MOSCOW (MRC) -- Oil prices were mixed as optimism about the easing of coronavirus-related restrictions reassured markets, although traders remained cautious with storage capacities filling up fast and supply cuts not deep enough to counter falling demand, reported Reuters.
Brent crude rose 78 cents, or 4%, to USD20.77 a barrel at 1338 GMT, following a 6.8% slide on Monday.
US West Texas Intermediate (WTI) crude was down 46 cents, or 4%, at USD12.32 a barrel. The contract plunged 25% on Monday.
"While wild price swings are set to last in the very near term, we see more upside than downside from prices around USD20 per barrel. The oil price should recover in the longer term," said Norbert Rucker, analyst at Swiss bank Julius Baer.
From Italy to New Zealand, governments announced the easing of restrictions, although Britain said its too dangerous to relax a lockdown for fear of a deadly second outbreak. More parts of the United States looked set to restart business.
German retailers sought on Tuesday to persuade the government to let all stores operate normally from May 4, saying the decision to only allow smaller stores to open was confusing for customers.
"While we expect oil demand to modestly recover from the April lows as countries ease some lockdown measures, demand will remain under severe pressure in the near term because of the COVID-19 pandemic," said UBS commodities analyst Giovanni Staunovo.
BP Chief Executive Bernard Looney told Reuters his company expected global oil demand to drop by about 15 million barrels per day (bpd) in the second quarter due to coronavirus-related movement restrictions.
That is more than the 10 million bpd of cuts agreed by the Organization of the Petroleum Exporting Countries, Russia and other allied producers. The reductions are due to be implemented from May 1.
Russian Energy Minister Alexander Novak said on Tuesday oil markets would start balancing out once an output deal took effect, but no significant rise in prices was likely in the near future due to high levels of global storage.
Analysts said part of the WTI decline was due to retail investment vehicles like exchange-traded funds selling out of the front-month June contract and buying into months later to avert massive losses like last week, when WTI fell below zero.
The United States Oil Fund LP (USO), the largest oil-focused U.S. exchange-traded product, said it would further shift its holdings into later-dated contracts.
"The exodus in our view remains motivated by concerns over the saturation of storage capacity at Cushing and the associated risk of negative pricing," Harry Tchilinguirian, global oil strategist at BNP Paribas, told the Reuters Global Oil Forum.
Global storage onshore was estimated to be about 85% full as of last week, according to data from consultancy Kpler.
In a sign of the energy industry’s desperation for places to store petroleum, oil traders are resorting to hiring expensive US vessels to store gasoline or ship fuel overseas, shipping sources said.
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.