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MOSCOW (MRC) -- Crude oil futures
strengthened during mid-morning trade in Asia Feb. 9, as expectations of a
return to pre-coronavirus consumption patterns amid the abating crisis and hopes
of an upcoming US stimulus package lifted demand sentiment. The production curbs
by OPEC+ along with lower year-on-year US shale production has tightened supply,
providing yet another boost to the international crude markers, reported S&P Global.
At 11:00 am Singapore
time (0300 GMT), the ICE Brent April contract was up 61 cents/b (1%) from the
Feb. 8 settle to USD61.17/b, while the March NYMEX light sweet crude contract
was up 52 cents/b (0.9%) to USD58.49/b.
The front month ICE Brent crude
futures contract hurtled past the USD60/b milestone for the first time in a year
as fundamentals improved on both the demand and supply side.
According to
analysts, signs of recovering demand could be seen across the globe, with
Chinese imports at a six-month high last week, Indian demand returning to
pre-pandemic levels amid increased car use, and the US becoming the largest
buyer of its domestic crude in January.
"Optimism is high that vaccine
rollouts will have key parts of the global economy's return to normal," Edward
Moya, senior market analyst at OANDA, said in a Feb. 9 note.
Along with
vaccinations, the demand sentiment has been boosted by rising hopes of a
stimulus package in the US, analysts at ANZ said in a Feb. 9 note.
Supply
side restraint from oil producers in both the OPEC+ alliance and the US has also
contributed to the bull run in the oil markets, analysts said.
"The
supply side of the oil equation is not at risk as the Saudis have taken that
risk off the table for the next couple of months and as US shale producers'
output is almost 20% less than last year," Moya said.
Analysts at ANZ
echoed a similar sentiment, adding that total rig count in the US remains 60%
below levels seen prior to the pandemic, demonstrating a reluctance to increase
drilling activity.
However, some analysts remained cautious of the
optimism surrounding oil markets, warning that it may have overestimated the
effect of the improving fundamentals.
"Oil is surging on a combination of
supply constraints and rising demand (both current and anticipated), [but] a
word of caution is due as both the WTI and Brent markets are well in thick of
overbought territory," Stephen Innes, chief global markets strategist at Axi,
said in a Feb. 9 note.
Energy producers have increased their downside
risk cover as they remain slightly skeptical of the recent uptrend in crude
prices, and retail investors expect prices to correct downwards in the near term
despite being bullish in the long term, according to S&P Global Platts
Analytics.
Meanwhile, market participants are looking for fresh cues on
the supply outlook in the upcoming weekly inventory reports from the American
Petroleum Institute and the US Energy Information Administration, due later Feb.
9 and Feb. 10, respectively.
Commercial crude stocks are expected to have
declined 2.7 million barrels to around 473 million barrels last week, analysts
surveyed by Platts said, leaving them just 3% above the five-year average of US
Energy Information Administration data; the narrowest surplus since the week
ended April 3, 2020.
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). |
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