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Crude oil futures steady to higher on a weaker US dollar

July 31/2020

MOSCOW (MRC) -- Crude oil futures were steady to higher during mid-morning trade in Asia July 28 as a weaker US dollar boosted risk appetites and provide support for the global crude complex, as per S&P Global.

NYMEX September WTI settled up 31 cents at USD41.60/b, and ICE September Brent was up 7 cents on the day at USD43.41/b.

At 11:05 am Singapore time (0305 GMT), ICE Brent September crude futures was up 19 cents/b (0.44%) from the July 27 settle to USD43.60/b, while the NYMEX September light sweet crude contract was up by 6 cents/b (0.14%) at USD41.66/b. The US Dollar Index was at 93.64, down 0.02% from the close of the US trading session.

The weaker US dollar is trading below the 94.0 level, its lowest since May 2018, continuing to boost investor appetite for risk assets, such as crude oil.

With an upcoming Federal Open Market Committee meeting on July 28 and 29 where Federal Reserve chairman Jerome Powell is expected to express continued support for the Fed's dovish monetary policy, the decline in the US dollar is likely to continue, keeping oil prices buoyant.

"Oil markets are receiving support from expectations of the FOMC's firmer commitment in the upcoming policy meeting towards allowing above-target inflation to occur for some time, which should be viewed as incredibly positive for risk assets. And oil prices will continue to draw support from the Fed's dovish policy, which sees the US dollar move lower," Stephen Innes, chief global markets analyst at AxiCorp, said in a note July 28.

Meanwhile, the US' Senate Majority Leader McConnell had formally announced details of a newly proposed trillion-dollar fiscal stimulus package on July 27, which will provide most Americans with a one-time, $1,200 stimulus check and cut enhanced weekly unemployment benefits by two-thirds, from the current USD600 to about USD200 a week, according to media reports.

Negotiations over the final details of the fiscal stimulus package will ensue just as the weekly USD600 unemployment benefits from the USD2.2 trillion Coronavirus Aid, Relief and Economic Security Act expires.

However, rising geopolitical tensions between the US and China, amid an uncertain economic backdrop will continue to limit gains, keeping Brent crude futures trading within the familiar USD40-USD45/b range.

"For oil prices to break out higher, there must be a significant flattening of the US Sunbelt CV-19 case count curve at a minimum," Innes added.

While the number of daily new infections in US has come off considerably from a record high 77,300 on July 16 to 55,000 on July 26, according to the latest John Hopkins University data, the number remains significantly higher than the daily infection rates in other major economies, even as many US states paused or reversed reopening plans.

Market participants will look for fresh cues from the inventory reports by the American Petroleum Institute and the Energy Information Administration on July 28 and 29, respectively.

As MRC informed previously, 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.

And 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 DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.


mrcplast.com
Author:Margaret Volkova
Tags:Asia, Europe, PP, PE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, BASF, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals, Russia, USA.
Category:General News
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