MOSCOW (MRC) -- Oil rose above USD31 a barrel on Wednesday as hopes for a recovery in demand as some countries ease coronavirus lockdowns offset a report showing a higher-than-expected rise in US inventories, reported Reuters.
Brent crude has almost doubled since hitting a 21-year low reached on April 22, supported by expectations demand will recover and by a record supply cut led by the Organization of the Petroleum Exporting Countries.
Brent was up 79 cents, or 2.6%, at USD31.76 a barrel at 0930 GMT, having risen in the past six sessions. West Texas Intermediate (WTI) crude added 88 cents, or 3.6%, to USD25.44.
“Clearly, the optimism of the re-opening of the global economy has supported the oil rally,” said Naeem Aslam, analyst at Avatrade.
But in a reminder that a supply glut persists, the American Petroleum Institute said on Tuesday that US crude inventories rose by 8.4 million barrels last week, more than analysts expected.
"We’re talking about normalisation of supply and demand but we’ve got a long way to go," said Lachlan Shaw, National Australia Bank’s head of commodity strategy.
Italy, Spain, Nigeria and India, as well as some US states began allowing some people to go back to work and opened up construction sites, parks and libraries.
Germany’s federal government and 16 states have agreed on ways to ease the lockdown.
The easing of lockdowns should lead to a recovery in global oil demand, which in April was expected to collapse by at least 20%, an unprecedented drop, as governments told people to stay at home.
To tackle the resulting glut, OPEC and its allies agreed to a record oil output cut of 9.7 million barrels per day, about 10% of pre-coronavirus demand. That reduction began on May 1.
For now though, soaring inventories are a reminder of excess supply lingering in the market.
Traders will be looking for confirmation of the API’s inventory report when the official US government figures from the Energy Information Administration come out later on Wednesday.
"We would tend to agree that the market has bottomed out, but would caution against getting overly excited about this," said analysts at JBC Energy. "The data trundling in for April really is shockingly bad."
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
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 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 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
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