MOSCOW (MRC) -- Crude oil futures were steady during mid-morning Asian trade Oct 13, maintaining overnight losses, as production capacity in the US Gulf of Mexico started to come back online, heightening concerns of a supply glut amid an unimproved demand outlook, reported S&P Global.
At 10.25 am Singapore time (0225 GMT) ICE Brent December crude futures were up 1 cent/b (0.02 %) from the Oct. 12 settle to USD41.74/b, while the NYMEX November light sweet crude contract was up 2 cents/b (0.05%) at USD39.45/b. Both international crude markets had dived 2.64% and 2.88% to settle at USD41.72/b and USD39.43/b, respectively, on Oct. 12, after supply disruptions caused by a Norwegian labor strike and a hurricane in the US Gulf of Mexico were resolved.
In the US Gulf of Mexico, after the dissipation of Hurricane Delta, oil and gas producers have begun resuming production, and have thus far found little serious damage to their infrastructure, S&P Global Platts reported on Oct. 12.
According to data by the US Bureau of Safety and Environmental Enforcement, over 400,000 b/d of offshore crude production was back online as of Oct. 12, after Delta had shuttered 91%, or 1.697 million b/d, of production capacity on Oct. 10.
"The crude oil market was under pressure from easing supply concerns. BHP and Chevron said they would begin restoring operations at the US Gulf oil platforms affect by Hurricane Delta. The storm had shut about 90% of oil production in the gulf, but the region appears to have sustained little damage," an ANZ analyst said in an Oct. 13 note.
On a slightly bullish note, due to the shut-downs necessitated by Delta, analysts surveyed by Platts expect a US commercial crude inventory draw of 2.3 million barrels in the week ended Oct. 9. Such a draw would bring total commercial inventories down to about 490.6 million barrels, putting them only 11.9% above the five-year average of US Energy Information Administration data -- the tightest overhang since May.
Regardless, the upcoming return of barrels from the US Gulf of Mexico could lead to a supply glut in the oil markets, especially since it coincides with Libya's National Oil Corp lifting the force majeure on the Sharara oil field -- the country's largest with a 300,000 b/d capacity -- equivalent to current Libyan production combined.
"The Libyan Oil supply's permanency is proving to be one of the biggest headaches for OPEC and oil bulls alike," Stephen Innes, chief market strategist at AXI, said in an Oct. 13 note.
Meanwhile, the resurgent coronavirus pandemic continues to threaten renewed lockdown restrictions, which will impede global economic recovery and sap oil demand.
Edward Moya, senior market analyst at OANDA, said in an Oct. 13 note: "Energy markets are looking beyond hurricane season and (are) focused on the glut concerns as the demand outlook appears vulnerable to restrictive measures since the northern hemisphere can't get the virus under control before the dreaded winter wave."
As MRC wrote before, Sasol Ltd. said its Lake Charles Chemicals Project in Louisiana remains shut, though no apparent damage to equipment was found following the nearby landfall of Hurricane Delta. While a preliminary assessment is underway, crews also indicated no flooding damage was experienced at the site from the hurricane that hit on Oct. 9, the company said in a reply to questions. Some power supply was lost overnight. “We will resume the coordinated startup sequence of Sasol’s Lake Charles facilities when it is safe to do so,” the company said. “Start-up will depend on the availability of electricity and other feedstocks as well as the restoration process underway from Hurricane Laura.”
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.