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Crude edges lower in Asia trade as OPEC+ comment dashes output cut hopes

October 15/2020

MOSCOW (MRC) -- Crude oil futures edged lower in mid-morning trade in Asia Oct. 14 as comments dashing hopes of an extension to the current OPEC+ production cut countered strong China import data that had fueled sharp overnight gains, reported S&P Global.

At 11.05 am Singapore time (0305 GMT) ICE Brent December crude futures were down 17 cents/b (0.4%) from the Oct. 13 settle at USD42.28/b, while the NYMEX November light sweet crude contract was also down 17 cents/b (0.42%) at USD40.03/b. The benchmarks had settled 1.75% and 1.95% higher, respectively, Oct. 13.

However, sentiment subsequently soured when UAE energy minister Suhail al-Mazrouei quashed speculation that OPEC+ was reconsidering its scheduled 2 million b/d rollback in production. "That is the agreement we signed. It is very clear," Mazrouei said late Oct. 13 at the Energy Intelligence Forum.

OPEC+ is scheduled to relax its current 7.7 million b/d output cut to 5.8 million b/d from January 2021, but a bleak demand outlook amid the resurgent coronavirus pandemic and the return of barrels from Libya had been fueling optimism the rollback may be postponed.

Markets had earlier Oct. 13 been boosted by the release of strong data by China Customs that showed the country's crude imports rose 17.6% year on year to 48.5 million mt in September, and were up 2.1% on month. Imports over January-September were up 12.7% on year at 416 million mt, the data showed.

OPEC in its monthly oil market report released Oct. 13 had also raised its global oil demand forecast for 2020 by 60,000 b/d to 90.29 million b/d. However, it downgraded its forecast for 2021, expecting oil demand to total 96.84 million b/d, 80,000 b/d lower than its last forecast in September.

"China so far appears to be the only country globally moving steadily on the path to recovery based on gradually improving economic indicators, particularly in industrial production, which is rising from month to month," OPEC said in the report. "Oil demand is projected to be in line with these positive developments and trends."

Aside from China, the demand outlook for oil remains bleak as the threat of renewed restrictions amid a resurgent coronavirus pandemic continue to hang over global economies.

"The recovery remains all too fragile, as reflected through gnarly news flow, a resurgence of is now apparent in many major economies," AXI chief market strategist Stephen Innes said in a note Oct. 14. "The question is how to control the spread, and (whether) broader restrictions [will] feed through economic and mobility activity - and hence oil demand."

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.
Author:Margaret Volkova
Tags:Asia, Europe, PP, PE, LLDPE, crude and gaz condensate, propylene, ethylene, petrochemistry, BASF, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals, China, United Arab Emirates (UAE), Russia.
Category:General News
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