Last updateFri, 29 May 2020 4pm

U.S. Chemical Production Edged Lower in April

According to the American Chemistry Council, the U.S. Chemical Production Regional Index dropped 3.1% in April following a 1.0% decline in March and a 0.4% decline in February. During April, chemical output fell across all regions, with the steepest decline in the Gulf Coast region. The lower level of chemical activity is directly related to supply chain disruptions and the lockdown of much of the U.S. economy during April. Production fell across all chemical segments. Within several major segments, however, production of some chemical materials increased, including supply chains tied to personal protective equipment and disinfection products.

IHS Markit: U.S. to Halt 1.75 Million b/d of Production

Due to the collapse in oil prices, IHS Markit expects U.S. producers are in the process of curtailing about 1.75 million barrels a day (b/d) of existing production by early June due to operating cash losses, lack of demand and storage capacity, and an unwillingness to sell resources at the very low prices available since the onset of the COVID crisis.

These reductions are not permanent. IHS Markit has projected a return of most curtailed volumes in the summer and fall of 2020 as tightening fundamentals lead operating margins back to positive territory. This resumption of production may accelerate if WTI remains above $30 per barrel—a price that allows operators to cover their operating costs and that reflects improved storage availability.

IEA: Energy Demand May Never Recover After Pandemic

A new report from the International Energy Agency (IEA) projects that energy demand will fall 6% in 2020 – seven times the decline after the 2008 global financial crisis. In absolute terms, the decline is unprecedented – the equivalent of losing the entire energy demand of India, the world’s third largest energy consumer. Advanced economies are expected to see the biggest declines, with demand set to fall by 9% in the U.S. and by 11% in the EU.

“This is a historic shock to the entire energy world. Amid today’s unparalleled health and economic crises, the plunge in demand for nearly all major fuels is staggering, especially for coal, oil and gas. Only renewables are holding up during the previously unheard-of slump in electricity use,” said Dr Fatih Birol, the IEA executive director. “It is still too early to determine the longer-term impacts, but the energy industry that emerges from this crisis will be significantly different from the one that came before.”

Major Shifts in Energy Supply and Demand Patterns Due to COVID-19

Reduced economic activity resulting from shelter-in-place restrictions due to COVID-19 drove significant near-term disruptions to energy markets in the month of April with U.S. petroleum demand falling nearly 27% to 14.2 million barrels per day (b/d), according to data released in the American Petroleum Institute’s April 2020 Monthly Statistical Report. Gasoline deliveries fell more than 31% in April to their lowest level since 1972, while jet fuel posted its largest monthly decline on record, falling nearly 56% to 0.6 million b/d. On a weekly basis, total U.S. petroleum demand rebounded by 1.6 million b/d as of May 1 after appearing to bottom out during the second week of April.

On the supply side, U.S. oil-targeted drilling fell a record 52% over the past two months as producers adjusted output to align with this historic decline in demand. Domestic oil production fell 0.9 million b/d in April to 12.0 million b/d, which combined with reductions in natural gas and other liquids output, amounted to the largest monthly decline in U.S. total liquids supply on record.

U.S. & UK Chemical Industries Begin Bilateral Trade Negotiations

The United States and United Kingdom entered formal trade negotiations on May 5. U.S.-UK chemicals trade totaled $5.3 billion in 2019. The chemical industry is the UK’s largest exporter of manufactured goods. A trade agreement that eliminates U.S. tariffs on chemical imports from the UK could save U.S. chemical manufacturers $76 million per year. Eliminating UK tariffs on chemical imports from the U.S. would reduce tariffs paid in the U.K by $84 million.

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