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Crude oil futures rise on large US stock draw, weakening dollar

January 14/2021

MOSCOW (MRC) -- Crude oil futures rose in mid-morning trade in Asia Jan. 13 on a larger-than-expected draw in US crude inventories and a weakening US dollar, reported S&P Global.

At 10:29 am Singapore time (0229 GMT), the ICE Brent March contract was up 55 cents/b (0.97%) from the Jan. 12 settle at USD57.13/b, while the February NYMEX light sweet crude contract was up 49 cents/b (0.92%) over the same period at USD53.70/b. The markers had risen 1.65% and 1.84%, respectively, on Jan. 12.

American Petroleum Institute data released Jan. 12 showed a 5.821 million-barrel decline in US crude inventories for the week ended Jan. 8. This was larger than expected; analysts surveyed by S&P Global Platts had predicted a 3.8 million-barrel draw.

The API data also showed a 1.876 million-barrel build in gasoline and 4.433 million-barrel build in distillate inventories, but the market ignored these indications of depressed fundamentals in downstream markets.

At 10:29 am, the NYMEX February RBOB contract was trading 1.64 cents/gal (1.06%) higher than the Jan. 12 settle at USD1.5694/gal, and the NYMEX February ULSD contract was up 1.24 cents/gal (0.78%) over the same period at USD1.6091/gal.

Market participants are awaiting the release of more comprehensive inventory data by the US Energy Information Administration slated for later in the day for confirmation of the draw.

Analysts noted that oil prices were also benefitting after the US dollar resumed its downtrend after a brief rally.

"Crude oil prices gained as a weaker USD saw investor appetite improve. The recent strength in the USD has been a headwind for commodity markets over the past week; although underlying fundamentals have helped offset it," ANZ analysts said in a Jan. 13 note.

Amid tightened supply outlooks following Saudi Arabia's 1 million b/d production cut and upward-trending demand projections, the EIA in its monthly Short-Term Energy Outlook released Jan. 12 revised its crude price forecast higher.

The EIA now expects Brent crude prices to average USD52.75/b in 2021, up USD4.25/b from its December forecast, and the WTI price to average USD49.75/b, up USD4/b.

Despite the upward revision, the EIA's forecast remains less bullish than some banks including Citibank, which sees Brent crude averaging USD59/b in 2021 and WTI USD56/b.

As MRC informed previously, global oil demand may have already peaked, according to BP"s latest long-term energy outlook issued in September 2020, as the COVID-19 pandemic kicks the world economy onto a weaker growth trajectory and accelerates the shift to cleaner fuels.

Earlier last 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:Asia, Europe, PP, PE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, BASF, Borealis, BP Plc, LyondellBasell, Sabic, Total Petrochemicals, Russia, USA.
Category:General News
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