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Crude oil futures climb on positive US economic data, stocks drawdown

September 04/2020

MOSCOW (MRC) -- Crude oil futures were higher during mid-morning Asian trade Sept. 2 as the US' manufacturing data for August was stronger-than-expected and a private inventory report released late Sept. 1 showed a large surprising decline in the US' commercial crude inventories, reported S&P Global.

At 10:28 am Singapore time (0228 GMT), ICE Brent November crude futures were up 38 cents/b (0.83%) from the Sept. 1 settle at USD45.96/b, while the NYMEX October light sweet crude contract was up 36 cents/b (0.84%) at USD43.12/b. The ICE Brent November crude futures had settled at USD45.58/b at the end of the Sept. 1 trading session, while NYMEX October had settled at USD42.76/b.

"The forward-looking market had another sentiment reinforcement to work with in the form of the August US Institute for Supply Management manufacturing index surprise," Pan Jingyi, market strategist at IG, said Sept. 2.

"The more closely watched reading compared to the Markit index had yielded a surprise for August. Headline ISM manufacturing index having risen to 56.0, had reflected continued expansion for the US economy. It also marks the third consecutive reading above the 50 level," she added.

Better-than-expected US manufacturing data also came a day after a private gauge of Chinese manufacturing activity. The Caixin/Markit manufacturing PMI grew strongly, while official data released by the National Bureau of Statistics of China on Aug. 31 showed Chinese services PMI at its highest since 2018.

Meanwhile, a private inventory report by the American Petroleum Institute released Sept. 1 showed a larger-than-expected drawdown in US crude stockpiles for the week ended Aug. 28.

"With one more week of US driving season left, oil prices received a much needed helping hand from a bullish to consensus oil inventory draw. The American Petroleum Institute reported on Tuesday (Sept. 1) crude oil inventories declined 6.36 million barrels against a 1.8 million consensus," Stephen Innes, chief global markets strategist at AxiCorp, said in a Sept. 1 note.

Market participants will look to the more definitive weekly US inventory report due for release by the Energy Information Administration later Sept. 2 for further cues. Notably, it will be the sixth consecutive week of drawdown in US commercial crude inventories if the official EIA data confirms the API industry report released on Sept. 1 and would be ultimately bullish for the global crude complex.

Earlier this year, as MRC wrote before, 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.
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, Singapore, USA.
Category:General News
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