MOSCOW (MRC) -- Crude oil futures prices fell further Sept. 4, with front-month contracts settling near two-month lows as global demand outlooks dimmed following a mixed US jobs report, according to S&P Global.
NYMEX October WTI settled USD1.60 lower at USD39.77/b, while ICE November Brent was down USD1.41 to settle at USD42.66/b.
US payrolls expanded by about 1.4 million jobs in August, US Labor Department data showed Sept. 4, pushing the unemployment rate down to 8.4%. While the headline jobs figure was in line with market expectations, there were some signs of weakness in the report. About 17% of the monthly job gain was from temporary government hiring for the US Census, and the number of permanent job losses rose 534,000 to 3.4 million, Labor Department data showed.
NYMEX October RBOB settled 2.77 cents lower at USD1.772/gal and October ULSD declined 1.62 cents to settle at USD1.1515/gal.
The labor report may be paradoxically bearish for global markets as it may forestall further US stimulus efforts, analysts said.
"The biggest takeaway right now is that with what we've seen in equities and oil prices, a lot of the historic rebound we saw from negative $40/b or so prices to where we are now, a big component of that was that we had unlimited amounts of stimulus, or at least it felt unlimited, that was getting pumped into the economy," OANDA senior market analyst Edward Moya said. "But now we are seeing unemployment beating (US Federal Reserve) expectations. This means that the Fed was overly pessimistic and that is very, very concerning for risky assets that got propped up by the stimulus trade."
Front-month Brent and WTI last settled lower July 9.
US oil demand remains tepid despite the rebound in labor markets. Refined product demand slid 13% during the week ended Aug. 29, US Energy Information Administration data showed Sept. 4 - the largest one-week fall since the week ended April 3, during the ramp-up of nationwide coronavirus lockdowns. The fall pushed weekly product demand to the lowest since the week ended May 29, and the four-week moving average down to a six-week low of 18.28 million b/d.
The crude oil forward structure has turned significantly more bearish in recent days. The contango between front-month and year ahead WTI contracts opened to $3.72/b Sept. 4, the widest since May 27. The contango in front-to-12th month Brent contracts opened to USD4.22/b, the widest since May 29.
As MRC wrote before, more consolidation was expected in the European refining system post COVID-19 as operators had already been facing flat or falling demand and rising competition from new refineries in Asia, according to delegates at the S&P Global European Refining Virtual Conference Sept. 3. "There will be some consolidation in the refining system in Europe," according to Adi Imsirovic, research associate at the Oxford Institute for Energy Studies.As a result of the coronavirus pandemic, "we have lost 9 million barrels of demand," Imsirovic said, adding the immediate impact for a few simple refineries was that they "are worried about survival".
We remind tha tin 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 overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.