MOSCOW (MRC) -- Crude oil futures were lower in mid-morning trade in Asia July 13 ahead of mid-week deliberations by OPEC+ over whether to maintain its current supply cut for another month, and as several countries reported a sharp rise in coronavirus infections, reported S&P Global.
At 11:04 am Singapore time (0304 GMT), ICE Brent September crude futures were down 44 cents/b (1.02%) from the July 10 settle at USD42.80/b, while the NYMEX August light sweet crude contract was 43 cents/b (1.06%) lower at USD40.12/b.
"The record high inventories in the US and a second wave contagion around the globe have added speculation that OPEC+ might yet throw a surprise decision this week by extending the 9.6 million b/d output cuts by a further month, but we think that is unlikely given how prices have almost doubled from lows in April," OCBC analysts said in a note July 13. "In the short term, we expect oil prices to remain within its consolidation phase," they added.
The OPEC+ Joint Ministerial Monitoring Committee will decide July 15 whether to extend 9.7 million b/d production cuts that expire end July by another month.
With major economies showing signs of recovery, sources familiar with the negotiations are indicating that an extension is unlikely, which will see OPEC+ moving ahead as planned to a 7.7 million b/d cut in August.
However, the US has reported more than 60,000 new coronavirus infections a day for the past four days, taking its total number of cases above 3.3 million, according to media reports. Brazil, India and South Africa have also reported an increase in cases, according to the World Health Organization.
The surging number of infections was likely to continue weighing on market sentiment as governments weigh the feasibility of further movement restrictions, clouding the near-term demand outlook.
Elsewhere, Libya, which holds Africa's largest crude reserves, lifted a force majeure on oil loadings July 10, but the Libyan National Army a day later vowed to maintain a blockade until its demands are met.
Crude production in Libya has been reduced to around 70, 000-100,000 b/d in recent months from more than 1.1 million b/d before the blockade was imposed in January. Any short term increase in crude exports from Libya is likely to "add another unwanted level of supply-side uncertainty at an extremely critical point in the oil price recovery phase," AxiCorp chief global markets analyst Stephen Innes said in a note July 13.
As MRC informed before, 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 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.