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Crude oil futures edge higher on bullish US product data, market awaits OPEC+ decision

March 04/2021

MOSCOW (MRC) -- Crude oil futures ticked higher during the mid-morning trade in Asia, with optimism over large draws in US product inventories trickling down into markets otherwise cautious ahead of the OPEC+ meeting, reported S&P Global.

At 10:32 am Singapore time (0232 GMT), the ICE Brent May contract was up by 19 cents/b (0.30%) from the March 3 settle to USD64.26/b, while the April NYMEX light sweet crude contract was up by 10 cents/b (0.16%) to USD61.38/b.

Data released from the Energy Information Administration spurred some optimism in the market as it showed massive declines in US product inventories.

According to the data, US gasoline inventories registered the largest-ever one-week draw reported by EIA in records dating back to January 1992, plummeting 13.62 million barrels to 243.47 million barrel during the week ended Feb. 26. Distillate inventories also recorded their largest draw since January 2003, plunging 9.72 million barrels to 143 million barrels last week.

The bullish data for downstream products took away some attention from the largest-ever one-week build in US commercial inventories, which rose 21.56 million barrels to 484.61 million barrels last week.

"Gasoline demand was the star of the show with a very welcome and colossal draw as the weather improved and road traffic picked up significantly," Stephen Innes, chief global market strategist at Axi, said in a March 4 note.

Meanwhile, the market eagerly awaited the March 4 OPEC+ meeting, after the March 3 OPEC+ Joint Ministerial Monitoring Committee meeting concluded with no recommendation on April crude output levels. Delegates to the meeting said that Saudi Arabia, citing the tenuous nature of oil's recovery, wants to limit any rise in production quotas, while other coalition members want to pump more crude in order to take advantage of oil's bull run.

While there has been speculation in the market that Saudi Arabia would choose not to continue with its unilateral 1 million b/d output cut, S&P Global Platts Analytics said in a recent note that strong OPEC+ quota compliance may convince Saudi Arabia to ease this extra cut in a more phased manner, thereby ensuring that the market remains supported by constrained supply.

"A more gradual rollback of Saudi Arabia's 1 million b/d cut remains a distinct possibility, which could result in tighter markets and signal higher prices as (April loadings) will be needed for increased summer refinery runs," Platts Analytics said.

ANZ research, in a March 3 report, said that while the crude oil futures market has rallied due to progress on the pandemic and US stimulus fronts, the sentiment in the physical markets remains lackluster, and that a full recovery for oil still looks some way off.

"We expect OPEC+ to increase output by 750kb/d in April. This assumes a 500kb/d increase across the group, coupled with a 250kb/d increase from Saudi Arabia," they said.

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.
Author:Margaret Volkova
Tags:Asia, PP, PE, crude and gaz condensate, homopolymer PP, propylene, LDPE, HDPE, ethylene, gas processing, petrochemistry, Gazprom neft, Sibur Holding, Shurtans Gas-Chemical Plant, Russia, Saudi Arabia, USA, Uzbekistan.
Category:General News
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