London +4420 814 42225
Moscow +7495 543 9194
Kiev +38044 599 2950
info@mrcplast.com

Our Clients

Order Informer

 
Home > News >
 

Oil rallies on Gulf tensions and output cuts

April 27/2020

MOSCOW (MRC) -- Oil rose on Thursday, spurred by rising tensions in the Middle East, output cuts by producing nations to tackle oversupply and the promise of more government stimulus to ease the economic pain of the new coronavirus pandemic, reported Reuters.

Brent crude was up US1.60, or 7.8%, at USD21.97 per barrel by 1123 GMT. US crude rose USD1.74, or 12.6%, at USD15.52 a barrel.

Oil prices have suffered one of their most tumultuous weeks.

The expiring WTI front-month contract on Monday fell into negative territory for the first time as traders paid buyers to take crude off their hands given a lack of storage space due to the current supply glut.

Brent has lost roughly two thirds of its value this year.

Concerns about the collapse in demand because of travel restrictions to contain the coronavirus pandemic and a shortage of space to store oil still dominate, but analysts say they do not expect a repeat of Mondays price shock.

The rally on Thursday followed an announcement from U.S. President Donald Trump he had instructed the US Navy to fire on any Iranian ships that harass it in the Gulf, although he added later he was not changing the militarys rules of engagement.

The head of Irans Revolutionary Guards said Tehran will destroy US warships if its security is threatened in the Gulf.

"This ratchets up tensions once again between the US and Iran. However, given the glut we have in the oil market, it is difficult to see this offering lasting support to the market, unless the situation does escalate further," INGs head of commodities strategy Warren Patterson said.

Output cuts by producers also supported prices. Kuwait said it had begun reducing oil supply to the international market without waiting for the deal agreed by major oil exporting countries to take effect on May 1.

OPEC and other oil producing nations, a grouping known as OPEC+, agreed this month to cut output by a record amount, around 10% of global supply, to support oil prices.

"It is questionable that bringing forward the planned output restraint by a week would make a material difference, especially as no demand consolidation is anticipated in the current quarter," PVM Oil Associates analyst Tamas Varga said.

In addition to the OPEC+ deal, other producers are also pledging reductions. Oklahomas energy regulator said companies could shut wells without losing their leases. The state is the fourth-largest oil producer in the United States.

US crude inventories rose by 15 million barrels to 518.6 million barrels the week to April 17, close to the record of 535 million barrels set in 2017, data showed on Wednesday.

The stocks build was less than the market had expected, analysts said, providing some support for prices, while the promise of more government stimulus improved market sentiment across global markets.

The US House of Representatives expects to pass a nearly USD500 billion coronavirus relief bill on Thursday to provide funds to small businesses and hospitals.

As MRC informed earlier, global oil consumption cut by up to a third. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

We remind that earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

We also remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.


mrcplast.com
Author:Margaret Volkova
Tags:Near East, Europe, PP, PE, LLDPE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, BASF, Borealis, Sabic, Total Petrochemicals, Iran, Russia, USA.
Category:General News
|
| More

Leave a comment

MRC help

 


 All News   News subscribe