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Oil at highest since March on lower US inventories

May 22/2020

MOSCOW (MRC) -- Oil prices rose to their highest since March, supported by lower U.S. crude inventories, OPEC-led supply cuts and recovering demand as governments ease restrictions on peoples movements imposed due to the coronavirus crisis, reported Reuters.

Crude prices have slumped in 2020, with global benchmark Brent hitting a 21-year low below USD16 a barrel in April as demand collapsed. With fuel use rising and more signs that the supply glut is being tackled, Brent has since more than doubled.

Brent crude for July rose USD1.17, or 3.3%, to USD36.92 per barrel by 1340 GMT. U.S. West Texas Intermediate crude climbed 96 cents, or 2.9%, to USD34.45. Both benchmarks are at their highest since March 11.

Global supply has been curtailed to a great degree, said Rystad Energy analyst Paola Rodriguez Masiu. We are on a clear path to a gradual recovery now.

In the latest sign the supply glut is easing, U.S. crude inventories fell by 5 million barrels last week. Analysts had expected an increase.

At the same time, there is evidence of recovering fuel use. British airline easyJet plans to restart some flights on June 15, pointing to higher jet fuel demand.

Physical crude markets, at historic lows just weeks ago, are also rising.

It is now abundantly clear that the market is tightening and crude prices are rebounding as demand returns, said analysts at JBC Energy.

The Organization of the Petroleum Exporting Countries, Russia and other allies, known as OPEC+, agreed to cut supply by a record 9.7 million barrels per day (bpd) from May 1 to support the market.

So far in May, OPEC+ has cut oil exports by about 6 million bpd, according to companies that track the flows, suggesting a strong start in complying with the deal. OPEC says the market has responded well.

As MRC informed previously, 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.


mrcplast.com
Author:Margaret Volkova
Tags:PP, PE, LLDPE, crude and gaz condensate, PP block copolymer, homopolymer PP, propylene, LDPE, HDPE, ethylene, petrochemistry, BASF, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals.
Category:General News
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