MOSCOW (MRC) -- Oil futures settled lower Dec. 22 amid pandemic-dimmed demand outlooks prompted by the spread of more lockdowns across Europe, reported S&P Global.
NYMEX February WTI settled 95 cents lower at US47.02/b and ICE February Brent declined 83 cents to settle at USD50.08/b.
The UK's demand for road fuels and jet fuel is taking a fresh tumble after the country's efforts to contain a new strain of the coronavirus ripple through the European region.
A number of European countries, as well as countries further afield such as India and Russia, suspended all flights and closed their borders to the UK on Dec. 21 after the UK announced details of a new coronavirus strain spreading in the country. France has temporarily halted all UK arrivals and goods flows from ferries and trains.
The UK government on Dec. 20 imposed a tougher lockdown on 17 million people in the southeast of England amid concerns over the potentially more infectious COVID-19 variant.
Front-month Brent slid nearly 2% the day to settle at the lowest since Dec. 11, while WTI was down 1.5% and the lowest since Dec. 14.
NYMEX January RBOB settled down 2.09 cents at US1.3395/gal and January ULSD was 1.58 cents lower at US1.4616/gal.
"Crude prices declined as global lockdowns appear to be a harsh reality for the first quarter," OANDA senior market analyst Ed Moya said in a note. "The crude demand outlook over the next few months is bleak as US hospitalizations are at a record high, a new COVID strain could be spreading across Europe, and as skepticism grows over how quickly people will be willing to get vaccinated."
Brent forward structure slid deeper into contango, with the sixth-month contract settling at a 7 cent/b premium over front month, compared with a 3 cent/b discount on Dec. 21. The sixth-month contract had been in 45 cent/b backwardation to front month as recently as Dec. 10.
Europe's latest round of lockdowns had already removed some 900,000 b/d of road fuel demand last month, according to Rystad Energy. This year, European oil demand is forecast to decline by about 15%, or 1.8 million b/d.
"In the short term, we expect mobility restrictions in the US and Europe introduced in Q4 2020 to mostly spill over into Q1 2021, for which we expect oil demand to average 93.6 million b/d," Rystad said in a note.
Meanwhile, a strengthened US dollar added further pressure to oil prices. The ICE US Dollar Index climbed to a six-session high 90.57 in afternoon trading.
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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