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Crude, product prices diverge as market eyes US stimulus, European COVID-19 situation

September 28/2020

MOSCOW (MRC) -- Crude prices were holding lower in midday US trading Sept. 25 as the market eyed rising COVID-19 cases in Europe as well as fresh hopes for more US stimulus spending, said S&P Global.

In Europe, resurgence of the coronavirus is prompting governments to reintroduce new restrictions on movement. Around 40% of Madrid's intensive care capacity is now taken up by people suffering from the virus, while on Sept. 24 France, the UK and Spain reported 16,096, 6,634 and 2,321 new cases, respectively -- the highest totals for those countries since spring.

"The crude demand outlook is unlikely to get a bump until concerns over growing coronavirus restrictions in both Europe and the US ease," said OANDA senior market analyst Edward Moya in a note. While the new restrictions on travel and trade are generally bearish for oil demand, outlooks remain somewhat supported due to the fact that so far there is little appetite for a return to full lockdown measures seen during the spring.

"European policymakers' view on what makes effective countermeasures to the coronavirus's spread has apparently changed -- blanket lockdowns, which caused sharp economic dislocations, are no longer in favor; selective measures targeting specific places/activity are in," S&P Global Platts Analytics said.

Meanwhile, refined products futures gleaned some support from the prospect of a second round of US stimulus spending. NYMEX October RBOB was up 35 points at USD1.1992/gal while October ULSD was trading around even and was up 11 points at USD1.1178/gal.

US Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi agreed Sept. 24 to revive negotiations on a federal stimulus bill that stalled earlier this summer. Democrats in the House of Representative are seeking an aid plan for airlines, restaurants and small business worth USD2.4 trillion, according to media reports Sept. 25. The White House has signaled that it would support USD1.5 trillion in spending, but some Republicans are opposed to that level. The bill that the house passed in May was worth USD3.5 trillion and included USD25 billion for airlines.

Gasoline cracks were again testing one-month highs intraday. The front-month ICE NYH RBOB crack versus Brent strengthened to around USD7.70/b midmorning Sept. 25, on pace to close at the strongest level since Aug. 24.

As MRC informed earlier, global oil refiners reeling from months of lackluster demand and an abundance of inventories are cutting fuel production into the autumn because the recovery in demand from the impact of coronavirus has stalled, according to executives, refinery workers, and industry analysts. Refiners cut output by as much as 35% in spring as coronavirus lockdowns destroyed the need for travel. As lockdowns eased, refiners increased output slowly through late August. But in top fuel consumers the United States and elsewhere, refiners have been decreasing rates for the last several weeks in response to increased inventories, a sustained lack of demand, and in response to natural disasters.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, neftegaz, petrochemistry.
Category:General News
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