MOSCOW (MRC) -- Crude oil futures ticked lower during mid-morning trade in Asia Oct. 9, but maintained most of their overnight gains, as the market remained lifted by the exacerbating supply disruptions in the Gulf of Mexico and Norway, as well as reports that Saudi Arabia is reconsidering the relaxation of the OPEC+ quotas slated from 2021 onward, reported S&P Global.
At 11.05 am Singapore time (0305 GMT), ICE Brent December crude futures were down 7 cents/b (0.16 %) from the Oct. 8 settle to USD43.27/b, while the NYMEX November light sweet crude contract was down 10 cents/b (0.24%) at USD41.09/b. Both international crude markets had surged 3.22% and 3.10% respectively to settle at USD43.34/b and USD41.19/b respectively on Oct. 8.
The general uptrend in oil prices can be attributed to increasing volumes of crude production being brought offline in the US Gulf of Mexico and Norway.
In the US Gulf of Mexico, according to Oct. 8 data from the US Bureau of Safety and Environmental Enforcement, Hurricane Delta has forced oil and gas producers to shut almost 45% of the Gulf's offshore operating facilities, idling around 91.53%, or 1.693 million b/d of crude capacity, along with 61.82%, or 1.675 Bcf/d of natural gas capacity.
In Norway, with the escalation of the Lerderne union's planned strike threatening to affect more fields, including the flagship Johan Sverup field, it will take out up to 966,000 b/d of oil equivalent output, industry group Norwegian Oil & Gas said on Oct. 8. Already since Oct. 5 when the strike began, 330,000 boe/d, or 8% of the Norway's total output, has been shuttered.
Stephen Innes, chief strategy officer at AXI, said in an Oct. 9 note: "The confirmation from Equinor (that it) would need to shut in its giant Johan Sverdrup oilfield if the current [labor strike] was to extend to Oct. 14 takes more barrels off the market, which is always a welcome relief for the oil complex that is struggling to rebalance."
Reports that Saudi Arabia is reconsidering the 2021 roll-back in OPEC+ production quotas may have provided additional relief to the market.
The OPEC+ alliance relaxed its historic 9.7 million b/d production cut to 7.7 million b/d in August, and is scheduled to further roll it back to 5.8 million b/d at the start of 2021.
"Saudi Arabia is said to be concerned about the rising infections of COVID-19 around the world and its impact on demand. They also need to make allowances for a return of Libyan oil to the market," ANZ analysts said in an Oct. 9 note.
On a bullish note, US President Donald Trump told Fox Business on Oct. 8 that negotiations over a new US stimulus package were back on, two days after he unexpectedly shut them down. A stimulus package has long been seen by the oil markets as critical to the US economic recovery and to oil demand.
Edward Moya, senior market analyst at OANDA, said: "Crude prices are also benefiting from optimism over a stimulus deal...Even if Congress is unable to reach an agreement before the election, financial markets are confident something will quickly get done after the election aftermath settles."
As MRC wrote before, global oil demand may have already peaked, according to BP's latest long-term energy outlook, as the COVID-19 pandemic kicks the world economy onto a weaker growth trajectory and accelerates the shift to cleaner fuels.
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 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.
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