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Crude climbs amid tightened supply outlooks, easing US lockdowns

January 26/2021

MOSCOW (MRC) -- Crude futures settled higher Jan. 25 amid tightened supply outlooks and easing COVID-19 restrictions in the US, reported S&P Global.

NYMEX March WTI settled 50 cents higher at USD52.77/b and ICE March Brent was up 47 cents at USD55.88/b.

Oil prices had moved higher overnight amid reports of tightened compliance with OPEC+ production quotas. Iraq is slashing oil production to making up for the excess production over its OPEC+ output quota. It will pump 3.6 million b/d this month and next month, the lowest since 2015 and down from 3.85 million b/d in December.

"OPEC remains steadfast in offering support as noted by Iraq's plan to reduce output to the lowest since 2015 to make up for previous non-compliance," TD Securities analysts said in a note.

Meanwhile, the recent resurgence in Libya's crude exports is under threat as the Petroleum Facilities Guard militia group has begun a strike at the Ras Lanuf, Marsa el-Hariga and Es Sider terminals over a salary dispute. Libyan crude and condensate output had surged to around 1.25 million b/d earlier this month, its highest in more than six years.

US commercial inventories are expected to have declined 1.7 million barrels to around 484.9 million barrels last week, according to analysts surveyed by S&P Global Platts Jan. 25. The counter-seasonal draw down would leave stockpiles around 8% above the five-year average of US Energy Information Administration data, in from 9.3% the week prior and marking the narrowest supply overhang since late November.

NYMEX February RBOB settled 1.24 cents higher at USD1.5611/gal and February ULSD climbed 1.79 cents to USD1.5939/gal.

Against this backdrop the market was also weighing mixed demand signals. In China, a new outbreak of coronavirus in several cities has sparked fears that the country could experience another wave of the pandemic. The local governments have imposed mobility restrictions in the affected cities, including Beijing, and urged citizens to refrain from travel during the upcoming Lunar New Year holiday.

But in the US signs that a post-holiday surge was slowing prompted some states to ease restrictions. California on Jan. 25 lifted a regional stay-at-home order that affected the vast majority of state residents. New York Governor Andrew Cuomo said Jan. 25 said that the state is planning to ease some restrictions amid a slowdown in new cases.

The easing of pandemic restrictions could add a tailwind to already upward trending US gasoline demand, which typically shows a steady climb toward an early March peak, according to EIA data. Apple Mobility data shows that US driving activity was higher for a third straight week last week, climbing nearly 2% from the week prior and up nearly 3% from a late-December nadir.

The front-month ICE New York Harbor RBOB crack versus Brent rallied to USD9.57/b in afternoon trading, on pace for the strongest close since mid-July.

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 Uzbekneftegazs 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.
Author:Margaret Volkova
Tags:PP, PE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, gas processing, petrochemistry, Gazprom neft, Sibur Holding, Shurtans Gas-Chemical Plant, China, Libya, Russia, USA, Uzbekistan.
Category:General News
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