MOSCOW (MRC) -- Crude oil futures fell during the mid-morning trade in Asia March 10 as bullishness over OPEC+ rolling over production quotas faded and the American Petroleum Institute reported a large build in US crude stocks, reported S&P Global.
At 11:23 am Singapore time (0323 GMT), the ICE Brent May contract was down by 37 cents/b (0.55%) from the March 9 settle at USD67.15/b, while the April NYMEX light sweet crude contract was 25 cents/b (0.39%) lower at USD63.76/b.
The markers have fallen 2.65% and 3.15%, respectively to date this week as crude oil markets try to find balance after the OPEC+ coalition's surprise decision last week to keep its production steady in April sent prices surging.
"The declines in oil benchmarks this week indicate that the optimism following last week's OPEC+ surprise had been overstretched and the pullback in oil prices was likely warranted based on technical factors, with the 14-day RSI easing away from overbought territory," Han Tan, market analyst at FXTM, told S&P Global Platts on March 10.
"Heightened expectations for the recovery in US oil production, fueled by the (Energy Information Administration's) upward revisions to output levels for this year and next, may also dampen the upside for oil prices," Tan added.
The EIA has revised up its outlook for 2021 production by 100,000 b/d to 11.1 million b/d, and for 2022 production by 500,000 b/d to 12 million b/d, Platts reported earlier.
API data released late March 9 showed a 12.8 million-barrel build in US crude inventories in the week ending March 5. The market reacted in early March 10 trade by pushing oil prices down.
"Oil prices slid further on a build in crude oil inventories of 12.792 million barrels for the week ending March 5," said Stephen Innes, chief global market strategist at Axi, in a March 10 note.
Innes however cautioned against putting too much weight on the API data: "I think it best to interpret the API data with a pinch of salt as it is unclear whether the reported stock build is a laggard effect of (EIA's) large build printed last week, or whether we will see another large build from the EIA (in its report due later March 10)."
The markets took solace in the much more bullish product data from the API, which showed 8.5 million-barrel and 4.8 million-barrel draws in US gasoline and distillate inventories, respectively. These movements in product inventories could be indicative of improved downstream fundamentals, which bodes well for the entire oil complex.
The demand outlook for the oil complex remained bright, and could receive a further boost later March 10 when the US House of Representatives is expected to vote on a Senate-approved USD1.9 trillion stimulus package.
"The build in crude inventories is set to be mitigated by the sustained demand recovery, especially as more US fiscal stimulus rolls out this month and virus-curbing measures are eased," Tan 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 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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