MOSCOW (MRC) -- Brent crude futures surged above USD70 a barrel for the first time since the COVID-19 pandemic began, while U.S. crude touched its highest in more than two years, following reports of attacks on Saudi Arabian facilities, said Hydrocarbonprocessing.
Brent crude futures for May hit USD71.38 a barrel in early Asian trade, the highest since Jan. 8, 2020, and were at USD70.96 a barrel by 0611 GMT, up USD1.60, or 2.3%. U.S. West Texas Intermediate (WTI) crude for April rose USD1.47, or 2.2%, to USD67.56. The front-month WTI price touched USD67.98 a barrel earlier, the highest since October 2018.
Asian stocks also rose after the U.S. Senate approved a USD1.9 trillion stimulus bill while positive economic data from the United States and China bode well for a global economic rebound. Yemen's Houthi forces fired drones and missiles at the heart of Saudi Arabia's oil industry on Sunday, including a Saudi Aramco facility at Ras Tanura vital to petroleum exports, in what Riyadh called a failed assault on global energy security.
"We could see further upside in the market in the near-term, particularly as the market probably now needs to be pricing in some sort of risk premium, with these attacks picking up in frequency," ING analysts said in a report, noting that this was the second attack this month following an incident in Jeddah on March 4.
RBC Capital's Helima Croft said the latest incident underscored just how dangerous the security environment remains in the region nearly 18 months after the September 14, 2019 Iranian strikes that temporarily took offline half of the kingdom's oil output. Brent and WTI prices are up for the fourth consecutive session after OPEC and its allies decided to keep production cuts largely unchanged in April.
China's crude shipments in the first two months of 2021 are up 4.1% on year after the world's top importer expanded its refining capacity and as its fuel demand continued to grow. Despite fast-rising crude prices, Saudi Arabia's oil minister has voiced doubts on demand recovery.
"The decision to keep quotas unchanged signals the group’s intent to drawdown inventories further, without concern of overtightening the market," ANZ analysts said in a note. "It also suggests they see little threat from rising output elsewhere." However, the energy minister in the world's third-largest crude importer, India, said higher prices could threaten the consumption led-recovery in some countries.
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.
MRC