MOSCOW (MRC) -- Crude prices lack direction Jan. 27 as the market weighed a bullish US crude draw against pandemic-dimmed demand outlooks, reported S&P Global.
NYMEX March WTI settled up 24 cents at USD52.85/b, and ICE March Brent was down 10 cents at USD55.71/b.
US commercial crude inventories declined 9.91 million barrels during the week ended Jan. 22 to a 10-month low of 476.65 million barrels, according to US Energy Information Administration data released Jan. 27. It was the largest one-week draw since the week ended July 24 and left inventories just 6% above the five-year average, the narrowest supply overhang since early April.
The draw far-exceeded American Petroleum Institute data released late Jan. 26 showing a 5.3 million-barrel crude draw over the same period.
The US crude draw sent oil futures higher midday, but the market later gave up these gains amid weakened economic outlooks.
"Oil has been rangebound for the past few weeks and it seems like nothing will change unless something major happens on the COVID front," OANDA senior market analyst Edward Moya said in a note. "Crude prices could surge higher if Europe gets their vaccine rollouts heading in the right direction or tank if virus variants shutdown China and other countries that have been successfully reopening."
NYMEX February RBOB settled down 36 points at USD1.5771/gal, while February ULSD finished up 1.05 cents at USD1.6089/gal.
The number of daily COVID-19 deaths in the US climbed to a new high of 4,205 on Jan. 26, according to New York Times data, but as the number of new cases steadily declines, states have begun easing lockdown restrictions.
New York governor Andrew Cuomo on Jan. 27 announced restrictions on nonessential businesses and indoor dining would be lifted across much of the state. The move comes on the heels of California on Jan. 25 lifting a regional stay-at-home order that affected the vast majority of state residents.
Outside of the US, however, the pandemic situation remained grim. In Europe, countries are considering greater restrictions to curb the spread of the virus, whereas in Asia, demand-side concerns remain heightened following an outbreak in China.
Already, authorities in China have called upon citizens to not travel during the Lunar New Year Holiday, souring sentiment in the oil markets.
"While the general upward direction of travel in the market makes sense, it's difficult for oil traders to make a definitive near-term shift to the next price level higher given the very uncertain near-term demand outlook," surmised Stephen Innes, chief global markets strategist at Axi, in a Jan. 27 note.
US gasoline cracks weakened as stockpiles rose amid an unexpected dip in demand. The ICE New York Harbor RBOB crack against Brent edged down 7 cents to around USD10.16/b in afternoon trading.
Total gasoline inventories climbed 2.47 million barrels to 247.69 million barrels in the week ended Jan. 22, EIA data showed, as implied demand slipped 3.4% to 7.83 million b/d. The counter-seasonal decline left demand nearly 12% behind the five-year average, in line with levels seen earlier this month.
Notably, Apple Mobility data shows that US driving activity was higher for a third straight week last week, climbing nearly 2% from the week prior and up nearly 3% from a late-December nadir. This discrepancy suggests a possible disconnect between actual end user demand and the EIA figures, which are a proxy based on product disappearing from primary sources..
As MRC informed previously, oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, according to an official with International Energy Agency's (IEA) statement.
We remind that the COVID-19 outbreak has led to an unprecedented decline in demand affecting all sections of the Russian economy, which has impacted the demand for petrochemicals in the short-term. However, the pandemic triggered an increase in the demand for polymers in food packaging, and cleaning and hygiene products, according to GlobalData, a leading data and analytics company. With Russian petrochemical companies having the advantage of access to low-cost feedstock, and proximity to demand-rich Asian (primarily China) and European markets for the supply of petrochemical products, these companies appear to be well-positioned to derive full benefits from an improving market environment and global economy post-COVID-19, says GlobalData.
We also remind that in December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on potential investments in Uzbekistan including a major expansion of Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed construction of a new gas chemicals facility. The signed cooperation agreement for the projects includes “the creation of a gas chemical complex using methanol-to-olefins (MTO) technology, and the expansion of the production capacity of the Shurtan Gas Chemical Complex”.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
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