MOSCOW (MRC) -- Crude oil futures extended overnight gains during mid-morning trade in Asia July 6 on fears that oil demand will soon outstrip supply after the OPEC+ coalition, consisting of OPEC members and other oil producers, cancelled its July 5 meeting without ratifying an increase in production for August onward, reported S&P Global.
At 11:16 am Singapore time (0316 GMT), the ICE September Brent futures contract was up 25 cents/b (0.32%) from the previous close at USD77.41/b, while the NYMEX August light sweet crude contract was up 30 cents/b (4%) at USD76.64/b. The ICE Brent marker had settled 1.30% higher July 5 at USD77.16/b, the highest on record since Oct. 29, 2018.
The rise in the international oil markers come after OPEC+ called off their July 5 meeting, which was to mark the third day of official talks, necessitated by the coalition's failure to reach an agreement to ease production cuts from August onwards.
The producer group has reached a tentative agreement to boost collective crude output by 400,000 b/d each month from August to December, but Saudi Arabia wanted to tie the production increases to lengthening the supply management pact through the end of 2022 from the current April 2022 expiry.
The UAE, however, refused to sign off on the extension, insisting that its baseline production level from which its quota is determined be raised first. The UAE's baseline under the current pact, determined by its October 2018 production level, is 3.168 million b/d, but it now claims a capacity closer to 4 million b/d. UAE officials have also highlighted that the country has about 35% of its capacity shut, compared with an average 22% for other members.
Since all OPEC+ decisions must be unanimous, UAE's refusal to sign off on the extension, and by association the production plan, means that the alliance will rely on the fallback agreement, which calls for output quotas to remain flat at July levels. The coalition is withholding 5.8 million b/d of output as of July.
Analysts say that this would lead to an undersupplied market, with oil demand expected to rise as countries around the world emerge from pandemic-related lockdowns.
Meanwhile, as MRC informed earlier, Indian refiners, anticipating a lifting of US sanctions, plan to make space for the resumption of Iranian imports by reducing spot crude oil purchases in the second half of the year. The world"s third-largest oil consumer and importer halted imports from Tehran in 2019 after former US President Donald Trump withdrew from a 2015 accord and re-imposed sanctions on the OPEC producer over its disputed nuclear programme.
Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.