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Oil buying fades as risks shift to downside

January 26/2021

MOSCOW (MRC) -- Hedge funds purchased petroleum derivatives for the 11th consecutive week, but the buying impulse that started with the announcement of successful coronavirus vaccines appears to be fading, said Hydrocarbonprocessing.

Hedge funds and other money managers bought the equivalent of 17 million barrels in the six most important petroleum futures and options contracts in the week to Jan. 19, according to data from regulators and exchanges.

Since early November, portfolio managers have purchased a total of 466 million barrels, taking their net holding to 822 million, the highest for a year.

In the latest week, there were small purchases of NYMEX and ICE WTI (+7 million), European gas oil (+6 million), U.S. diesel (+6 million) and U.S. gasoline (+1 million) but small sales of Brent (-3 million).

None of these changes was significant, except the focus on buying gas oil and diesel, which reversed the bias towards crude and gasoline in previous weeks, and suggested some opportunistic relative value-seeking.

The combined net long position across the six contracts is in the 78th percentile for all weeks since the start of 2013 while the ratio of long to short positions is in the 76th percentile. Fund positions therefore appear stretched on the long side, though not yet excessively so, implying there is still room for position building, but risks are now concentrated on the downside.

Bullish positions are most lopsided in gasoline and crude. Positioning remains neutral in diesel and gas oil, which likely explains some of the recent buying interest in those two fuels.

As per MRC, top oil exporter Saudi Arabia has cut supplies of February-loading crude for some Asian buyer by up to a quarter while meeting requirements of at least four others. This comes after Saudi Arabia pledged additional voluntary output cuts of 1 million barrels per day (bpd) in February and March under a deal between the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.

As MRC wrote previously, Formosa Petrochemical Corporation (FPCC) was running its crackers in Taiwan at 100% capacity utilisation in end-December, 2020. The company"s crackers have combined ethylene production capacity of 2.935 million metric tons/year. Meanwhile, FPCC is planning overhaul of the smallest cracker in mid-2021.

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.


mrcplast.com
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, propylene, ethylene, neftegaz, petrochemistry.
Category:General News
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