MOSCOW (MRC) -- Crude oil futures were trading higher in mid-morning trade in Asia July 1 after a significant draw in US crude oil inventories, and despite an increase in coronavirus cases clouding the demand outlook, reported S&P Global.
At 10:25 am Singapore time (0225 GMT), new front-month ICE Brent September crude futures were up 45 cents/b (1.09%) from the June 30 settle at USD41.72/b, while the NYMEX August light sweet crude contract was 53 cents/b (1.35%) higher at USD39.80/b.
"The American Petroleum Institute survey estimated a significant draw in crude oil inventories of 8.156 million barrels for the week ending June 26, which was much higher than analysts' guesses," Stephen Innes, chief global markets analyst at AxiCorp, said in a note July 1.
Market participants will look to more definitive US Energy Information Administration data due for release later in the day to confirm these estimates.
"The reports could go a long way to easing some of those lingering inventory concerns. And possibly there is enough oomph in (the API) announcement to trigger a retest of the psychologically important WTI USD40/b before (the) EIA release," Innes added.
Meanwhile, rising coronavirus cases in some US states continue to weigh heavily on market sentiment, capping any strong recovery in crude prices in the short term.
Coronavirus cases more than doubled in 14 US states in June, including California, Florida and Texas, according to media reports. White House infectious disease expert Anthony Fauci told a Senate hearing June 30 that new cases could more than double to 100,000/day unless a full nationwide effort was undertaken, according to media reports.
"This has seen the EU extend its travel ban on US citizens. Within the US, states stalled the easing of restrictions. New York extended its list of states from which visitors must quarantine on arrival. Sentiment wasn't helped by signs that supply may be on the rise," ANZ analysts said in a note July 1.
ConocoPhillips said June 30 it will start increasing producing in July after announcing some of the biggest North American production cuts in the second quarter, with 460,000 boe/d curtailed in June. The company said it will begin by restoring its Lower-48 US production and its Alaskan production in July, followed by its Surmont volumes in Canada later in the third quarter.
"Brent ended Q2 with gains of 21%. It has been an eventful Q2 for crude oil, with WTI plunging into negative price territory briefly and OPEC+ enacting the largest output reduction in its history. In Q3, we think oil prices may continue to rise, but at a much slower pace than Q2. The path to recovery is unlikely to be smooth or linear," OCBC analysts said in a note July 1.
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 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC