MOSCOW (MRC) -- Crude oil futures ticked down during midmorning trading in Asia Dec. 7 as the rally spurred by OPEC+ partially extending production quotas tapered off after most of California entered into a lockdown, reported S&P Global.
At 11:02 am Singapore time (0302 GMT), the ICE February Brent contract was down 18 cents/b (0.37%) from the Dec. 4 settle at $49.07/b while the NYMEX January light sweet crude contract was down 18 cents/b (0.39%) at $46.08/b. Both markers rose 2.07% and 1.60%, respectively, in the week ended Dec. 5, with the rally driven by the OPEC+ easing production quotas Dec. 3 by 500,000 b/d in January 2021.
The alliance will set output levels every 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.
However, the sentiment soured Dec. 7 after the reimposition of lockdown measures in Southern California and large parts of the Central Valley on Dec. 5. The restrictions came after intensive care capacity in these regions fell below a 15% threshold, and are expected to remain in place for at least three weeks, according to media reports.
"Some of the shine is coming off the OPEC rally as the reality of Xmas lite sets in with the bulk of Californians, one of the US's biggest road fuel demand states, are set to enter wide-sweeping new virus lockdowns," said Stephen Innes, chief global market strategist at AxiTrader, in a Dec. 7 note.
"Oil being a prompt contract, it does not have the luxury to look through "Grinchy" holiday season-imposed lockdowns, like other forward-looking assets," he added.
Meanwhile, oil prices could also be influenced by news about the US stimulus package, seen by the market as key to injecting life into the ailing US economic picture and shoring up demand for oil.
The increasing agreement in the political sphere that further fiscal response is needed for a US economic recovery portends well for ratification of a US stimulus bill.
"The prospect for another US COVID-19 pandemic stimulus package before end-2020 rose substantially as senior Republican lawmakers warmed to the US$908bn proposal put forth by a bipartisan group of lawmakers as a basis for a deal," UOB analysts said in a Dec. 7 note.
"House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer have already endorsed using the bipartisan proposal as the basis for negotiations while several Republican senators, including South Carolina's Lindsey Graham, a close ally of Trump, said that it contained elements for an agreement," they added.
As MRC invofmed 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% 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.
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