After the crude oil market experienced a series of imbalances in supply and demand, the crack price difference of refined oil products dropped to negative values, insufficient storage capacity, and oil prices dropped to negative values at a record high, OPEC+ reduced production on a large scale from the supply side, coupled with the improvement of the global new coronavirus epidemic. , the crude oil market begins to rebalance. The crack price difference of refined oil products has rebounded, crude oil supply and demand have returned to balance, and crude oil inventories have declined slightly. Gasoline has been supported by the peak season, and destocking has been relatively smooth, while distillate fuel oil inventories have remained high. In the second half of the rebalancing of the crude oil market, crude oil and refined oil products are still mainly destocked, and the upward path of oil prices is tortuous.
The demand side is slowly improving
(1) The cracked price difference of refined oil products bottomed out and rebounded
The cracked price difference of gasoline, diesel and heating oil to crude oil bottomed out and rebounded successively. Under the epidemic, “stay at home orders” and blockade measures have reduced transportation and gasoline demand has fallen sharply. The crack price difference between NYMEX gasoline and WTI bottomed out on March 23, falling sharply to -$2.58/barrel; the crack price difference between ICE diesel and Brent hit the bottom on March 23. The bottom time was later than that of gasoline, falling to a low of US$0.93/barrel on May 6; NYMEX heating oil, because winter is the peak seasonal demand season, the cracking spread bottomed later than that of gasoline and diesel, and fell to a low of US$7.24 on May 28. /bucket.
As of August 17, the cracked price differences between gasoline and WTI and heating oil and WTI were US$10.45/barrel and US$9.15/barrel respectively, and they have been around this price difference for 4 consecutive months. Volatility; the diesel to Brent crack price difference is 5.03 US dollars per barrel, and has fluctuated around this price difference for 2 consecutive months. Affected by the epidemic, the demand for refined oil products has weakened, prices have fallen sharply, and the crack price spreads of various refined oil products have also fallen to historical lows. The willingness of refineries to process has declined, resulting in a reduction in the output of various refined oil products and a change in the production ratio of different refined oil products. As demand slowly recovers and the supply and demand of refined oil products play a dual role, the crack price spread rises again.
The picture shows that the cracking price difference of gasoline, diesel and heating oil has fallen to low levels
(2) Refinery processing demand rebounded from low levels
U.S. refinery capacity utilization and gasoline production fell to historical levels After a low level, it gradually recovered. On April 17, U.S. refinery capacity utilization dropped sharply to a record low of 67.6%. As of August 7, the refinery capacity utilization rate increased by 13.4 percentage points to 81%, which is still far behind the five-year average of 95.72% during the same period. Gasoline production fell to a low of 5.818 million barrels/day on April 3. It has now rebounded by 3.782 million barrels/day to 9.6 million barrels/day. The gap with the average of 10.1516 million barrels/day in the same period of five years has narrowed significantly, mainly due to the The U.S. has resumed work and production and summer is the peak season for demand, and production has recovered relatively quickly. The decline in demand for refined oil products has caused crack spreads to fall to historical lows, reducing refinery willingness to process, and at the same time, processing demand has declined. As demand recovers, the crack price spread of various refined oil products rebounds, and refinery operating rates and refined oil output rebound from low levels.
Crude oil demand fell most severely in April. As the crack spread of refined oil products rebounded, refinery operating rates and processing volumes rebounded. In July, the processing volume of U.S. refineries was 14.96 million barrels/day, an increase of 780,000 barrels/day from the previous month, and there was still a gap of 2.74 million barrels/day compared with the same period last year; the processing volume of European refineries was 9.01 million barrels/day, an increase of 0.57 million barrels/day from the previous month. barrels/day, a year-on-year decrease of 1.65 million barrels/day. The seasonal characteristics of the processing volume of U.S. refineries are relatively obvious. From February to August, the processing volume of refineries should gradually increase. However, affected by the epidemic, the processing volume of refineries fell sharply counter-seasonally from February to April. As the epidemic situation gradually improves, demand for refined oil products gradually recovers, cracking profits bottom out, refineries are more willing to process, and processing volume also stops falling and rebounds. And according to the refinery processing volume in previous years, it is expected that the refinery processing volume will continue to increase in August. After the autumn maintenance period from September to October, the refinery processing volume will continue to rise.
(3) The refinery adjusts the output of each oil product
Because the crack price difference of each refined oil product falls to a low level at different times, the refinery adjusts the output of each oil product. As the gasoline cracking spread took the lead to fall into negative values, refineries adjusted the production of gasoline and distillate fuel oil, resulting in gasoline output falling sharply to historical lows, while distillate fuel oil output changed little from the previous period. In the week of March 20, the ratio of gasoline to distillate fuel oil production fell to its lowest level of 1.17. With the recovery of gasoline demand and high distillate fuel oil inventories, the production ratio between the two has slowly returned to the previous level. As of the week of August 7, the output ratio between the two has rebounded to 2, consistent with the same period last year.
The picture shows a U.S. refinery adjusting the output of each oil product
Reducing production to ease oversupply
(1) OPEC+ proactively reduces production to bring the oil market back to balance
Saudi Arabia is the main producer of OPEC and is pushing to complete the production reduction agreement. In the 9.7 million barrels/day production reduction agreement, Saudi Arabia reduced production by 2.5 million barrels/day, accounting for more than 25% of the total production reduction. It also cut an additional 1 million barrels/day in June, leading Kuwait and the United Arab Emirates to follow suit and cut production by an additional 80,000 barrels/day. day, 100,000 barrels per day, pushing the implementation rate of OPEC production cuts in June to 112.82%. There are also cases where countries that did not meet the previous production reduction standards still do not comply with the agreement during this large-scale production reduction, such as Iraq.The high point was 263.234 million barrels. Subsequently, gasoline inventories began to fluctuate and decline. As of the week of August 7, gasoline inventories fell by 16.15 million barrels from their highest point to 247.084 million barrels, which was still 17.8532 million barrels away from the average of 229.2308 million barrels for the same period in the past five years. With summer being the peak season for gasoline, supported by demand, it is expected that gasoline will continue to be destocked, and it will take some time before it drops to normal levels for the same period in previous years.
Distillate fuel oil inventories remain high, and attention will be paid to the subsequent pace of destocking. Compared with gasoline, the destocking of distillate fuel oil is extremely difficult. When the crack price spreads of various refined oil products fell to low levels one after another, refineries reduced the proportion of gasoline production, and distillate fuel oil production maintained the pre-epidemic level, with a small decline. After the “stay-at-home order” and blockade measures were relaxed, the characteristics of the peak season for gasoline demand gradually emerged, and the inventory decline was more obvious. Distillate fuel oil is often used to produce heating oil and diesel. The peak season for heating oil is still some time away. The global economy has been greatly affected by the impact of the epidemic. Diesel is used for industrial purposes, and demand recovery is relatively slow. Currently, both crude oil and gasoline are being destocked, while distillate fuel oil inventories still hit a new high of 179.977 million barrels in the week of July 31. Judging from seasonal trends, distillate fuel oil inventories in previous years experienced an accumulation process during the autumn maintenance period from September to October, and then continued to be destocked. Taking into account the above factors, it is expected that the destocking process of distillate fuel oil will be tortuous.
(4) Domestic crude oil warehouse receipt pressure is high
Domestic Crude oil futures inventories are at relatively high levels in history, and warehouse receipts are under great pressure. On August 13, CNPC International Dalian, the domestic crude oil designated delivery warehouse, canceled 500,000 barrels of crude oil warehouse receipts, and crude oil futures inventory fell slightly from a historical high of 45.29 million barrels to 44.79 million barrels. The pressure on warehouse receipts restricts the upward movement of oil prices in the internal and external markets. If the pressure on warehouse receipts is released, the price of crude oil in the internal and external markets will gradually return.
The center of gravity of oil prices will shift upward
In summary, crude oil The market has completed part of the rebalancing process. After the crack spread fell to a historical low, refinery processing demand fell sharply. As the epidemic improved, the demand for refined oil gradually recovered, the crack spread returned to the previous level, and the refinery operating rate and processing volume also gradually recovered. The demand side drove the crude oil market to recover. balance.
OPEC+ has proactively cut production on a large scale for three consecutive months, while the United States has passively reduced production due to falling oil prices, jointly promoting the rebalancing of the oil market from the supply side. Under the dual effects of supply and demand, crude oil has shifted from a severe oversupply to a tight balance. Although OPEC+ will relax the production reduction agreement in the future, considering that demand is also recovering, supply and demand are still in a tight balance, and the gap will be made up by digesting high inventories. .
In the second half of the rebalancing, attention should be paid to the pace of crude oil and refined oil destocking. The rebalancing process still has unfinished inventory removal. Since the cost of floating storage is higher than the monthly difference, oil storage loses economics and inventories begin to decline. Due to the sharp reduction in the proportion of gasoline production by refineries in the early stage and the peak demand season, compared with distillate fuel oil, gasoline destocking was relatively smooth. U.S. commercial crude oil inventories were also destocked slightly, while distillate fuel oil inventories remained high. Considering the peak demand season and During traditional autumn maintenance, it is expected that it will take some time for crude oil and refined oil inventories to return to normal levels for the same period in previous years.
With the improvement of the supply and demand pattern and the continued destocking of crude oil and refined products, in the long run, the center of gravity of oil prices will slowly shift upward. Be wary of the uncertain risks before the US election and the impact of the second epidemic. risk. </p
