Petrochemical markets shrug at OPEC+ deal, await potential impacts in May

Houston — Petrochemical markets were largely unimpressed with the OPEC+ deal reached over the Easter holiday weekend, as global oil output cuts were not slated to start until May and demand destruction was seen as deeper than the cuts could address, sources said.

"Need to see US producers cut first to see what happens," a US olefins source said.

Under the deal announced Sunday, the 23-country OPEC+ alliance will reduce output by 9.7 million b/d of crude oil for May and June, down from 10 million b/d initially expected, as Mexico was allowed a more generous quota.

On Monday President Donald Trump tweeted that OPEC+ was looking to cut 20 million b/d, though it did not appear to move oil markets, which were seeking more clarity on the agreement reached after Saudi Arabia ended the four-day stalemate with Mexico.

The market could potentially see up to 20 million b/d, or one-fifth of world oil supply, removed if Sunday's deal were combined with financially forced shut-ins in the US and Canada as well as reductions from Brazil, Norway and others.

NYMEX May WTI closed on Monday down 35 cents at $22.41/b, and ICE June Brent was 26 cents higher at $31.74/b. NYMEX RBOB gasoline futures for May settled Monday at 70.33 cents/gal, up 2.60 cents/gal from Friday.

Some aromatics sources said production cuts and low margins were likely as or more responsible for pressured pricing as crude prices, and it remained to be seen whether demand would rebound.

"Crude price doesn't seem to care," a second olefins source said Monday. However, the source said the deal could be potentially long-tern bullish for crude and natural gas liquids, which would in turn affect olefins.

A downstream polymers source said the lower-than-expected deal was a "little disappointment," but once the cuts are implemented, "that is building some positive scenario that we may be seeing two to three months down the road."

That source added that Sunday's announcement could, "at least psychologically" provide some confidence to skittish buyers on taking positions.