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MOSCOW (MRC) -- Crude oil futures
tumbled during the mid-morning trade in Asia Jan. 18, as rising coronavirus
cases in China raised fresh demand-side concerns, while the spread of mutated
strains of the virus also weighed down sentiment in the market, reported S&P Global.
At 11:10 am
Singapore time (0310 GMT), the ICE Brent March contract was down 45 cents/b
(0.82%) from the Jan. 15 settle to USD54.65/b, while the February NYMEX light
sweet crude contract was down 38 cents/b (0.73%) to $51.98/b. The Brent marker
had fallen 1.59% in the week ended Jan. 15 to USD55.10/b, whereas the NYMEX
light sweet crude marker had ticked up 0.23% to USD52.36/b.
The fall in
oil futures comes as a jump in coronavirus cases in China threatened to derail
crude's demand recovery.
Towards the end of the week to Jan. 16, several
Chinese cities were placed under lockdown to curb the spread of the virus. Even
though the lockdown is due to be lifted by Jan. 19, fears of further
restrictions remain heightened after the country reported over a hundred
COVID-19 infections during each day of the weekend, according to media
reports.
"We are seeing a continuation of the downward momentum from last
week. Oil's rally stalled in second half of last week after the market started
to emerge from under the spell of the surprise Saudi production cut, and started
paying attention to the worsening pandemic situation in the western hemisphere
and the worrying outbreaks in China," Vandana Hari, CEO of Vanda Insights, told
S&P Global Platts on Jan. 18.
Hari further added that, against the
backdrop of the fresh outbreaks, the market took little solace from the
reasonably strong Chinese economic growth data, which may have instead drawn
more attention to China's current struggle with the pandemic.
"It is not
just the outbreaks in China that have rattled the markets, it is also the spread
of three different and more contagious coronavirus strains reported in the UK,
South Africa and Brazil," Hari said.
Despite the escalation of the
pandemic, analysts retained a largely bullish outlook in the medium-term, noting
that oil remains supported by the 1 million b/d cuts from Saudi Arabia, the
vaccine roll-outs and hopes of further stimulus in the US.
"Despite the
pullback in prices last week, the market remains supported by Saudi Arabia's
output cut. Assuming demand growth remains stable, this should see the drawdown
on global inventories rise to 1.1mb/d in Q1," said ANZ analysts in a Jan. 18
note.
Hari agreed, saying: "Majority of the premium from the Saudi cuts
remains intact as 1 million b/d over two months is a substantial reduction in
supply. However with the resurgent pandemic, it remains a two step forward, one
step back situation for now."
As MRC informed
previously, oil producers face an unprecedented challenge to balance supply
and demand as factors including the pace and response to COVID-19 vaccines cloud
the outlook, according to an official with International Energy Agency's (IEA)
statement.
We remind that the
COVID-19 outbreak has led to an unprecedented decline in demand affecting all
sections of the Russian economy, which has impacted the demand for
petrochemicals in the short-term. However, the pandemic triggered an increase in
the demand for polymers in food packaging, and cleaning and hygiene products,
according to GlobalData, a leading data and analytics company. With Russian
petrochemical companies having the advantage of access to low-cost feedstock,
and proximity to demand-rich Asian (primarily China) and European markets for
the supply of petrochemical products, these companies appear to be
well-positioned to derive full benefits from an improving market environment and
global economy post-COVID-19, says GlobalData.
We also remind that in
December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on
potential investments in Uzbekistan including a major expansion of
Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed
construction of a new gas chemicals facility. The signed cooperation agreement
for the projects includes “the creation of a gas chemical complex using
methanol-to-olefins (MTO) technology, and the expansion of the production
capacity of the Shurtan Gas Chemical Complex”.
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. |
