MOSCOW (MRC) -- Crude oil futures traded lower in mid-morning trade in Asia Wednesday, stepping back from a 10-week high hit overnight, on growing geopolitical tensions between the US and China, reported S&P Global.
At 10:10 am Singapore time (0210 GMT), ICE Brent July crude futures fell 36 cents/b (1%) from Tuesday's settle at $35.81/b, while the NYMEX July light sweet crude contract was 46 cents/b (1.34%) lower at USD33.89/b.
"Optimism nestled within the markets at the start of the week, carried by reopening hopes, though fresh aggravating news on US-China relations appears to be changing the mood going into midweek," IG market strategist Pan Jingyi said in a note Wednesday.
Crude futures hit 10-week high Tuesday, amid hopes the continued reopening of economies could bring balance to oversupplied oil markets in coming weeks.
Nonetheless, oil pared gains amid growing tensions between the US and China over the origins of coronavirus.
Earlier in the week, US President Donald Trump warned that Washington was considering sanctions on China for its crackdown on Hong Kong, according to media reports.
This came after China's announcement at its National People's Congress in Beijing, saying it would pass a national security law on Hong Kong this summer.
"The fact of the matter is that it could remain a bumpy ride in the sessions ahead as the situation evolve," Pan said with regards to Asian markets.
Meanwhile, analysts surveyed by S&P Global Platts are expecting total commercial crude inventories to decline 1.2 million barrels during the week ended May 22 to around 525.3 million barrels.
While this seemed like a third straight week of falling inventory levels, the nationwide surplus to the five-year average is still expected to increase to around 10.7% from 10.1% the week prior, Platts reported.
As MRC wrote earlier, the heads of the world's largest oil and gas producers pledged Tuesday to maintain a strategic focus on producing cleaner energy and helping to mitigate climate change despite reeling from the impact of the coronavirus pandemic on oil and gas prices.
We remind that global oil consumption cut by up to a third in Q1 2020. 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.
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 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 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.