MOSCOW (MRC) -- Crude oil futures were trading lower in mid-morning trade in Asia June 12 as a rise in COVID-19 cases in the US clouded the overall outlook for oil demand recovery, reported S&P Global.
At 10:10 am Singapore time, ICE Brent August crude futures were down 58 cents/b (1.50%) from the June 11 settle at USD37.97/b, while the NYMEX July light sweet crude contract was 72 cents/b (1.98%) lower at SD35.62/b.
"A surprise stockbuild in the US last week as well as increasing concerns over a second wave of coronavirus cases in the US have been the main catalysts for oil's slide," OCBC analysts said in a June 12 note.
Bearish sentiment spilled over into early Asia trading after crude settled sharply lower June 11 on concerns a resurgent COVID-19 pandemic would dampen economic recovery.
"The oil markets turned unreservedly defenseless to a post-lockdown uptick in COVID-19 infections in the world's largest oil consuming economy, the humongous US market," AxiCorp's chief global markets strategist Stephen Innes said in a June 12 note.
Around six US states have seen an increase in new COVID-19 cases, including Texas and Arizona, according to media reports. The total number of cases in the US had surged past 2 million as of June 11.
"If a widespread secondary outbreak is confirmed, it will undoubtedly threaten to bring the US economy and global market to its knees once again," Innes added.
On the OPEC+ front, focus remains on supply cut compliance after the alliance agreed on June 6 to extend a record 9.6 million b/d of output cuts through to the end of July.
Several OPEC+ delegates have recently voiced concerns over plans for the group to meet monthly to assess production levels, S&P Global Platts reported earlier.
Meanwhile, the US oil rig count fell by seven on the week to 199, Enverus data showed June 11. This indicated that drilling activity has slowed, but failed to spur an uplift in sentiment.
As MRC wrote previously, OPEC, Russia and allies agreed on Saturday to extend record oil production cuts by one month until the end of July.
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 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 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.