MOSCOW (MRC) -- Crude oil futures fell during the mid-morning trade in Asia Jan. 22, as pandemic concerns heightened amid a lack of new drivers, reported S&P Global.
At 10:43 am Singapore time (0243 GMT), the ICE Brent March contract was down 58 cents/b (1.03%) from the Jan. 21 settle to USD55.51/b, while the March NYMEX light sweet crude contract was down 60 cents/b (1.13%) to USD52.53/b. The Brent marker had risen 0.04% to settle at USD56.10/b on Jan. 21, with the NYMEX light sweet crude marker falling 0.34% to USD53.13/b.
After the commotion of US President Joe Biden's inauguration subsided, the escalation of the pandemic once again became the focal point of the market's attention. The UK suffered its worst day of the pandemic in the week of Jan. 17, when the country registered more than 1,800 deaths, while fresh outbreak in multiple Chinese cities also sparked fears that the country could experience another debilitating wave.
Chinese authorities have already imposed mobility restrictions in affected cities, and have called on citizens to refrain from any travel during the upcoming Lunar New Year holidays.
With oil demand from the pandemic-stricken western hemisphere already weak, market analysts fear that tougher and longer lockdowns in China could further exacerbate the situation, and send prices falling.
"The news that China is restricting travel ahead of the Chinese New Year holiday underscores the severity of the recent uptick in infection numbers and concerns about oil demand in the world's second-biggest consumer," said Stephen Innes, chief global market strategist at AXI in a Jan. 22 note. "The spread of [the coronavirus] in China is the most significant demand-side risk in Q1," Innes added.
Meanwhile, the market continued to ruminate over the impact that the Biden administration will have on the oil market. While analysts agreed that the administration's focus on pushing through additional stimulus measures and on containing the pandemic bodes well for oil demand in the near-term, there remained consternation over the administration's green legislative agenda.
"The US oil industry is also bracing itself for a period of upheaval following the inauguration of Joe Biden as President," said ANZ analysts in a Jan. 22 note.
"One of his first moves was to block the Keystone pipeline project. Biden has also said he will look to limit the drilling activity on federal land and waters, possible hindering US shale's growth," they said.
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.
MRC