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MOSCOW (MRC) -- Crude oil futures rose
during mid-morning trade in Asia Feb. 3 after the American Petroleum Institute
reported a large draw in US crude inventories, underscoring the bullish
sentiment being fostered by improved demand-supply fundamentals across the oil
market, reported S&P
Global.
At 10:46 am Singapore time (0246 GMT), the ICE Brent April
contract was up 26 cents/b (0.45%) from the Feb. 2 settle at USD57.72/b, while
the March NYMEX light sweet crude contract was up 27 cents/b (0.49%) at
USD55.03/b.
The rise in oil futures came after API data released late
Feb. 2 showed a sizable 4.26 million-barrel draw in US crude inventories in the
week to Jan. 29. The data also indicated a marginal improvement in fundamentals
for downstream markets, reporting 240,000-barrel and 1.62 million-barrel draws
in US gasoline and distillate inventories, respectively.
The market will
look to more comprehensive inventory data due for release by the Energy
Information Administration later Feb. 3 for confirmation. If the EIA data
validates the API data, oil markets could receive yet another boost.
Oil
markets had already been turning bullish as demand in the physical market ticks
higher and Saudi Arabia's 1 million b/d output cut begins to constrict
supply.
"Oil continues to strengthen today with Brent just shy of USD58/b
before profit-taking set in. Considerable activity in the physical market is
behind the move," said Stephen Innes, chief global market strategist at Axi, in
a Feb. 3 note.
The slow amelioration of the coronavirus pandemic in parts
of the world has inspired further confidence in the demand outlook for
oil.
Analysts noted that both infection and hospitalization numbers in
the US were declining and that the Biden administration was on track to meet its
target of administering 100 million vaccinations in 100 days. China also seems
to have stemmed a coronavirus resurgence that had oil analysts worried in
January, reporting only 25 infections Feb. 2, a one-month low.
"Crude
prices are rallying as the US has turned a critical corner in the fight against
COVID-19... the biggest risk remains a setback in Chinese crude demand and so
far that does not seem to be happening," said Edward Moya, senior market analyst
at OANDA, in a Feb. 3 note.
The market also has its eyes set on the OPEC+
Joint Ministerial Monitoring Committee meeting scheduled for later Feb. 3, which
will provide a preview for the OPEC+ meeting in March, when the alliance is
expected to unveil its production plan going forward.
"The big question
(for the meeting) is how this rapid price rise might open up another potential
can of worms for OPEC as members will want to pump more oil, not to mention US
shale will be eager to step on the production accelerators," Innes
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 ScanPlast report,
Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2%
year on year. Only shipments of low density polyethylene (LDPE) and high density
polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to
the Russian market reached 1 240,000 tonnes in 2020 (calculated using the
formula: production, minus exports, plus imports, exluding producers'
inventories as of 1 January, 2020). |
