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MOSCOW (MRC) -- Crude oil futures were
rangebound in mid-morning trade in Asia Feb. 10 as improving fundamentals for
crude oil were weighed against concerns of an overheated market, reported S&P Global.
At 10:34 am
Singapore time (0234 GMT), the ICE Brent April contract was up 1 cent/b (0.02%)
from the Feb. 9 settle at USD61.10/b, while the March NYMEX light sweet crude
contract was down 7 cents/b (0.12%) at USD58.29/b.
Crude oil prices
continued to receive support from strengthening current and future demand as the
coronavirus pandemic receded amid vaccine rollouts, with hopes of a swift
economic recovery boosted by an impending US stimulus package, analysts
said.
"COVID infection numbers continue to fall, raising hope that fuel
consumption will improve," ANZ analysts said in a Feb. 10 note, adding that
demand recovery was already visible with Chinese fuel sales in significant
growth mode and Indian demand returning to pre-pandemic levels as car usage
increases.
Furthermore, the American Petroleum Institute's weekly
inventory report released late Feb. 9 estimated US crude inventories fell by 3.5
million barrels in the week ended Feb. 5, above the 2.7 million-barrel decline
estimated by analysts surveyed by S&P Global Platts, and at a level analysts
considered bullish for the market.
The market will look to the US Energy
Information Administration's weekly inventory report due later Feb. 10 for
further clarity on price direction.
"The reported draw estimate from API
was a surprise, and if EIA reports a similar figure later today, it may provide
some support to the market," Warren Patterson, head of commodities strategy at
ING, told S&P Global Platts Feb. 10.
On the supply side, the OPEC+
alliance's commitment to production quotas and Saudi Arabia's additional 1
million b/d supply curb that kicked in Feb. 1 continue to contribute to a
tightening market.
However, concerns that the crude market may have
overestimated the improving fundamentals persist, with some analysts perceiving
oil to be in overbought territory.
The EIA's short term energy outlook
released late Feb. 9 cast a shadow of doubt over the pace of demand recovery,
with the expectation of a rise in global consumption of petroleum and liquid
fuels by 5.4 million b/d in 2021 revised down 0.2 million b/d from the previous
month's forecast.
"The EIA's short-term energy outlook showed the
persistent levels of COVID uncertainty continue to weigh on the demand outlook
for the rest of the year," said Edward Moya, senior market analyst at
OANDA.
Concerns about how long the supply tightness would last were also
weighing on optimistic sentiment.
The current strength in oil prices may
incentivize OPEC+ to increase production at the March 4 meeting, easing some of
the supply tightness in the market, said Stephen Innes, chief global strategist
at Axi, in a Feb. 10 note.
Patterson echoed similar sentiment, saying:
"The rally (in oil) is running out of steam and further upside is limited as
current prices will induce producers in North America to increase drilling
activity."
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, excluding producers'
inventories as of 1 January, 2020). |
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