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Crude oil futures up in Asia as JCPOA talks drag and on concerns that stronger demand outpaces increases in supply

June 02/2021

MOSCOW (MRC) -- Crude oil futures were higher during midmorning trade in Asia June 2 as negotiations over the Joint Comprehensive Plan of Action continued to dawdle, and as a rebound in oil demand in China, the US and Europe threatened to outpace impending increases in supply, reported S&P Global.

At 10:50 am Singapore time (0250 GMT), the ICE August Brent contract was up 38 cents/b (0.54%) from the previous settle at USD70.63/b, while the NYMEX July light sweet crude contract was up 35 cents/b (0.52%) at USD68.07/b.

Any resolution on the JCPOA remained far from certain as the fifth and final round of negotiations proceeded in Vienna, putting into question the prospect of increased Iranian oil hitting the market.

Crude oil prices were also supported by a strong demand outlook for regions undergoing economic rebounds, including China, the US and Europe.

The market was particularly exuberant about the demand outlook in the US, where the Memorial Day weekend kick-started the country's summer driving season. Gasoline demand in the US was already on an uptrend even prior to the Memorial Day holiday, with Apple mobility data showing US driving activity averaging 152% of the baseline in the week ended May 28 - marking a second straight week the index has hit a fresh all-time high in records dating back to January 2020.

With rising oil demand in China and the West expected to compensate for curtailed demand in parts of Asia still grappling with elevated COVID-19 infection numbers, and with the prospect of additional Iranian crude still in flux, the OPEC+ coalition decided during its June 1 meeting to proceed with initial plans to relax its output quota by 840,000 b/d in July.

OPEC will convene June 24 and then hold an expanded meeting July 1, with Russia and nine other partners in the OPEC+ supply accord to decide on production quotas for August and beyond.

Despite more OPEC+ crude coming into the market, concerns have emerged that the market is on the cusp of overheating.

"Over the next six months, I see very clearly that there is a strong recovery of oil demand in the US, China, Europe and elsewhere and if OPEC+ sticks to its current policies, we may see a wider gap between supply and demand," International Energy Agency's director Faith Birol told Bloomberg Television in an interview June 1.

In its latest oil market report released in May, the IEA had cautioned that current production plans by OPEC+ meant supply "won't rise fast enough to keep pace with the expected demand recovery, even if a nuclear deal with Iran sees more volumes coming from the OPEC member later this year."

As MRC wrote earlier, Indian refiners, anticipating a lifting of US sanctions, plan to make space for the resumption of Iranian imports by reducing spot crude oil purchases in the second half of the year. The world"s third-largest oil consumer and importer halted imports from Tehran in 2019 after former US President Donald Trump withdrew from a 2015 accord and re-imposed sanctions on the OPEC producer over its disputed nuclear programme.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 576,270 tonnes in the first three month of 2021, up by 4% year on year. Low density polyethylene (LDPE) and high density polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market totalled 410,890 tonnes in January-March 2021, up by 56% year on year. 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, India, Iran, Russia, USA.
Category:General News
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