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Crude oil futures rise slightly on supply disruptions in the Permian Basin

February 17/2021

MOSCOW (MRC) -- Crude oil futures were slightly higher during mid-morning trade in Asia Feb. 16, extending overnight gains, as the ongoing Arctic blast across North America caused supply disruptions, propelling demand for heating fuel higher, reported S&P Global.

At 11.48 am Singapore time (0348 GMT), the ICE Brent April contract was up by 34 cents/b (0.54%) from the Feb. 15 settle to USD63.64/b, while the March NYMEX light sweet crude contract was up 79 cents/b (1.33%) to USD60.26/b.

The cold weather had hit Texas hard, with temperatures falling to their lowest in 30 years, resulting in power outages and disruptions in production as well as refining activities in the Permian Basin.

"Concerns over oil supply disruptions from Texas continue to prop up the market. Cold weather, power outages, and logistical issues have all led to disruptions," analysts from ING said in a Feb. 16 note, adding that as much as 1 million b/d of crude oil production may be disrupted due to the bad weather.

However, analysts noted the supply disruptions are likely to be short-lived, with weather forecasts expecting temperatures to rise after Feb. 18.

Analysts at ANZ said in a Feb. 16 note that the cold temperatures have also increased demand for heating fuel, similar to conditions in North Asia last month.

The winter storm has also affected refineries in the region, with many having to reduce operating rates or shut down completely, resulting in a bullish movement in gasoline futures and product cracks.

At 11.48 am Singapore time (0348 GMT), the March NYMEX RBOB gasoline futures contract was up by 5.80% from the Feb. 15 settle to USD1.7907/b.

"These refinery shutdowns have provided a boost to some of the product cracks as well, with both RBOB and heating oil cracks spiking higher on the back of the news," analysts at ING said.

While the weather conditions in the US exacerbate the prevailing supply tightness for crude oil and prop up prices temporarily, analysts believe there is ample evidence of support in the form of expectations of a speedy economic recovery following vaccine rollouts and an upcoming US stimulus package, as well as supply curtailments by OPEC+ countries, that may result in oil continuing to trade at strong levels.

Analysts at ANZ also noted that while demand is about 8%-9% below pre-pandemic levels, supply constraints are playing their part in balancing the oil markets.

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). Supply of exclusively PP random copolymer increased.


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