MOSCOW (MRC) -- Renewed lockdown restrictions in Europe and slower than expected vaccine rollouts are likely to check a global recovery in fuel demand and make OPEC+ oil producers take a cautious stance when the group reassesses output policy this week, reported Reuters.
With its extensive vaccination program, Europe was central to forecasts for demand recovery, especially as many Europeans were hoping for a return to normality by the summer and holidays abroad. That now seems unlikely.
Germany, Europe's biggest oil consumer, has extended its lockdown until April 18 to contain a third COVID-19 wave.
A third of French people have entered a month-long lockdown, and most of Italy, including its capital Rome and its financial centre Milan, have curbs on business and movements.
Lockdowns in Austria, Norway and Switzerland have also been tightened.
When the Organization of the Petroleum Exporting Countries and other oil producing nations, a group known as OPEC+, meet on Thursday, it will be difficult for them to ignore the new lockdowns that most analysts had ruled out for the medium term because of their economic cost.
With oil prices making steady gains earlier this year, OPEC+ had hoped to ease output cuts, but industry sources say those plans in jeopardy.
The renewed lockdowns and problems with vaccination could prevent the recovery of up to 1 million barrels per day (bpd) of oil demand in 2021, Rystad Energy said.
Energy Aspects forecasts European demand to be lower by 800,000 bpd year-on-year in March, but expects the demand to continue recovering, rising by 2.7 million bpd in third quarter versus first quarter 2021.
Globally, Energy Aspects expects August demand to be 8.2 million bpd higher versus March, as summer discretionary driving peaks.
In the United States, the situation has been more stable. The US vaccine rollout has outpaced Europe's, and additional widespread lockdown measures have not been imposed.
The United States is the world's biggest gasoline consumer, and gasoline demand has mostly been rising week on week, Energy Information Administration data shows.
Demand increased in the week to March 19 to 8.6 million bpd, the highest since November except for the first week of March, when demand hit 8.7 million bpd. Traders are waiting for demand this year to hit a sweet spot of 9 million bpd, which will indicate stronger levels of consumption, said John Kilduff, partner at Again Capital LLC in New York.
Gasoline demand in Asia was also stable and there are no renewed widespread lockdowns.
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 ScanPlast report, Russia's estimated PE consumption totalled 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.