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Crude rally extends as COVID-19 vaccine rollouts boost demand outlooks

February 15/2021

MOSCOW (MRC) -- Crude futures climbed to fresh 13-month highs Feb. 12 as oil demand outlooks improved amid signs of progress on US COVID-19 vaccination distribution and a coronavirus stimulus package, reported S&P Global.

NYMEX March WTI settled up USD1.23 at USD59.47/b and ICE April Brent climbed USD1.30 to USD62.44/b.

President Joe Biden announced late Feb. 11 that the US has secured deals to buy 200 million more COVID-19 vaccines from producers Moderna and Pfizer, boosting optimism that a rapid rollout of doses will lead to a robust oil demand recovery in the second half of the year.

"The crude demand outlook looks like it could get its best-case scenario as Americans who want a COVID[-19] vaccine will be able to get it by April," OANDA senior market analyst Edward Moya said in a note. "WTI crude is having an amazing February and given the strength heading into a long weekend, it seems energy traders are hesitant on scaling back."

Meanwhile, the president's USD1.9 trillion coronavirus relief bill continued to advance through Congress, with the House of Representatives Ways and Means Committee passing a USD940 billion portion of the package that included a third round of direct relief payments totaling USD1,400.

NYMEX March RBOB settled up 4.23 cents to USD1.6925/gal and March ULSD climbed 2.68 cents to USD1.7714/gal.

Over the next three years, global oil consumption is set to see the fastest rise in absolute volumes since the 1970s, according to Bank of America's Global Energy Weekly report, released late Feb. 11. Total demand is expected to grow nearly 9 million b/d by 2024, the report said, with 5.3 million b/d of that total being realized in 2021, 2.8 million b/d in 2022, and 1.4 million b/d in 2023.

Notably, the recovery in demand has not been even across sectors and has not improved steadily, either, on a sequential basis, BofA analysts said.

"For instance, mobility dropped across a broad range of regions in December and January, dragging down fuel demand. Meanwhile, segments like petrochemical demand have flourished due to increased use of single-use plastics, while others, like jet fuel, have floundered," the Global Commodity research team wrote in the report.

"This lack of consistency in the oil demand recovery is visible also across different regions and points in time. For example, workplace mobility in Europe has taken a major hit, particularly in the UK ... . Also, after a steady improvement since (first-quarter) 2020, China has seen a sharp drop in the number of flights heading into the Chinese New Year," they added.

In the US, crude inventories have declined more than 17 million barrels since mid-January and are rapidly approaching their five-year average following three weeks of counter-seasonal draws, but European demand outlooks remain under pressure as Germany recently extended its nationwide lockdown to March amid concern regarding the spread of new variants of the virus.

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:Asia, PP, PE, crude and gaz condensate, PP random copolymer, propylene, LDPE, HDPE, ethylene, medicine, petrochemistry, Gazprom neft, Sibur Holding, Shurtans Gas-Chemical Plant, UK, China, Russia, USA.
Category:General News
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