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MOSCOW (MRC) -- Crude oil futures
dived during mid-morning trade in Asia March 2, as a stronger US dollar eroded
buying sentiment, and as uncertainty over the upcoming OPEC+ meeting continued
to weigh on the market, reported S&P
Global.
At 11:05 am Singapore time (0305 GMT), the ICE Brent May
contract was down 96 cents (1.5%) from the March 1 settle to USD62.73/b, while
the April NYMEX light sweet crude contract fell $1.07/b (1.76%) to
USD59.57/b.
The fall in crude prices was precipitated by a stronger US
dollar, which makes purchasing oil more expensive for buyers using other
currencies. At 10:54 am, the March US Dollar Index futures on ICE was trading at
91.235, up 0.388% from the March 1 settle of 91.036.
Contributing to the
downturn was jitters ahead of the March 4 OPEC+ meeting, which is expected to
offer guidance into the coalition's production plan going forward.
"Crude
oil fell as traders look ahead nervously to the OPEC meeting later this week,"
ANZ analysts said in a March. 2 note.
The coalition has currently taken
out 7.2 million b/d of crude production - roughly 7% of pre-pandemic supply -
and can increase supply by up to 500,000 b/d each month, as per the agreement
struck on Dec. 3, 2020.
The March 4 meeting, however, could potentially
see oil production rising by up to 1.5 million b/d, as Saudi Arabia is also
expected to announce whether it will extend its voluntary additional 1 million
b/d cut, scheduled to end after March.
Analysts believe that given rising
global oil demand, the market can likely absorb a 1.5 million b/d increase in
oil production. However, these analysts have also cautioned that such a large
increase in supply could spook the market, and lead to a downward price
correction.
The meeting may see some contention among coalition members,
some of whom such as Saudi Arabia, remain conservative, with others, such as
Russia, are keen to increase supply given oil's impressive rally.
"Brent
crude has rallied nearly 30% this year as stimulus measures and the vaccine
rollout raised hopes of stronger demand...this could see alliance members once
again turn to the kingdom to provide the bulk of support to the market, even if
others call for higher quotas," ANZ analysts said.
In inventory data,
commercial crude stocks in the US are expected to have increased 1.3 million
barrels to around 464.3 million barrels in the week ended Feb. 26, analysts
surveyed by S&P Global Platts said. The build would put inventories 0.4%
behind the five-year average of US Energy Information Administration data,
opening the first deficit to the average since late March 2020.
The
weekly inventory reports from the American Petroleum Institute and the EIA, are
due to be released later March 2 and March 3, respectively.
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. |
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