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MOSCOW (MRC) -- Crude oil futures
finished the week sharply lower as a stronger dollar and expectations of rising
global supply continued to pull prices off 13-month highs seen earlier last
week, reported S&P
Global.
NYMEX April WTI settled USD2.03 lower at USD61.50/b and ICE
April Brent declined 75 cents to USD66.13/b.
Notably the Feb. 26 session
was the last day of trading for the April Brent contract, and its prompt expiry
may explain why it showed a relatively modest 1% decline compared with
front-month WTI, which slid more than 3% in the session. The second-month Brent
contract settled down around 2.6% on the day.
Oil price declines
accelerated late in the session as the US dollar tested three-week highs. The
ICE US dollar index was around 0.8% higher in afternoon trading at around
90.905, the highest since Feb. 17 and testing levels last seen in early
February.
NYMEX March RBOB settled down 1.53 cents at USD1.8770/gal and
March ULSD finished 5.01 cents lower at USD1.8565/gal.
Rising US bond
yields as investors priced in expected higher inflation as a result of
government stimulus and a quick economic recovery were driving the dollar
higher. A stronger dollar makes oil more expensive for buyers using other
currencies.
A University of Michigan report released Feb. 26 showed
February consumer sentiment exceeded market expectations but was still down from
January. The report showed inflation expectations of 3.3% for 2021, unchanged
from the previous month's report and the highest since 2014.
Expectations
of an announcement of supply increases from OPEC+ at its next meeting on March 4
and concerns over the scale of spare Saudi capacity were also dragging on oil
prices.
"A return to the originally planned phase 3 would mean an
increase in supply of 2.25 million b/d versus March levels," HSBC's Global Head
of Oil and Gas Equity Research, Gordan Gray, said. "Market fundamentals could
probably just about absorb such an amount in Q2 - if demand recovers enough -
but an announcement of an immediate increase on this scale would risk spooking
the market badly. The most likely outcome is a staged move to phase 3 supply
levels - probably a 0.5 million b/d increase at most in April."
"A
conservative agreement should support prices in the short term but there's still
much more spare capacity in OPEC+ than there is likely demand growth," Gray
said. "Global demand could conceivably be 5-6 million b/d higher in H2 2021 than
in Q1, but this must be seen against around 8 million b/d of OPEC+ supply curbs
still in place."
ICE New York Harbor RBOB crack versus Brent edged up to
USD16.37/b in afternoon trading, just 5 cents under the one-year high seen last
week.
The majority of the plants along Texas's refinery row are in the
process of restarting, these plants are not likely to return to their pre-storm
capacity until mid-March, according to company statements and filings made with
state regulatory agencies detailing emissions events, which go along with plant
restarts.
S&P Global Platts Analytics estimates that about 5.4
million b/d of US Gulf Coast crude capacity was down for the week ended Feb. 26,
out of the region's 9.96 million b/d. Almost all of the outages were in Texas,
which has 5.1 million b/d of crude processing capacity at its coastal refineries
and 742,000 b/d of inland refining capacity, according to US Energy Information
Administration data.
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. |
