MOSCOW (MRC) -- Oil prices jumped on Tuesday, with U.S. crude hitting its highest since 2014 and Brent futures climbing to a three-year high, after the OPEC+ group of producers stuck to its planned output increase rather than raising it further, said Hydrocarbonprocessing.
On Monday, OPEC+ agreed to adhere to its July pact to boost output by 400,000 barrels per day (bpd) each month until at least April 2022, phasing out 5.8 MMbpd of existing production cuts.
U.S. West Texas Intermediate (WTI) oil closed up USD1.31, or 1.7%, at USD78.93 a barrel. During the session it surged more than 2% to as high as USD79.48, the most in nearly seven yrs. Brent crude settled up USD1.30, or 1.6%, at USD82.56. Earlier, Brent hit a three-yr high of USD83.13. Both contracts extended gains made on Monday, when they each rose more than 2%.
"The market is realizing we are going to be undersupplied for the next couple of months and OPEC seems to be happy with that situation," said Phil Flynn, an analyst at Price Futures Group in Chicago. Oil prices have already surged more than 50% this yr, adding to inflationary pressures that crude-consuming nations such as the United States and India are concerned will derail recovery from the COVID-19 pandemic.
Late last month, the OPEC+ Joint Technical Committee (JTC) said it expected a 1.1-MMbpd supply deficit this yr, which could turn into a 1.4-MMbpd surplus next yr. Despite pressure to ramp up output, OPEC+ was concerned that a fourth global wave of COVID-19 infections could hit the demand recovery, a source told Reuters a little before Monday's talks.
Rocketing global natural gas prices, which may incentivize some power generators to switch from gas to oil, mean crude prices are likely to remain supported even though there could be a short-term pullback, said Gary Cunningham, director of market research at Tradition Energy.
As per MRC, Russia is expected to have 3.464 million tonnes of primary oil refining capacity offline in October, a weekly estimate based on Refinitiv Eikon data and Reuters calculations showed on Friday, up 9.1% from last week's estimate. That is still be lower than the previous month, with many plants expected to finish maintenance. Expected idled refining capacity for September was estimated at 3.943 million tonnes, down 7.9% from last week's estimate.
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 1,396,960 tonnes in January-July 2021, up by 7% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 841,990 tonnes in the first seven months of 2021, up by 29% year on year. Supply of propylene homopolymers (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of statistical copolymers of propylene (PP random copolymers) subsided.
MRC