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MOSCOW (MRC) -- Crude oil futures
strengthened during mid-morning trade in Asia Feb. 15 as the demand outlook
brightened on hopes that the coronavirus pandemic is abating and on expectations
of an upcoming stimulus package from the US, reported S&P Global.
The gains are also
buoyed by the tightness in supply from OPEC+ production cuts and supplemented by
disrupted production in the US.
At 10:52 am Singapore time (0252 GMT),
the ICE Brent April contract was up by USD1.26/b (2.01%) from the Feb. 12 settle
to USD63.68/b, while the March NYMEX light sweet crude contract was up USD1.26/b
(2.11%) to USD60.73/b.
The progress made in combating the coronavirus
pandemic globally contributed to the strong outlook for economic recovery across
the broader financial markets, including oil.
"More countries and regions
are easing lockdown measures with vaccine rollouts helping to contain the spread
of the coronavirus," Margaret Yang, strategist at DailyFX, said in a Feb. 15
note.
"A marked decline in daily new infections painted a brighter
outlook of economic recovery and normalization of business activity. A
better-handled pandemic situation, alongside an impending Democratic fiscal
stimulus package, have buoyed reflation hopes and led equity, crude oil and
industrial metals higher," she added.
The US stimulus package, currently
proposed at USD1.9 trillion, is making significant headway in its approval
process, giving market participants hope for a smooth and speedy economic
recovery in the US.
"A risk-on tone across markets continues to benefit
commodity markets...with investors focused on the prospect of US stimulus
measures boosting demand," ANZ analysts said in a Feb. 15 note.
Alongside
bolstered expectations of demand recovery, supply side fundamentals are also
providing support to the market, fueling the continued rally.
The OPEC+
alliance is maintaining supply curbs through the month, with Saudi Arabia
reducing its production voluntarily by an additional 1 million b/d till March,
which is clearing oil surplus in the market, according to
analysts.
Furthermore, the risk of increased production from US shale oil
companies amid rising oil prices has not materialized due to poor weather
conditions in the region, making production difficult and keeping supply in the
global markets tight.
"A barrage of a winter storm raging across the
Permian Basin (is) resulting in crude streaming from those wells to slow or halt
completely according to boots on the ground," Stephen Innes, chief global
strategist at Axi, said in a Feb. 15 note.
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). Supply of exclusively PP random copolymer
increased. |
