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Crude oil futures rangebound as economic impact of pandemic weighs on vaccine optimism

November 24/2020

MOSCOW (MRC) -- Crude oil futures remained rangebound during mid-morning trade in Asia Nov. 23 as market optimism over the pace of development of COVID-19 vaccines was countered by the more immediate impact of the pandemic on economic activity and global demand, reported S&P Global.

At 10:30 am Singapore time (0230 GMT), ICE Brent January crude futures were up 5 cents/b (0.11%) from the Nov. 20 settle at USD45.01/b, while the NYMEX January light sweet crude contract was 5 cents/b (0.12%) lower at USD42.37/b.

The contracts contract rose 5.1% and 5% respectively in the week ended Nov. 20 in a rally driven primarily by vaccine optimism, with speculation the incoming Biden administration was reluctant to impose a nationwide lockdown in the US and the signing of the Regional Comprehensive Economic Partnership among Asia-Pacific nations also boosting sentiment earlier in the week.

However, the focus shifted back to the progression of the coronavirus Nov. 23, with the trajectory of crude prices likely tethered to the market's assessment of the pandemic's impact on the global economy and on energy demand.

"The market will be looking at the upcoming Markit PMI data releases across the European Union, the UK and the US for clues as to how badly the pandemic has hit business activity in major economies," DailyFX strategist Margaret Yang told S&P Global Platts Nov. 23. "This Wednesday's US initial jobless claim figures and EIA crude oil inventories will be closely watched, too," she added.

Other market analysts emphasized the upcoming OPEC and non-OPEC Ministerial Meeting on Dec. 1, which is expected to provide clarity over the OPEC+ alliance's production plan going into 2021. Most market analysts expect the meeting to confirm a three- to six-month extension of the current 7.7 million b/d production cut, but some analysts, encouraged by hints from key figures within the OPEC+ alliance, believe that deeper production cuts could also be announced.

"The broader market is very aware that even the most promising vaccine news will not have a discernible effect on oil demand until at least the second half of 2021. But what will have an immediate impact on the oil market - or rather bring into better equilibrium the balance of supply and demand by drawing down inventory more definitively - is an OPEC quota extension," Axi global chief market strategist Stephen Innes said in a Nov. 23 note.

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).

According 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, excluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
Author:Margaret Volkova
Tags:Asia, Europe, PP, PE, crude and gaz condensate, PP random copolymer, propylene, HDPE, ethylene, medicine, petrochemistry, BASF, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals, Russia, USA.
Category:General News
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