MOSCOW (MRC) -- Crude futures settled slightly lower June 23 as expectations of higher demand stemming from improved economic activity were offset by increases in coronavirus cases, as per S&P Global.
NYMEX August crude settled 36 cents lower at USD40.37/b, while ICE August Brent settled 45 cents lower at USD42.63/b.
In refined products, NYMEX July RBOB settled 81 points higher at USD1.2994/gal, and July ULSD settled at $1.203/gal, down 1.56 cents.
Economic indicators were supportive for the oil complex. Equities and oil climbed early in the session after the White House confirmed that the US-China trade deal was still on.
Also supportive was the IHS Markit Purchasing Managers' Index, which showed a slowing of the US economic downturn in June as states began to lift lockdowns imposed to contain the coronavirus pandemic.
"Despite many firms noting a rebound in client demand, some stated that renewals and requests for new business were historically muted. The rate of contraction nevertheless slowed notably, with manufacturers in particular registering only a fractional decrease," IHS Markit said in a release. "The downturn in new business from abroad also slowed significantly, as clients in key export markets increased their buying activity amid looser lockdown restrictions."
That followed an increase in European PMI readings.
"France's composite PMI rose to a four-month high of 51.3 while the heavyweight economy Germany clocked 45.8, also a four-month high," said Mihir Kapadia, CEO of Sun Global Investments.
However a full quarter of economic data will be needed to assess the full impact of the pandemics, while "as new clusters in Beijing and the US have shown, another peak cannot be ruled out especially during the winter months," Kapadia said.
Crack spreads have strengthened this month as the easing of restrictions is expected to bolster demand for refined products. The August ULSD crack spread against ICE Brent was trading around USD8.56/b late June 23, down from USD9.55/b June 17, but up from USD6.24/b June 1.
The August RBOB crack spread against ICE Brent was trading around USD11.73/b June 23, up from USD7.08/b June 1.
Also, the global crude glut appears to have eased for now, causing the deep contango structure in both NYMEX WTI and ICE Brent to narrow.
According to S&P Global Platts Analytics, global crude inventories at 5.229 billion barrels June 18 were down 55 million barrels on the month. That decline was driven primarily by a drop in crude in transit, rather than onshore or floating crude storage.
Still, the crude structure was looking less bearish, as OPEC and non-OPEC producers have cut output. The ICE front-month Brent crude contract ending June 23 at a roughly USD2.65/b discount to the twelfth-month contract, from a USD15.37/b discount April 21.
An increase in coronavirus cases in some areas threatens the petroleum recovery, although it is unclear that states would impose similar lockdown measures to those seen in April and May even if the pandemic spreads.
US President Donald Trump's coronavirus health advisor, Dr. Anthony Fauci, warned June 23 that states are seeing a "disturbing surge" in infections, according to a CNBC report.
South Korean health officials on June 22 announced that the country was going through a second wave of coronavirus. Initially lauded as a success story, fresh clusters since May have led to warnings that the pandemic would continue for more months.
The World Health Organization said June 22 that coronavirus cases were soaring in major countries, with "worrying increases" in Latin America, especially Brazil.
As MRC informed before, global oil consumption cut by up to a third in Q1 2020. 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