MOSCOW (MRC) -- Crude oil futures rose during the mid-morning trade in Asia March 9, as expectations of higher oil demand amid an improved economic climate encouraged buying activity from investors, even as the market recovered from the chaos brought about by an attempted attack on a Saudi oil shipping port, reported S&P Global.
At 11:29 am Singapore time (0329 GMT), the ICE Brent May contract was up by 51 cents/b (0.75%) from the March 8 settle to USD68.75/b, while the April NYMEX light sweet crude contract was up by 41 cents/b (0.63%) to USD65.46/b.
Earlier on March 8, news of an attempted March 7 drone attack on a petroleum storage tank at the heavily protected Ras Tanura port had sent the Brent and NYMEX light sweet crude markers surging, with the front-month Brent contract crossing USD71/b briefly. Prices however came right back down after reports emerged that oil supply had not been affected.
This morning, after the volatility seen on March 8, prices increased, as the market fell back onto the promise of an improved supply-demand equation.
The demand prospect for oil has brightened considerably as COVID-19 infection numbers have fallen in major economies, and as the global economic climate continues to improve. A USD1.9 trillion US stimulus package, which has been approved by the US Senate and is now pending final approval by the US House of Representatives, promises to further expedite the demand recovery for oil.
Meanwhile, supply remains tight as the OPEC+, in its March 4 meeting, decided to largely roll over its March production quotas into April, and therefore keep 8 million b/d of OPEC+ production - or roughly 8% of pre-pandemic supply - off the market for at least another month.
"We have seen what looks like a classic V-shaped recovery in oil prices in the past few months, and that has been prompted by a broader improvement in the economic climate. Fundamentals for oil look good, and in the absence of noteworthy events, we are likely to see oil trending higher," David Lennox, resource analyst at Fat Prophets, told S&P Global Platts on March. 9.
Meanwhile, in inventory data, commercial US crude stocks are expected to have increased 2.7 million barrels to around 487.3 million barrels in the week ended March 5, analysts surveyed by Platts said. The build would leave inventories 3.6% above the five-year average of US Energy Information Administration data, in from 4% the week prior.
The weekly inventory reports from the American Petroleum Institute and the EIA, are due to be released later March 9 and March 10 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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