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Crude oil futures fall on US crude build, pandemic concerns

November 16/2020

MOSCOW (MRC) -- Crude oil futures fell during the mid-morning trade in Asia Nov. 13, extending overnight losses, after the US Energy Information Administration data showed a large build in US crude inventories, while concerns over the progression of the coronavirus pandemic continued to weigh on the market, reported S&P Global.

At 10:51 am Singapore time (0251 GMT), ICE Brent January crude futures were down 73 cents/b (1.68%) from the Nov. 12 settle to USD42.80/b, while the NYMEX December light sweet crude contract was down 83 cents/b (2.02%) at USD40.29/b. Both markers had fallen 0.62% and 0.80% on Nov. 12 to settle at USD43.53/b and USD41.12/b, respectively.

The downward trajectory of crude prices comes as data from the EIA showed that, amid an unseasonable pullback in refinery demand, commercial crude stocks had climbed 4.28 million barrels to 488.71 million barrels in the week ended Nov. 6. This large build in crude inventories came as a surprise to the market, with analysts having told S&P Global Platts earlier that they were expecting a 3 million-barrel draw in inventories in the same week.

The EIA data was also contrary to the data released by the American Petroleum Institute on Nov. 10, which had earlier boosted market sentiment by showing a 5.147 million-barrel decline in the week ended Nov. 6.

Stephen Innes, chief global market strategist at AXI, said in a Nov. 13 note: "Unequivocally the market needed a comparable draw (from the EIA data as was seen in the API data) to keep the vaccine trade momentum going."

The EIA data was not all bearish, however, as it also indicated improved fundamentals in downstream oil markets, with gasoline inventories having declined 2.31 million barrels to close to a one-year low of 225.37 million barrels, and distillate inventories having declined 5.36 million barrels to 149.29 million barrels, a six-month low.

Additionally, the data showed that total products supplied, EIA's proxy for demand, had climbed 1.82 million b/d to an eight-month high of 20.18 million b/d, with gasoline demand climbing 430,000 b/d and distillate demand rising 290,000 b/d.

However, the bullish aspects of the EIA data release did not make much of an impact on the market, which is growing more anxious over the escalation of the coronavirus pandemic in the US, where states have re-introduced restrictions. COVID-19 infections in Japan reached a new daily high on Nov. 12, according to media reports, while most of Europe remains under some degree of lockdown.

Against the backdrop of the pandemic, the International Energy Agency said in its Nov. 12 report that global oil demand will plunge by 8.8 million b/d in 2020, a downward revision of 400,000 b/d from its previous forecast. This follows the OPEC's downward revisions of oil demand by 280,000 b/d for 2020 and by 580,000 b/d for 2021, made a day earlier.

The IEA said that although vaccines, like the one being developed by Pfizer and BioNTech, may contribute to a recovery in oil demand in the second half of 2021, the near-term outlook remains sombre.

ANZ analysts echoed the above sentiment, as they said in a Nov. 13 note: "The outlook for crude oil demand has darkened because of new pandemic restrictions."

As MRC informed previously, 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).

ccording to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
Author:Margaret Volkova
Tags:Europe, PP, PE, crude and gaz condensate, PP random copolymer, propylene, HDPE, ethylene, petrochemistry, BASF, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals, Russia, USA.
Category:General News
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