MOSCOW (MRC) -- Oil prices dipped in early trade on Tuesday, with demand worries due to tighter lockdowns in Europe outweighing relief from vaccination rollouts and concerns about a flare-up of tension in the Middle East, reported Hydrocarbonprocessing.
US West Texas Intermediate (WTI) crude futures fell 16 cents, or 0.3%, to US46.83 a barrel at 0158 GMT, while Brent crude futures fell 20 cents, or 0.4%, to US50.09 a barrel, erasing half of Monday's gains.
London stepped up restrictions requiring bars and restaurants to close, as COVID-19 infection rates continued to rise sharply, which will dent fuel demand in the near term.
Further marring the demand outlook, Italy said it was considering more stringent restrictions over the Christmas holidays, while most stores in Germany have been ordered to shut until Jan. 10, with little prospect of an easing early in the new year.
However vaccination rollouts in the United States, Britain and Canada, which spurred a sharp rally in oil prices last week, continue to keep Brent above USD50.
"You've got demand recovery hopes based on the rollout of vaccinations, but increasing restrictions on the pandemic side," said Commonwealth Bank commodities analyst Vivek Dhar.
OPEC on Monday pared its forecast for the oil demand recovery in 202l by 350,000 barrels per day, due to the persistent impact of the coronavirus pandemic, but said a rapid rollout of vaccines in major economies "provides potential upside for next year's growth forecast."
In a sign of weaker demand, analysts expect data from the American Petroleum Institute on Tuesday and the Energy Information Administration on Wednesday to show that US gasoline inventories rose by 1.6 million barrels last week, while distillate inventories, which include diesel and heating oil, rose by 400,000 barrels.
Oil prices found some support after a fuel transport ship at the Saudi Arabian port of Jeddah was hit by an explosion on Monday, which the energy ministry called a terrorist attack. That followed an attack on two oil wells in Iraq last week.
"When you have the level of tension rising in the Middle East, you build in a bit of a premium in pricing," Dhar said.
As MRC informed previously, global oil demand may have already peaked, according to BP's latest long-term energy outlook, as the COVID-19 pandemic kicks the world economy onto a weaker growth trajectory and accelerates the shift to cleaner fuels.
Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40% in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.
And 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 1,760,950 tonnes in the first ten months of 2020, up by 3% year on year. Only high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased. At the same time, PP shipments to the Russian market reached 978,870 tonnes in January-October 2020 (calculated using the formula: production minus exports plus imports minus producers' inventories as of 1 January, 2020). Supply of exclusively of PP random copolymer increased.