MOSCOW (MRC) -- Brent crude oil rebounded from two days of losses and US futures surged on Wednesday, bolstered by tentative discussions of additional supply cuts from OPEC producers and US inventory builds that were less dire than some anticipated, reported Reuters.
Oil trading has been more volatile than ever in recent days, as the market has become overwhelmed by a growing supply glut and catastrophic declines in demand as governments order people to stay at home, restricting travel and halting daily life, to stop the spread of the coronavirus.
US futures fell deep into negative territory on Monday, closing a record minus USD37.63 a barrel, while Brent touched its lowest level since June 1999 early Wednesday.
As of 1:20 p.m. EDT (1720 GMT), Brent was up USD1.54, or 8%, at USD20.87 a barrel. Earlier in the session, the global benchmark fell to USD15.98, its lowest since June 1999.
US West Texas Intermediate (WTI) crude futures for June delivery rose USD3.09, or 26.7%, to USD14.66 a barrel.
Since the start of the year, Brent has fallen more than 65%, while WTI has dropped around 75%.
The world’s major oil producers, led by the Organization of the Petroleum Exporting Countries and its allies, attempted to wrest control of spiraling inventories by announcing a collective cut of 9.7 million barrels per day in supply in early April.
But those cuts will come too slowly to offset rising inventories, which hit 518.6 million barrels in the United States last week, just 3% off an all-time record, the Energy Department said.
"If storage continues to increase at the end of the day, which seems likely considering all these Saudi barrels knocking at the door, then we are going to get to maximum storage sometime in the not so distant future," said Bob Yawger, director of futures at Mizuho in New York.
Saudi Arabia on Tuesday said it was ready to take extra measures with other producers and Iraq made similar comments. The next formal meeting by OPEC and allies, a group known as OPEC+, is in June.
Even without another formal agreement, decreasing storage capacity and falling demand could force producers to cut more. An OPEC source told Reuters it was "logical" to expect the market to force more cuts on OPEC+ producers.
US crude inventories rose 15 million barrels last week, in line with analysts’ expectations, though some even predicted a build of more than 20 million barrels.
Meanwhile, US gasoline stocks rose by just 1 million barrels, less than expected, while product supplied, a proxy for demand, increased modestly for the first time in weeks.
"It wasn’t the disaster that the market had been expecting," said Phil Flynn, an analyst at Price Futures Group. "There were rays of hope in the report that maybe we’re stabilizing on the demand destruction."
This week the front-month US contract fell below zero for the first time ever ahead of its Tuesday expiry as panicking traders paid customers to take oil off their hands so they would not have to take delivery with nowhere to store the surplus.
Inventories at the Cushing, Oklahoma, delivery hub for WTI are nearly full, at almost 60 million barrels, with much of the rest leased already.
As MRC informed earlier, global oil consumption cut by up to a third. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.
We remind that earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.
We also remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC