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Crude retreats as pandemic concerns overshadow US stimulus bill

December 29/2020

MOSCOW (MRC) --  Crude futures settled lower Dec. 28 as pandemic-fueled demand concerns overshadowed the positive news of the passing of a US stimulus package, reported S&P Global.

NYMEX February WTI settled 61 cents lower at USD47.62/b and ICE February Brent pulled back 43 cents to be settled at US50.86/b.

Demand recovery outlook continued to face headwinds from the emergence of a more contagious strain of COVID-19. Several countries, including Canada, France, Japan, Spain and Norway, have reported cases of the new strain, and there are now fears that the variant may have been transmitted undetected to other countries, many of which do not conduct genomic sequencing as actively as the UK.

Another coronavirus mutation has been discovered in South Africa, and as a result, other areas like the UK and Hong Kong have banned arrivals from the African nation.

"Thin trading conditions should see oil prices consolidate for the rest of the week, but risks for a dollar rebound and nervousness ahead of next week's OPEC gathering could provide some headwinds," OANDA senior market analyst Ed Moya said in a note.

NYMEX January RBOB settled 1.12 cents lower at USD1.3677/gal and January ULSD finished down 1.1 cents at USD1.4790/gal.

US gasoline inventory builds likely resumed in the week ended Dec. 25 as the Christmas holiday weighed on already-weak driving demand, an S&P Global Platts analysis showed Dec. 28. Total US gasoline inventories are expected to have climbed 2.3 million barrels last week to around 240 million barrels, analysts surveyed by Platts said.

Apple mobility data showed US driving activity in the week ended Dec. 25 was down nearly 3% from the week prior, snapping back-to-back weekly gains in driving demand.

Total commercial crude inventories are expected to have declined 3.8 million barrels to around 495.7 million barrels in the week ended Dec. 25, analysts said. But despite likely drawing for a third straight week, inventories are expected to remain ample at nearly 11% above the five-year average.

Oil futures had rallied earlier in the session after US President Donald Trump on Dec. 27 signed a pandemic stimulus bill, ending several days of brinkmanship with Congress regarding the size of the relief payments and ensuring the continuation of federal unemployment benefits that had expired on Dec. 26.

The passage of the stimulus bill prompted US investment bank Goldman Sachs on Dec. 28 to revise its outlook for first quarter US GDP growth upward to 5% from 3%, according to media reports.

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 DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
Author:Margaret Volkova
Tags:Europe, PP, PE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals, Spain, Canada, Norway, Russia, USA, France, South Africa, Japan.
Category:General News
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