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OPEC+ deal, COVID-19 fears send NYMEX crude plunging for biggest single-day drop since the historic April 20, 2020

July 20/2021

MOSCOW (MRC) -- A new OPEC+ deal to hike production volumes this year and throughout 2022 combined with rising COVID-19 fears and a broad Wall Street selloff sent crude prices plunging July 19 for the biggest single-day drop since the historic April 20, 2020, negative pricing event, reported S&P Global.

Front-month NYMEX WTI plummeted more than 7%, down USD5.39, to settle at USD66.42/b, while ICE September Brent shed USD4.97 to settle at USD68.62/b.

NYMEX August RBOB fell by 14.32 cents to USD2.1104/gal, and August ULSD dropped 12.81 cents to USD1.9852/gal.

The Dow Jones Industrial Average nosedived by more than 900 points during July 19 New York trading as rising fears of the rapidly spreading COVID-19 delta variant triggered a market selloff. Energy futures were doubly shaken by the July 18 OPEC+ deal that not only returns crude production through the rest of 2021, but also throughout 2022. Adding additional tensions, the US and China are clashing over the US and NATO allies accusing China of major cybersecurity hacks.

OPEC+ is striving for a reasonably balanced market by ending its stalemate with the United Arab Emirates, according to energy analyst Bill Herbert of Simmons Energy, but the new deal also allows for Saudi Arabia, Russia and others to push their production volumes above pre-pandemic levels next year.

The deal allows OPEC and its allies to ease production cuts by 400,000 b/d each month starting in August, amounting to a 2 million b/d total increase by the end of the year. The deal also extends the OPEC+ supply management pact to the end of 2022, from its previous expiry of April 2022.

And none of this is occurring in a vacuum since the vast majority of the world remains unvaccinated while the coronavirus delta variant spreads worldwide from Asia to North America.

"The world needs a reality check," World Health Organization epidemiologist Maria Van Kerkhove recently said, arguing the world is moving further away from the end of the pandemic.

New infections have spiked in much of Asia, Europe, Australia and Africa, with Indonesia becoming a major new hot spot, while US COVID-19 cases surged by about 70% last week, fueled by the delta variant.

As MRC informed earlier, China's crude oil imports fell 3% from January to June versus a year earlier, in the first first-half contraction since 2013, as an import quota shortage, refinery maintenance and rising global prices curbed buying. Imports totalled 40.14 million tonnes last month, data released by the General Administration of Customs showed on Tuesday, equivalent to 9.77 million barrels per day (bpd).

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 953,400 tonnes in the first five months of 2021, which virtually corresponded to the same figure a year earlier. High denisty polyethylene (HDPE) shipments decreased. At the same time, PP shipments to the Russian market were 607,8900 tonnes in January-May 2021, up by 33% year on year. Shipments of homopolymer PP and PP block copolymers increased, whereas deliveries of PP random copolymers decreased.
Author:Margaret Volkova
Tags:Asia, Europe, North America, crude and gaz condensate, medicine, Australia, Indonesia, China, USA.
Category:General News
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