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Crude futures fall as COVID-19 pandemic concerns mar bullish economic outlook

April 20/2021

MOSCOW (MRC) -- Crude oil futures slipped during mid-morning Asian trade April 19, as concerns on the COVID-19 pandemic front pulled the market back after it ended higher last week on bullish data releases and improved demand forecasts, reported S&P Global.

At 10:55 am Singapore time (0255 GMT), the ICE Brent June contract was 20 cents/b (0.28%) lower than the April 16 settle at USD66.57/b, while the May NYMEX light sweet crude contract was 11 cents/b (0.17%) lower at USD63.02/b.

COVID-19 cases in key European economies, such as Germany and France, remain elevated, while analysts expressed further concerns over the rise in case numbers in India and Japan. India reported a record high 261,394 cases on April 17, latest data from John Hopkins University showed. The data also showed that cases in Japan have crept up to 4,802 by April 17, the highest on record since late January.

"There is no real conviction in the market that the end of the pandemic is near, and that is limiting the upside for oil," David Lennox, resource analyst at Fat Prophets, told S&P Global Platts on April 19.

"After positive economic data releases forced a rally in oil prices last week, the market has grown cautious, and is now looking over its shoulder," he added.

In the week ended April 16, the June contract for Brent had edged 5.91% higher to settle at USD66.67/b on April 16, whereas the May contract for NYMEX light sweet crude rose 6.42% to USD63.13/b. Last week's rise came on the back of a confluence of bullish factors, including signs of improved economic conditions in oil-consuming behemoths, namely the US and China, an improvement in OPEC's and the International Energy Agency's demand outlooks, and a rapidly weakening US dollar.

A rebound in economic activity in the US and China, as demonstrated by a slew of data released last week, is expected to be accompanied by an increase in oil and energy demand. These effects are noted in the market, with ANZ analysts referencing the Department of Transportation's data in an April 19 note, which stated that New York City's toll traffic is set for its busiest April in seven years.

ANZ analysts also noted strong oil demand in China as its National Bureau of Statistics' April 16 data showed a 17.8% year-on-year growth in crude throughput in Q1 to 14.17 million b/d. Market sentiment had also received a boost last week when OPEC and the IEA raised their 2021 crude oil demand forecast by 190,000 b/d and 230,000 b/d from their previous forecasts, respectively.

While the US dollar weakness pushed the market higher last week, an appreciation in the dollar this morning has had the opposite effect. At 10:43 am, the June contract for ICE Dollar Index was trading at 91.680, up 0.149% from the previous settle.

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 polyethylene (PE) consumption totalled 356,370 tonnes in the first two month of 2021, down by 9% year on year. Shipments of exclusively low density polyethylene (LDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market was 246,870 tonnes in January-February 2021, up by 30% 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, ethylene, gas processing, petrochemistry, Gazprom neft, Sibur Holding, Shurtans Gas-Chemical Plant, Germany, India, China, Russia, USA, Uzbekistan, France.
Category:General News
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