MOSCOW (MRC) -- Oil prices steadied, supported by tighter supplies from major producers but held in check by concerns over a record rise in global coronavirus infections that could stall a recovery in fuel demand, said Hydrocarbonprocessing.
Brent crude LCOc1 rose 5 cents, or 0.1%, to USD42.24 a barrel by 0941 GMT. U.S. crude CLc1 was down 10 cents, or 0.2%, at USD39.65. South Korea on Monday said for the first time that it is in the midst of a ‘second wave’ of the coronavirus. The World Health Organization reported a record increase in global cases on Sunday, with the biggest increase from North and South America.
“Infections are rising in key markets around the world and there are valid concerns that the world is in for a prolonged period of dealing with its consequences,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugen. Oil prices have been supported by a recovery in fuel demand globally as nations resume economic activity after coronavirus lockdowns.
Signalling a recovery in global markets and tighter supplies, Brent has moved into backwardation, where oil for immediate delivery costs more than supply later. Both contracts rose about 9% last week. However, after weeks of rising, prices of physical oil have begun to ease, traders and analysts say, as the rally succumbs to the reality of poor refinery margins and brimming storage tanks.
“I find it more difficult for oil to move higher at this point, especially with the growing concern about second-wave contagion,” said Howie Lee, an economist at Singapore’s OCBC Bank. In Canada and the United States, the number of operating oil and natural gas rigs fell to a record low last week, even as higher oil prices prompt some producers to resume drilling.
The OPEC+ group, consisting of the Organization of the Petroleum Exporting Countries and allies such as Russia, has yet to decide whether to extend a record supply cut of 9.7 million barrels per day (bpd) for a fourth month in August. Russia sees between USD40 and USD50 to the barrel as a fair and balanced oil price, Deputy Energy Minister Pavel Sorokin said.
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 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.
MRC