MOSCOW (MRC) -- Oil prices fell as investors worried about a second wave of coronavirus infections, but new output cuts from Saudi Arabia tempered worries about oversupply and limited price losses, reported Reuters.
Brent crude futures fell USD1.04, or 3.4%, to USD29.93 a barrel by 12:58 p.m. EDT (1658 GMT). US West Texas Intermediate (WTI) crude fell 30 cents, or 1.2%, to USD24.44 a barrel on 11 May.
Global oil demand has slumped by about 30% as the coronavirus pandemic has curtailed movement across the world, leading to growing inventories globally. While crude futures have fallen more than 55% this year because of the virus, prices have gained the past two weeks, supported by a modest rebound in demand as some travel restrictions are eased.
However, fears about a second wave of the virus weighed on futures.
Germany reported on Monday that new coronavirus infections were accelerating exponentially after early steps to ease its lockdown. Elsewhere, Wuhan, the epicentre of the outbreak in China, reported its first cluster of infections since the city's lockdown was lifted a month ago.
South Korea also warned of a second wave of the virus on Sunday.
"Traders stepped back from last week's enthusiasm, contemplating the possibility of a second wave of the epidemic, which, if realised, could drive demand lower than the market hopes and expects for the second half of 2020," said Rystad Energy's head of oil markets, Bjornar Tonhaugen.
Prices received a boost, however, after a Saudi energy ministry official said the ministry has directed national oil company Saudi Aramco to reduce its crude oil production for June by an extra 1 million barrels per day.
The reduction is on top of a pact by the Organization of the Petroleum Exporting Countries (OPEC) and allied producers - a group known as OPEC+ - to cut production from May 1 by about 10 million bpd in an effort to support prices.
"It's a balance between OPEC production cuts versus concerns about the possibility of a second wave of coronavirus," said Phil Flynn, senior analyst at Price Futures Group. "It's those two emotions that have been bouncing the market back and forth today."
In the United States, fears that the country is running out of oil storage space sent WTI prices into negative territory last month, prompting some U.S. producers to rein in output.
The number of operating oil and gas rigs in the world's largest oil producer last week fell to 374, a record low according to data going back to 1940 from energy services company Baker Hughes Co.
As MRC wrote before, 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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