MOSCOW (MRC) -- Crude oil futures declined in mid-morning trade in Asia Jan. 28, despite a fall in US inventories, as worries over global growth recovery came back to the fore after the International Monetary Fund warned on financial stability risk from vaccine shortages, reported S&P Global.
Now At 11:36 am Singapore time (0336 GMT), the ICE Brent March contract was down 27 cents/b (0.48%) from the Jan. 27 settle to USD55.54/b, while the March NYMEX light sweet crude contract dropped 22 cents/b (0.42%) to USD52.63/b.
The oil market participants grew concerned over slow vaccine distribution and vaccine shortages, which a report by the IMF warned could threaten financial stability. Fears of insufficient supply also exacerbated, as AstraZeneca's coronavirus vaccine shortage caused by production delays was met with insistence by the European Union to honor delivery commitments.
"Oil is down today as fears of the slow pace of vaccine distribution and a shortage in vaccines have exacerbated coronavirus concerns, and have cast a dark cloud over economic recovery," Vandana Hari, CEO of Vanda Insights, told S&P Global Platts on Jan. 28.
"The IMF financial stability report on Wednesday, warning of the risks posed by an inequitable distribution of vaccines, combined with escalating tensions between the EU and AstraZeneca over vaccine delays, has rattled the markets," Hari added.
Meanwhile, on Jan. 27, the Energy Information Administration reported a 9.91 million barrels draw in US crude inventories in the week ended Jan. 22. It was the largest one-week draw since the week ended July 24 and left inventories just 6% above the five-year average, the narrowest supply overhang since early April.
The EIA draw was about 90% larger than the draw reported by the American Petroleum Institute a day earlier and surpassed analyst expectations of a 1.7 million-barrel draw.
The US crude draw, however, failed to significantly lift market sentiment, as the EIA report was not all bullish, showing a 2.47 million-barrel build in US gasoline inventories, with distillate inventories also declining only by a meager 820,000 barrels.
To this, Hari said: "The EIA crude draw did not elicit a significant reaction from the market as it did not necessarily point to improved fundamentals in the market. Rather the draw seems to have partly been caused by a combination of an increase in US exports and a decrease in US imports."
According to data from the EIA, weekly US crude exports jumped 1.1 million b/d over the week ended Jan. 22, while imports declined 981,000 b/d.
Analysts, however, noted that despite uncertainties over the progression of the pandemic and vaccine distribution, the oil market showed remarkable resistance.
"I think 'risk markets' can thank their lucky stars that Saudi Arabia crystal ball outlook was clear as a whistle, and their proactive production cut measure buttressed investors from a more significant meltdown," Stephen Innes, chief global market strategist, said in a Jan. 28 note.
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.
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