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Crude futures flactuate in a narrow range despite economic rebounds, COVID-19 concerns linger

April 16/2021

MOSCOW (MRC) -- Crude oil futures were rangebound during mid-morning Asian trade April 16, as bullish sentiment, bolstered by signs of increasing US and Chinese economic activity, was tempered by the dire coronavirus situation in key economies around the world, reported S&P Global.

At 11:59 am Singapore time (0359 GMT), the ICE Brent June contract was 4 cents/b (0.06%) higher than the April 15 settle at USD66.98/b, while the May NYMEX light sweet crude contract was 2 cents/b (0.03%) lower at USD63.44/b.

Propping up market sentiment are reports that the US economic recovery is well underway, as evidenced by a 9.8% improvement in March retail sales, the largest increase since May 2020, according to data from the Department of Commerce. Additionally, data by the Department of Labor showed that new applications for US unemployment benefits fell to a seasonally adjusted 576,000, the lowest since the pandemic caused mass unemployment in March 2020.

Providing further tailwind to the markets are reports of a strong Chinese GDP growth, which the National Bureau of Statistics quantified at 18.3% in the first quarter of 2021, the fastest year-on-year rate for any quarter on record. On a quarterly basis, the Chinese economy grew at a slower 0.6% in Q1, the data showed.

"The latest economic data out of the US and China point to a global economic recovery that is truly gathering pace and taking meaningful strides into the post-pandemic era, bolstering hopes for oil bulls to reclaim the USD70 Brent handle," Han Tan, FXTM's analyst told S&P Global Platts April 16.

A rebound in economic activity in the US and China portends well for oil, as it is expected to be accompanied by an increase in oil and energy demand. Analysts have noted spillover effects of the economic advance on downstream products demand, specifically gasoline demand in the US.

Optimism due to the economic recovery narrative has also been dulled by a protracted battle with the coronavirus in key oil-consuming countries around the world. Italy, France and Germany, among other European states, remain under lockdown, while the situation in India has analysts particularly worried, as the country reported a record high 200,739 cases on April 14, according to John Hopkins University data.

The market, however, is hopeful of an improvement in the situation in Europe, as vaccination programs in the region are picking up pace.

As MRC informed earlier, 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 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 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.
Author:Margaret Volkova
Tags:Asia, Europe, PP, PE, crude and gaz condensate, PP block copolymer, homopolymer PP, propylene, LDPE, HDPE, ethylene, petrochemistry, Gazprom neft, Sibur Holding, Shurtans Gas-Chemical Plant, China, Russia, USA, Uzbekistan.
Category:General News
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