MOSCOW (MRC) -- Crude oil prices plummeted during the mid-morning trade in Asia Dec. 21, as concerns over a new highly infectious strain of the coronavirus raised fears of tightening lockdown and travel restrictions, reported S&P Global.
At 11:35 am Singapore time (0335 GMT), the ICE Brent February contract fell USD1.70/b (3.25%) from the Dec. 18 settle to USD50.26/b, while the February NYMEX light sweet crude contract was down USD1.54/b (3.13%) at $47.70/b. The fall in these markers has reversed an upward trend that saw both contracts rise by 4.58% and 5.33% on Dec. 18 to settle at USD52.26/b and USD49.25/b, respectively.
Market analysts attributed the steep fall in oil prices in the morning to the emergence of a highly infectious variant of coronavirus called B.1.1.7. The strain emerged in the UK, with the country enacting tougher restrictions to cope with the new strain.
"The new strain of the COVID-19 virus is worrying for the market, as it is believed to be more infectious, and could lead to a host of new travel restrictions, sapping oil demand," Pan Jingyi, market analyst at IG told S&P Global Platts on Dec. 21.
Several European countries, including France, Germany, the Netherlands, Austria and Italy and Belgium have announced travel restrictions pertaining to the UK in order to curb the spread of the virus, according to media reports.
Warren Patterson, head of commodities strategy at ING, told Platts on Dec. 21: "Over the past few weeks we have seen quite a bit of speculative money moving into the market, and the fear of more lockdowns and travel restrictions that this new virus strain has raised is causing some of that speculative money to close their positions."
Meanwhile, amid the coronavirus gloom, reports that a deal over a US stimulus bill worth nearly USD900 billion has been reached among US lawmakers failed to reassure the market, even though such stimulus has long been considered essential to US economic recovery and oil demand.
"Congress needs to do much more, especially with the UK lockdown headlines playing a major factor worrying investors which country is next to get hit with the mutant strain," said Stephen Innes, chief global market strategist at Axi in a Dec. 21 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% 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 1,760,950 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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