month’s estimate) and increase 6.3 mbpd in FY21.

• Non-OPEC production is projected to decrease by 2.2 mbpd in FY20, while rise by 1.3 mbpd in FY21.

• On average, OPEC members produced 23.6 mbpd of crude oil in Q3-20 and production is estimated at 25.7 mbpd in Q4-20.

• OPEC’s unplanned oil supply disruptions averaged 4.28 mbpd in September (versus average of 4.31 for August).

• OECD inventories are projected at 3.0bn barrels by end-2020 barrels (vs. previous month’s estimate 2.9bn) and at 2.9bn barrels in FY21 (vs. unchanged from previous month’s estimate).

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Figure 1: US Oil Production versus Rig Count

Source: US EIA, AlJazira Capital Research

Rig count US oil production (RHS)

8 9 10 11 12 13 14

200 500 800 1,100 1,400 1,700 2,000

Jan-14 Jun-14 Dec-14 Jun-15 Nov-15 May-16 Nov-16 May-17 Oct-17 Apr-18 Oct-18 Mar-19 Sep-19 Mar-20 Sep-20

Table 3: World Oil Demand and Supply

(mbpd) FY19 FY20E FY19 FY20E FY21E

World Crude Oil & Liq. Fuels Supply Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

OPEC Supp. 35.41 34.94 33.90 34.36 33.56 30.52 28.47 30.58 34.65 30.78 33.74 Non-OPEC Suppl. 64.93 65.55 66.28 67.37 67.22 61.89 62.62 63.51 66.04 63.81 65.09 Total World Supply 100.34 100.49 100.18 101.73 100.78 92.41 91.08 94.09 100.69 94.58 98.83 World Crude Oil & Liq. Fuels Cons.

OECD Cons. 47.56 46.98 48.10 47.73 45.25 37.41 42.59 44.33 47.60 42.40 45.47 Non-OECD Cons. 52.95 54.08 54.22 54.18 49.76 47.66 51.57 52.72 53.86 50.44 53.62 Total World Cons. 100.51 101.06 102.32 101.91 95.01 85.07 94.16 97.05 101.46 92.84 99.09 OECD Comm. Inventory (mn barrels) 2,864 2,922 2,931 2,880 2,971 3,201 3,090 2,967 2,880 2,967 2,921 OPEC Surplus Crude Oil Prod. Cap. 2.52 2.51 3.24 2.91 3.67 4.13 4.30 n/a 2.80 n/a n/a

Source: EIA STEO October 2020, AlJazira Capital Research

• The gap between crude consumption and supply is estimated to contract to 2.96 mbpd in Q4-20 (higher consumption than supply) from 3.08 mbpd in Q3-20 (higher consumption than supply).

• OECD’s crude inventories are expected to be 2.97bn barrels in Q4-20.

US oil production averaged 11.22 mbpd in September 2020.

Production increased 3.2% M/M from 10.87 mbpd in August and fell 10.2% Y/Y from 12.50 mbpd in September 2019.

In the week ended September 25, the rotary rig count in the US stood at 261 (up 6 W/W). The average number of rigs rose 2.7%

in September vis-à-vis a drop of 2.1% in August. The average rig count was down 70.8% Y/Y in September. Of the total 269 rigs on October 09, 193 (up 4 W/W) were used to drill for oil and 73 (down 1 W/W) for natural gas. In the US, oil exploration plunged 72.9% Y/Y, while gas exploration dropped 49.0% Y/Y.

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Figure 5: World Oil Production and consumption Figure 6: US Weekly Natural Gas Storage Figure 3: US Weekly Oil Inventories Figure 4: OECD Monthly Oil Inventories

Source: US EIA, AlJazira Capital Research Source: US EIA, AlJazira Capital Research

mn bbls

541

300 350 400 450 500 550

Jan-14 May-14 Oct-14 Feb-15 Jul-15 Nov-15 Mar-16 Aug-16 Dec-16 May-17 Sep-17 Feb-18 Jun-18 Nov-18 Mar-19 Aug-19 Dec-19 May-20 Sep-20 mn bbls

2,500 2,700 2,900 3,100 3,300 3,500

Jan-14 May-14 Oct-14 Mar-15 Aug-15 Jan-16 Jun-16 Nov-16 Mar-17 Aug-17 Jan-18 Jun-18 Nov-18 Apr-19 Sep-19 Jan-20 Jun-20 Nov-20

mbpd

80 85 90 95 100 105

Jan-14 Oct-14 Aug-15 May-16 Mar-17 Dec-17 Oct-18 Jul-19 May-20 Feb-21 Nov-21

1,000 1,500 2,000 2,500 3,000 3,500 4,000

Nov-17 Mar-18 Aug-18 Jan-19 Jun-19 Nov-19 Apr-20 Sep-20

Prod. (‘000bpd) Cap. Jun Jul Aug Sep % M/M Chg.

Equatorial Guinea 150 130 120 120 100 -16.7%

Gabon 220 220 160 160 180 12.5%

Republic of Congo 330 300 280 290 310 6.9%

Venezuela 900 370 360 310 400 29.0%

Algeria 1,080 810 810 870 870 0.0%

Libya 1,300 110 100 80 150 87.5%

Angola 1,450 1,240 1,180 1,250 1,270 1.6%

Nigeria 2,000 1,510 1,510 1,520 1,490 -2.0%

Iran 3,830 1,940 1,960 1,920 1,950 1.6%

Kuwait 3,075 2,150 2,220 2,270 2,310 1.8%

U.A.E. 3,400 2,430 2,450 2,990 2,680 -10.4%

Iraq 4,800 3,790 3,790 3,690 3,780 2.4%

Saudi Arabia 11,500 7,530 8,450 8,920 8,940 0.2%

Total OPEC 34,035 22,530 23,390 24,390 24,430 0.2%

Source: Bloomberg

0 2,000 4,000 6,000 8,000 10,000 Saudi Arabia

Iraq U.A.E.

Kuwait Iran Nigeria Angola Algeria Venezuela Republic of Congo Gabon Libya Equatorial Guinea

('000 bpd) Source: Bloomberg

• World oil production forecasts for FY20 were at 95.16 mbpd, while those for FY21 stood at 99.84 mbpd.

• US weekly oil inventories rose 0.1% W/W to 492.9 mbpd for the week ended October 02, while they decreased 1.2% M/M in September 2020.

• US weekly natural gas storage increased 2.1% W/W to 3,756 bcf in the week ended September 25, while rose 8.7% M/M.

• OECD oil inventories are projected to increase to 2,967mn barrels by the end of FY20 from 2,880mn barrels at the end of FY19.

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Brent WTI ORB

-40 -20 0 20 40 60 80 100

Jan-16 Jun-16 Nov-16 Apr-17 Oct-17 Mar-18 Aug-18 Jan-19 Jun-19 Nov-19 May-20 Oct-20

Naphtha Propane -Saudi Butane-Saudi 150

400 650 900 1,150

Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Jan-18 Sep-18 May-19 Jan-20 Sep-20

HDPE LDPE LLDPE

500 800 1,100 1,400 1,700 2,000

Jan-14 Dec-14 Nov-15 Nov-16 Oct-17 Oct-18 Sep-19 Sep-20

4.6

1.0 1.5 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

Jan-16 Apr-16 Aug-16 Nov-16 Mar-17 Jun-17 Oct-17 Jan-18 May-18 Aug-18 Dec-18 Mar-19 Jul-19 Oct-19 Feb-20 May-20 Sep-20

Ethylene Propylene-Asia Styrene-Asia 300

700 1,100 1,500 1,900

Jan-14 Jun-14 Nov-14 May-15 Oct-15 Mar-16 Sep-16 Feb-17 Jul-17 Jan-18 Jun-18 Nov-18 May-19 Oct-19 Apr-20 Sep-20

MEG (Asia) VAM

300 700 1,100 1,500 1,900

Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Jan-18 Sep-18 May-19 Jan-20 Sep-20

Figure 7: Oil and Gas Price Trends (USD per Barrel)

Figure 9: Feedstock Price Trends (USD per Ton)

Figure 11: End Products Price Trends (USD per Ton)

Figure 8: Henry Hub Natural Gas (USD per MMBTu)

Figure 10: Basic Petrochemicals Price Trends (USD per Ton)

Figure 12: Intermediate Products Price Trends (USD per Ton)

Source: OPEC, AlJazira Capital Research

Source: Argaam, AlJazira Capital Research

Source: Argaam, AlJazira Capital Research Source: Reuters Eikon, AlJazira Capital Research

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200 300 400 500 600 550

150

Jan-14 Jun-14 Nov-14 May-15 Oct-15 Mar-16 Sep-16 Feb-17 Jul-17 Jan-18 Jun-18 Nov-18 May-19 Oct-19 Apr-20 Sep-20 2,500 2,700 2,900 3,100 3,300 3,500

3,700 3,640

2,645

Figure 15: Methanol-China (USD per Ton) Figure 16: TiO

₂

US

Source: Argaam, AlJazira Capital Research Source: Argaam, AlJazira Capital Research

PP-Asia Polystyrene-Asia 650

1,050 1,450 1,850 2,250

1,560

695

Ammonia-Gulf Urea-Gulf DAP-Gulf 100

300 500

700 620

150

Petchem Spreads

• Naphtha prices averaged USD 401 per ton in September, up from USD 397 per ton in August. Polypropylene average prices increased to USD 951 per ton in September from 917 per ton in August.

• The HDPE-naphtha spread increased to USD 559 per ton in September as against USD 509 per ton in August. The PP-naphtha spread rose to USD 550 per ton from USD 520 per ton during the previous month.

• The HDPE-ethylene spread contracted to USD 159 per ton in September against USD 184 per ton in August.

• The PP-propane spread rose to USD 586 per ton, while the PP-butane spread also increased to USD 596 per ton in September.

• The polystyrene-benzene spread increased to USD 554 per ton in September from USD 508 per ton in August.

• The PVC-EDC spread increased to USD 603 per ton in September from USD 573 per ton in August.

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0 200 400 600 800 1,000

Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18 Aug-18 Jan-19 Jun-19 Nov-19 Apr-20 Sep-20

225 830

880

300 400 500 600 700 800 900

365

150 250 350 450 550 650 750 850 950

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 Mar-20 Sep-20

180 800

350 450 550 650 750

395 735

Figure 17: HDPE-Naphtha

Figure 19: PP-Propane (Saudi)

Figure 18: PP-Naphtha

Figure 20: PVC-EDC

775

250 290 350 450 550 650 750 850

-100 -200 0 100 200 300

400 380

-195

Figure 21: Polystyrene-Benzene Figure 22: HDPE-Ethylene

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Table 5: Petchem Price Performance

Name Price ^* (USD per ton) M/M % Chg. Q/Q % Chg. Y/Y % Chg. YTD % Chg.

Naphtha 405 0.0% 6.6% -21.4% -31.4%

Saudi Propane 365 0.0% 4.3% 4.3% -17.0%

Butane-Saudi 355 2.9% 7.6% -1.4% -22.0%

Ethylene 840 20.0% 3.1% 5.0% 15.1%

Propylene-Asia 880 8.0% 18.9% -3.8% 14.3%

HDPE 940 2.2% 10.6% 1.1% 11.9%

LDPE 1,090 9.0% 22.5% 16.0% 23.9%

LLDPE 900 7.1% 12.5% 0.0% 8.4%

PP-Asia 950 3.3% 4.4% -6.4% 3.3%

Styrene-Asia 665 3.9% 2.3% -31.8% -23.6%

Polystyrene-Asia 980 2.6% 6.5% -14.0% -6.7%

TiO₂* 3,158 0.3% -0.4% -0.8% -0.7%

PVC-Asia 970 12.8% 22.8% 12.1% 15.5%

MEG (Asia) 470 2.2% 10.6% -21.7% -16.1%

Methanol-China 205 13.9% 28.1% -14.6% -8.9%

DAP-Gulf 335 4.7% 11.7% 3.1% 8.1%

Urea-Gulf 265 -3.6% 17.8% 3.9% 10.4%

Ammonia-Gulf 245 0.0% 16.7% 4.3% 8.9%

MTBE-Asia 425 0.0% -3.4% -45.5% -38.8%

EDC 340 28.3% 58.1% 41.7% 13.3%

Butyl-A 1,275 17.0% 18.1% 5.8% 8.1%

BPA 1,375 21.7% 0.0% 27.3% 22.8%

Acetic Acid-AA 365 9.0% 14.1% -21.5% 9.0%

EVA 1,550 20.6% 44.9% 8.0% 7.6%

Vinyl Acetate Monomer-VAM 735 4.3% 14.8% -17.9% -13.5%

Note: * Prices as of September 27, 2020 *the weighted average price of TiO2

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 Urea, ammonia

YANSAB Polyethylene, polypropylene, MEG, MTBE, and benzene Tasnee Polyethylene, polypropylene, and propylene (TiO₂)

Saudi Kayan Polyethylene, polypropylene, MEG, polycarbonate, and bisphenol A

Petro Rabigh Polyethylene, polypropylene, propylene oxide, and refined petroleum products Petrochem Polyethylene, polypropylene, and polystyrene

Sahara Petrochemicals (Sipchem) Polyethylene, polypropylene, Methanol, butanol, acetic acid, and vinyl acetate monomer Saudi Group Styrene, benzene, cyclohexene, and propylene

Advanced Polypropylene

Alujain Polypropylene

CHEMANOL Formaldehyde – improvers concrete

NAMA Epoxy resin, hydrochloric acid, liquid caustic soda, and soda granule

MAADEN Ammonia and DAP

Source: Argaam Plus

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