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MOSCOW (MRC) -- Oil prices settled
higher Dec. 3 after an OPEC+ meeting ended with a compromise deal that would see
production rising incrementally after December, reported S&P Global.
NYMEX January WTI
settled 36 cents higher at USD45.64/b, while ICE February Brent was up 46 cents
at USD48.71/b.
Unable to agree on a long-term production plan, OPEC and
its partners will set output levels month to month, aiming to release crude
gradually onto the market without tipping it into a supply glut during an
uncertain recovery from the pandemic, ministers said Dec. 3.
Front-month
ICE Brent last settled higher March 5, while WTI finished just under its most
recent high seen Nov. 25.
The deal calls for the OPEC+ alliance to boost
production by an initial 500,000 b/d in January, after which ministers will meet
monthly to determine whether to adjust that for the month ahead.
NYMEX
January RBOB settled 2.18 cents higher at USD1.2617/gal, while January ULSD
climbed 2.71 cents to USD1.3933/gal.
The OPEC+ group, which controls
roughly half of global crude production capacity, is currently cutting 7.7
million b/d from November 2018 levels. Without a deal, the curbs were scheduled
to ease about a quarter to 5.8 million b/d from January. Now the cuts will scale
back to 7.2 million b/d and then be fine-tuned as market conditions
warrant.
"I think energy markets are content with the modest increase and
I think it will still allow (OPEC+) to provide that goal of getting the market
toward balance," OANDA senior market analyst Edward Moya said. "No one knows how
the crude demand outlook is going to unfold in the next few months depending on
how quickly things get back to normal, so we will probably have monthly
decisions become the norm until the outlook is a lot clearer."
The OPEC+
deal proved more bullish for Brent futures, which are typically considered to be
more exposed to global fundamentals. Year-ahead Brent futures settled at a 99
cent/b discount to the front-month, the widest backwardation in that part of the
curve since Feb. 21.
WTI prices, while also higher, faced headwinds from
the continued threat of pandemic lockdowns across the US. The one-year WTI
spread moved to 64-cent/b backwardation, out from 29 cents/b the session prior,
but near-term contracts remained in contango. Second-month WTI settled at a 15
cent/b premium to front-month and the sixth-month contract settled in a 29
cent/b contango.
A weakened US dollar added further support to crude
prices. The ICE US Dollar Index was holding at around 90.7 in afternoon trading,
on pace to close at the lowest level since April 2018.
Los Angeles
County - the largest in the US - issued a stay-at-home order Dec. 2
restricting non-essential travel and businesses. The order, reminiscent of
broader lockdowns seen in spring, is among the most restrictive seen in the US
in recent weeks as the nation battles to contain a resurgent pandemic.
In
New York City, the seven-day average COVID-19 positivity rate climbed to 5.19%
Dec. 1, prompting mayor Bill de Blasio to warn of an impending second-wave
pandemic. New York Governor Andrew Cuomo Nov. 30 ordered hospitals to take
emergency precautions in the face of rising caseloads and suggested the state
could again implement lockdown measures similar to those this past
spring.
As MRC informed
earlier, 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% 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 PE and PP.
According to MRC's ScanPlast report,
Russia's estimated PE consumption totalled 1,760,950 tonnes in the first ten
months of 2020, up by 3% year on year. Only high density polyethylene (HDPE) and
linear low density polyethylene (LLDPE) shipments increased. At the same time,
PP shipments to the Russian market reached 978,870 tonnes in
January-October 2020 (calculated using the formula: production minus exports
plus imports minus producers' inventories as of 1 January, 2020). Supply of
exclusively of PP random copolymer increased. |
