MOSCOW (MRC) -- Oil prices climbed at the end of last week on as countries including Australia moved ahead with plans to relax economic and social lockdowns put in place to halt the coronavirus pandemic, kindling market hopes for a boost in demand for crude and its products, reported Reuters.
Brent crude was up by 87 cents, or 3%, at USD30.33 a barrel by 0630 GMT on 8 May, having fallen nearly 1% on Thursday.
US oil gained USD1.12, or 4.8%, to USD24.67 a barrel, after a decline of nearly 2% in the previous session.
Both contracts are heading for a second week of gains after the lows of April, when US oil crashed below zero, with Brent up around 15% for the week and WTI more than 24% higher.
However, crude is still being pumped into storage, raising the prospect that any gains prompted by stronger demand will be capped.
"Oil is rallying on expectations of better demand. There are green shoots there but I think the market will need to see those broaden and extend to sustain the rally," said Lachlan Shaw, head of commodities research at National Australia Bank in Melbourne.
On the supply side, North American oil companies are cutting production quicker than OPEC officials and industry analysts expected and are on track to withdraw about 1.7 million barrels per day of output by the end of June.
"The supply cuts we have seen announced, particularly in North America, are also giving the market confidence," Shaw said.
Still, US crude inventories at the Cushing storage hub in Oklahoma increased by around 407,000 barrels in the week through May 5, traders said on Thursday, citing Genscape data.
Australia on Friday became the latest country to plan an easing of lockdown restrictions as infections from the virus slow to a trickle, aiming to relax social distancing restrictions in a three-stage process.
France, parts of the United States and countries such as Pakistan are also planning to ease the restrictions instituted to stop the spread of the world’s worst health crisis in a century.
In the US, the biggest consumer of oil and its products, motorists are starting to take to the roads as the lockdowns ease. Gasoline supplied to the U.S. market rose to almost 6.7 million barrels per day (bpd) last week, according to estimates from the US Energy Information Administration.
Prices moved higher later in the session after US and Chinese officials discussed a trade deal agreed earlier this year before the coronavirus outbreak, with both sides agreeing to implement the agreement.
"The apparent de-escalation of potential trade hostilities from this morning’s US-China phone call has seen bullish sentiment return," said Jeffrey Halley, senior market analyst at OANDA.
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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