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Crude oil futures extend losses in Asia on fears of OPEC+ disunity, stronger dollar

July 08/2021

MOSCOW (MRC) -- Crude oil futures extended overnight losses during mid-morning Asian trade July 8 as the release of bullish American Petroleum Institute data failed to lift market sentiment, amid fears of a breakdown in OPEC+ cooperation, while a stronger US dollar providing further headwinds for prices, reported S&P Global.

At 11:06 am Singapore time (0306 GMT), the ICE September Brent futures contract was down 20 cents/b (0.27%) from the previous close at USD73.23/b, while the NYMEX August light sweet crude contract was down 31 cents/b (0.43%) at USD71.94/b. The Brent and NYMEX light sweet crude markers had fallen 1.48% and 1.59% overnight to settle at USD73.43/b and USD72.20/b, respectively.

Market analysts attributed the downslide to concerns that the OPEC+ agreement could break down after the producer group cancelled its July 5 meeting before agreeing on an increase in production quotas August onward.

The fears were kindled by media report, which said that the UAE could raise output outside of the OPEC+ agreement, with analysts saying such a move could prompt other members to follow suit in the ensuing battle for market share. The UAE had earlier, during OPEC+ negotiations, objected to Saudi Arabia's plan to tie the production increases to a lengthening of the supply management pact through to the end of 2022, insisting that its baseline production level from which its quota is determined be raised first to reflect its current capacity.

Outside of the OPEC+ saga, oil prices were also weighed down by a stronger US dollar, with the US dollar index trading at 92.77 at 10:56 am, up 0.24% from the previous settle. Analysts said the appreciation of the dollar was driven by signs of strength in the US labor market following the release of the May Job Openings and Labor Turnover Survey, or JOLTS, report.

A stronger US dollar makes dollar denominated assets such as oil more expensive for buyers holding foreign currency, and hence dampens their demand.

OPEC+ concerns and the strength of the US dollar negated the impact of the bullish API data, released late July 7. The API data showed US crude inventories falling by 7.98 million barrels in the week ended July 2, and US gasoline inventories falling 2.74 million barrels. Distillate inventories registered a build, rising 1.09 million barrels.

We remind that as MRC informed 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 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.
Author:Margaret Volkova
Tags:Asia, crude and gaz condensate, Saudi Arabia, USA.
Category:General News
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