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Crude oil futures drop in Asia as supply concerns subsided

September 20/2021

MOSCOW (MRC) -- Crude oil futures moved lower during mid-afternoon trade in Asia Sept. 20 as supply concerns subsided on an increase in the US rig count amid recovery in the Gulf of Mexico, and as investors awaited the US Federal Reserve meeting in coming days for more pricing cues, reported S&P Global.

At 2 pm Singapore time (0600 GMT), the ICE November Brent futures contract was down 39 cents (0.52%) from the previous close at USD74.95/b, while the NYMEX October light sweet crude contract was down 47 cents (0.65%) at USD71.50/b.

"After a fourth weekly gain, crude prices slumped after oil rig counts delivered their biggest increase in a month and as risk aversion sent the dollar higher," said Edward Moya, OANDA's senior market analyst, the Americas, in a note.

Supply woes seem to be easing as Baker Hughes reported the US oil and gas rig count, a gauge of future output, at 512 Sept. 17, adding nine rigs in the past week and taking the total to the highest since April 2020.

Production and refining capacities in the Gulf of Mexico continue to push toward full recovery. The US Bureau of Safety and Environmental Enforcement reported Sept. 17 that 422,078 b/d or 23.19% of the Gulf's oil production remains offline, and 765,540 b/d or 34.43% of gas production - figures that were much improved from last week, when 66.36% of oil production and 75.55% of gas production was offline.

A stronger dollar also placed downward pressure on prices. At 2 pm Singapore time (0600 GMT), the ICE US Dollar Index was trading at 93.295, up 0.128% from the previous close. A stronger dollar results in dollar-denominated assets like oil futures becoming less attractive to investors holding foreign currencies, thus lowering demand for these assets.

The market will be closely watching the US Federal Open Market Committee meeting over Sept. 21-22 for clues on the pace of the Federal Reserve's tapering of its bond buying program. Fed Chairman Jerome Powell signaled last month that it would be appropriate for the tapering to occur by the end of this year, which would buoy interest rates and strengthen the US dollar, putting downward pressure on energy prices.

As informed earlier, Shell said earlier this month it observed damage from Hurricane Ida to its transfer station West Delta-143 offshore facilities in the Gulf of Mexico. West Delta-143 serves as the transfer station for all production from its assets in the Mars corridor in the Mississippi Canyon area of the Gulf of Mexico to onshore crude terminals. Shell said then it was not yet safe to send personnel offshore to learn the full extent of the damage and estimate the effect on production.

We remind that in late August, 2021, US crude stocks dropped sharply while petroleum products supplied by refiners hit an all-time record despite the rise in coronavirus cases nationwide, the Energy Information Administration said. Crude inventories fell by 7.2 million barrels in the week to Aug. 27 to 425.4 million barrels, compared with analysts' expectations in a Reuters poll for a 3.1 million-barrel drop. Product supplied by refineries, a measure of demand, rose to 22.8 million barrels per day in the most recent week. That's a one-week record, and signals strength in consumption for diesel, gasoline and other fuels by consumers and exporters.

We also remind that US crude oil production is expected to fall by 160,000 barrels per day (bpd) in 2021 to 11.12 million bpd, the US Energy Information Administration (EIA) said in a monthly report, a smaller decline than its previous forecast for a drop of 210,000 bpd.
Author:Margaret Volkova
Tags:Asia, crude and gaz condensate, propylene, ethylene, petrochemistry, Shell, USA.
Category:General News
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