MOSCOW (MRC) -- Crude oil prices made ground during the European morning trading session on July 6, taking their cue from rising Asian indexes rather than from bad news about coronavirus in the US, reported S&P Global.
As of 1059 GMT, ICE September Brent crude futures were up 50 cents from the close on July 3 at USD43.30/b, while the NYMEX August light sweet crude contract was up 40 cents at USD40.64/b.
"Asian indices opened on a four-month high today, kicking off the week in...positive expectations over the hopes of the Chinese economic engine sustaining global growth, despite rising (coronavirus) cases in the US," Mihir Kapadia, CEO of investment management firm Sun Global Investments, said in a note July 6.
In the US, deaths from COVID-19 reached 129,576 on July 5, and the total number of infections reached 2,841,906, according to the US Centers for Disease Control and Prevention. Texas reported 3,449 cases on July 5, California reported 5,410 cases, and Arizona reported 3,536 cases. This represented a continued rise, analysts said.
There is concern that the rise of COVID-19 related deaths in the US will choke demand and economic growth, analysts said. However, the bulls may interpret this in a positive light.
"I don't think a lot of people will be surprised when we see Q2 2020 earnings, they will see they are bad but not as bad we expected," according to Michael Poulsen, senior oil risk manager at hedging company Global Risk Management.
"I think the market is running a little ahead of itself in its optimism," he said.
Any bad news encourages expectations that central banks will pump more money into various asset classes, he added.
In Europe, the medium-to-short term outlook presents some bearish prospects. European Central Bank President Christine Lagarde said recently that the eurozone faces about two years of downward pressure, before the economy transforms in reaction to coronavirus and recovers.
The pandemic will expedite the pre-existing shift towards digitization and automation, shorter supply chains and greener industries, she said.
This points to more people working from home, which is bearish for oil demand, analysts at investment bank Commerzbank said in a note.
One signpost market players are looking out for is the current OPEC+ deal, which expires at the end of July. Investors are watching for any possible extension at the upcoming July 15 meeting of the OPEC+ Joint Ministerial Monitoring Committee.
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