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Crude searches for direction amid US stimulus headwinds, weaker dollar

January 27/2021

MOSCOW (MRC) -- Crude oil futures finished a volatile session mixed Jan. 26 as the market searched for direction amid US stimulus headwinds and bullish economic data, reported S&P Global.

NYMEX March WTI settled down 16 cents at USD52.61/b, while ICE March Brent climbed 3 cents to USD55.91/b.

Newly elected US President Joe Biden is facing major hurdles to his USD1.9 trillion stimulus plan in the US Senate, where Democrats are unable to reach an agreement with their Republican counterparts over the size of the bill. With such high hopes placed on looser fiscal policy measures under a new administration, such political impasse has not gone down well with wider financial markets, including oil.

The US House of Representatives delivered to the Senate a single article of impeachment against former-President Donald Trump Jan. 26, setting the stage for a Senate trial that will likely supplant stimulus negotiations for the foreseeable future.

But downward price pressure was limited by a series of strong economic-indicator data and a weaker US dollar. US consumer confidence climbed to 89.3 in January, Conference Board data showed, up from a five-month low 87.1 and exceeding market expectations.

Meanwhile, the International Monetary Fund reported that it now expects global GDP to grow 5.5% in 2021, after a 3.5% contraction in 2020. The 2020 figure has been revised up 0.9 percentage point from the previous forecast issued in October, while the 2021 estimate is a 0.3 percentage point upward revision.

Oil prices will average just above USD50/b in 2021, a more than 21% rise from 2020's depressed level, as the rollout of vaccines and fiscal stimulus programs will help the global economy post a stronger-than-expected recovery from the pandemic, IMF said.

The ICE US Dollar Index was testing two-week lows at around 90.13 in afternoon trading.

Refined product futures finished the session higher. NYMEX February RBOB settled up 1.96 cents at USD1.5807/gal and February ULSD climbed 45 points to USD1.5984/gal.

RBOB cracks continued to rally on the back of easing US lockdowns and expectations of tightened supply. The ICE New York Harbor RBOB crack versus Brent climbed to around USD10.22/b in afternoon trading, on pace for the highest close since mid-June.

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.

Analysts surveyed by S&P Global Platts Jan. 25 expected a 1.2 million-barrel build in US gasoline inventories for the week ended Jan. 22, widening the inventory deficit to the five-year average of US Energy Information Administration data to 2.4%.

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.


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