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Crude oil futures rangebound on stable fundamentals

October 21/2020

MOSCOW (MRC) -- Crude futures were rangebound during mid-morning trade in Asia Oct. 19, as fundamentals in the oil markets were stable, reported S&P Global.

At 10.20 am Singapore time (0220 GMT), ICE Brent December crude futures were down 13 cent/b (0.3%) from the Oct. 16 settle to USD42.880/b, while the NYMEX November light sweet crude contract was down 14 cents/b (0.34%) at USD40.74/b. Both international crude markets had dipped 0.39% and 0.20% to settle at USD42.92/b and USD40.88/b, respectively, on Oct. 16, after the Energy Information Association's Oct. 15 data showed that US crude exports had fallen to the lowest in 14 months in the week ended Oct. 9.

Amid steady fundamentals, market analysts said that during the week ending Oct. 23, the crude oil price trajectory will be tethered to news flow concerning the coronavirus pandemic.

The coronavirus pandemic continues to threaten global economic recovery, with Italy announcing tightened restrictions to curb the spread the virus on Oct. 18, and Ireland set to do the same later Oct. 19. Just last week, the UK, France and Germany had also adopted more restrictive measures in their battle against the pandemic.

Stephen Innes, chief market strategist at AXI, said in an Oct. 19 note: "The coronavirus pandemic will continue to dominate attention as case numbers rise in Europe and the US [and] as governments move to impose mobility restrictions. And with a trajectory for COVID-19 infections skewed firmly upwards at this juncture, it indeed raises doubts about the robustness of the anticipated economic recovery and thus the prospects for oil demand growth."

Against this gloomy backdrop, the market continues to pin its hopes on the possibility that the OPEC+ alliance will decide against easing their production cuts by almost 2 million b/d as scheduled from 2021 onwards, even after the UAE's energy minister Suhail al-Mazrouei said on Oct. 13 that there are no such plans to do so at the moment.

Barkindo, when presented with the possibility of extended cuts at the Energy Intelligence Forum on Oct. 15 said: "A lot of variables may be reintroduced, but we will focus on how to best assist this market to accelerate the recovery to restore the stability, and also to sustain the stability...Whatever decision that will be taken is to ensure that the recovery in 2021 will be at a favorable pace, will gather momentum in this Q4 and will accelerate."

Market analysts believe that given the bleak demand outlook, and the return of Libyan oil to the market, it is not advisable for OPEC+ to add more oil to the market.

"The toxic combination [of the sustained spread of the coronavirus pandemic and the return of Libyan barrels] makes the scheduled tapering on Jan. 1, 2021, very unlikely. Frankly, adding oil to the market at this juncture, with demand so fragile, is a flat-out bad idea if the group's real intentions are to stabilize and support," AXI's Innes said.

As MRC informed earlier, global oil demand is forecast to peak by around 2040 because transport-fuel demand will decline steeply and economic growth will slow in the post-coronavirus world, the Institute of Energy Economics, Japan, said in its annual IEEJ Outlook 2021 on Oct. 15.

We remind that 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 estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
Author:Margaret Volkova
Tags:Asia, Europe, PP, PE, LLDPE, crude and gaz condensate, PP random copolymer, propylene, ethylene, petrochemistry, BASF, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals, Russia, USA.
Category:General News
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