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Crude retreats as demand uncertainty prompts profit-taking

February 12/2021

MOSCOW (MRC) -- Crude oil futures settled lower Feb. 11, retreating from 13-month highs as traders booked profits amid mixed demand outlooks, reported S&P Global.

NYMEX March WTI settled 44 cents lower at USD58.24/b, and ICE April Brent declined 36 cents to USD61.11/b.

The International Energy Agency on Feb. 11 pointed to a tightening oil market this year, despite lowering its estimate of the recovery in global oil demand and seeing improving non-OPEC supply growth.

The Paris-based agency predicts global oil demand will grow by 5.4 million b/d in 2021 to reach 96.4 million b/d, noting this would be around 60% of the volume lost to the pandemic in 2020.

This is the fourth straight month the IEA has lowered its demand outlook, given the challenges the world is having in reining in COVID-19, as it shifted its optimism to the second half of the year.

"Crude prices are taking a moment after the February breakout took prices above levels some analysts thought couldn't be touched until a couple years down the road," OANDA senior market analyst Edward Moya said in a note. "The key for whether the crude rally continues is if we don't see a spike in (COVID-19) cases as restrictive measures are eased."

It was the first down day for front-month WTI since Jan. 29 and for front-month Brent since Jan. 28.

Downside price pressure from the IEA report was blunted after OPEC raised its estimate of 2021 global oil demand from last month, saying growth, especially for industrial fuels, in the second half will be led by positive economic developments supported by "massive stimulus programs."

Demand will average 96.1 million b/d this year, up from 95.91 million b/d forecast last month, OPEC said Feb. 11 in its closely watched monthly market report. The estimated increase of 5.8 million b/d over 2020 was revised down by about 100,000 b/d as H1 projections were lowered due to extended and partially re-introduced lockdowns because of the pandemic. Demand fell 9.7 million b/d in 2020.

S&P Global Platts Analytics takes a more sanguine view, predicting global oil demand will grow by 6.1 million b/d after a contraction of 8.8 million b/d in 2020, as it sees an even quicker recovery.

NYMEX March RBOB settled down 32 points Feb. 11 at USD1.6502/gal, and March ULSD declined 1.64 cents at USD1.7446/gal.

RBOB cracks edged higher as the market clawed back some losses posted during the previous session. The front-month ICE New York Harbor RBOB crack versus Brent was holding around USD13.64/b in afternoon trading, up from USD13.46/b the session prior.

US gasoline stocks rose by 4.3 million barrels the week ended Feb. 5, US Energy Information Administration data showed Feb. 10, including a 3.43 million-barrel increase on the US Atlantic Coast, home of the New York delivery point for NYMEX RBOB futures.

The USAC build pushed stocks 1.4% above the five-year average, snapping a six-week tightening trend that saw inventories fall as much as 3.2% behind average in late January.

Front-month RBOB declined nearly 1% Feb. 10 against a broadly higher oil complex, weighing on cracks.

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