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Crude falls on bearish API data, concerns over coronavirus restrictions

October 29/2020

MOSCOW (MRC) -- Crude oil futures took a dive during the mid-morning trade in Asia on Oct. 28, erasing most of their overnight gains, as the market grew anxious over a large build in the US crude inventories and over prospects of nationwide lockdowns in Europe, where countries are struggling to contain the second wave of the coronavirus pandemic, reported S&P Global.

At 9:53 am Singapore time (0153 GMT), ICE Brent December crude futures were down 67 cents/b (1.63 %) from the Oct. 27 settle to USD40.53/b, while the NYMEX December light sweet crude contract was down 75 cents/b (1.90%) at USD38.82/b. Both markers had jumped 1.83% and 2.62% to settle at USD41.20/b and USD39.57/b, respectively, on Oct. 27, after Hurricane Zeta shuttered 55.35% of US Gulf crude output.

The fall in oil prices in the morning comes after the American Petroleum Institute reported on Oct. 27 that US crude inventories had risen by 4.577 million barrels in the week ended Oct. 23, indicating that fundamentals in the market remained weak.

The API fueled further bearish sentiment through its reports of a 2.252 million-barrel build in US gasoline inventories. Consequently, a 5.333 million-barrel draw in distillate inventories did nothing to pacify the market.

At 9:53 am Singapore time, the NYMEX November RBOB contract was trading 2.22 cents/gal (1.94%) lower than the Oct. 27 settle at USD1.1212/gal and NYMEX November ULSD contract was down by 1.73 cents/gal (1.49%) at USD1.1404/gal.

Meanwhile, concerns over the surge in coronavirus cases Europe persisted, as the possibility of tighter restrictions, including nationwide lockdowns, threatened to derail demand recovery.

Stephen Innes, chief market strategist at AXI, said in an Oct. 28 note: "The doomy mood music's soundboard remains tuned to growing concerns about rising Covid-19 case counts, and reflationary hopes are fading fast with the French lawmakers taking a frightful economic step back into the Covid full stop abyss and likely to impose a nationwide lockdown, with the Eurozone's Economic juggernaut Germany likely to follow suit."

The onslaught of bearish factors has negated any boost the market may have received from curtailed production in the US Gulf, where producers are bracing for the arrival of Hurricane Zeta.

According to data from the US Bureau of Safety and Environmental Enforcement, as of Oct. 27, 914,811 b/d of crude output, or 55.35% of the US Gulf's crude capacity, had been taken offline and 25% of the region's platforms and rigs, or 157 facilities, had been evacuated.

As MRC wrote before, Chevron, Shell, BP, BHP, Murphy Oil and Equinor confirmed that they had shut down platforms and production ahead of the storm, with BP and Chevron among producers shutting-in all of their operated platforms, S&P Global Platts reported earlier.

We remind that Royal Dutch Shell plc. said earlier this month that its petrochemical complex of several billion dollars in Western Pennsylvania is about 70% complete and in the process to enter service in the early 2020s. The plants costs are estimated to be USD6-USD10 billion, where ethane will be transformed into plastic feedstock. The facility is equipped to produce 1.5 million metric tons per year (mmty) of ethylene and 1.6 mmty of polyethylene (PE), two important constituents of plastics.

Ethylene and propylene are feedstocks for producing 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, PP, PE, LLDPE, crude and gaz condensate, PP random copolymer, propylene, ethylene, petrochemistry, BP Plc, Chevron, Shell, Russia, USA.
Category:General News
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