For a long time, fuel oil prices have been closely related to crude oil prices. It is precisely because of this that after the Spring Festival, after the COVID-19 epidemic caused demand for crude oil to collapse and prices to plummet, fuel oil also lacked corresponding support on the cost side, and the demand side has always been running at a low level despite the impact of transportation disruptions.
At present, as the domestic epidemic prevention and control situation improves, the market operating rate has increased. What is the current situation of the fuel oil market? What changes has the sulfur limit order brought to the market? With certain uncertainties still existing in the crude oil market, how will its price develop? Recently, in the energy and chemical industry risk management online training (second phase) held in the last issue, market participants conducted in-depth discussions on these issues.
The fuel oil market has been greatly impacted by the global epidemic
mentioned When it comes to the fuel oil market, the shipping market will inevitably come to mind. After all, since 2016, fuel oil consumption has been dominated by marine demand, which accounts for more than 65% of total fuel oil demand. According to a reporter from Futures Daily, shipping not only carries 85% to 90% of the world’s transportation volume, but is also one of the modes of carrying my country’s domestic trade. Its importance to the domestic and even global economies is undoubted.
This year, due to the impact of the COVID-19 epidemic, transportation has been blocked and trade and shipping demand have fallen sharply. Against this background, marine oil consumption has weakened significantly, and marine fuel sales at major ports in the Asia-Pacific region have experienced a significant decline.
Data from the Port of Singapore Authority show that Singapore’s ship fuel supply in February was only 3.88 million tons, a month-on-month decrease of 630,000 tons, or 14%. Data released by my country’s customs show that Zhoushan Port’s marine fuel sales in February were 265,000 tons, a month-on-month decrease of 29%.
Of course, the end of January and the beginning of February coincides with my country’s Spring Festival holiday, so the decline in ship fuel data includes seasonal factors to a certain extent. Kang Yuanning, an energy researcher at Huatai Futures, told a reporter from Futures Daily that if seasonal effects are excluded, marine fuel consumption in Singapore Port and Zhoushan Port would decrease by 140,000 and 57,000 tons respectively.
“Considering my country’s important position in the supply chain, the impact of the epidemic on the shipping industry is global. Major ports have added prevention and control and quarantine procedures for the epidemic. It will also lead to a reduction in shipping efficiency and suppress marine oil consumption in disguise.” Kang Yuanning predicts that the demand for marine oil will decrease by about 2 million tons in February due to the epidemic.
By March, with the domestic epidemic under effective control, the domestic situation improved. As transportation and residents’ social activities return to normal and companies resume work and production in an orderly manner, domestic fuel oil production and demand have begun to recover.
In fact, as China’s fuel oil export tax rebate business was launched in February, domestic low-sulfur fuel oil production capacity was gradually released. According to Longzhong Information statistics, China’s total bonded low-sulfur marine heavy fuel oil production may reach 540,000 tons in March, a month-on-month increase of 168%. According to data from the National Bureau of Statistics, my country’s total fuel oil production in March was 2.422 million tons, a year-on-year increase of 22.3%. Among them, the supply of low-sulfur fuel oil has increased significantly as domestic refineries started large-scale production of low-sulfur ship fuel. Fan Chunhua and Wu Mengyang, energy and chemical analysts at Guosen Futures, mentioned in a recent report that Sinopec’s total production of low-sulfur fuel oil reached 327,000 tons in March, a month-on-month increase of 390%. As for PetroChina, supply also reached 104,000 tons, a month-on-month increase of 91%.
At the same time, the increase in domestic resource supply has also significantly reduced the cost of ship fuel supply in the bonded area, making the price more competitive. In particular, under such circumstances, the price of low-sulfur oil at Zhoushan Port, the leader in my country’s bonded ship oil supply industry, is gradually approaching that of Singapore. Affected by this, Zhoushan’s ship fuel sales rebounded sharply in March, supplying 354,500 tons of fuel, a month-on-month increase of 34%.
However, the good times did not last long. As the epidemic spread rapidly around the world, overseas production and trade activities were affected, and global shipping came under significant pressure under such circumstances.
Recently, Steve Gordon, global head of Clarkson Research, publicly stated that as the impact of the epidemic on the global economy deepens, it is expected that seaborne trade may shrink by 5% in 2020, which is the highest rate in the past 35 years. The biggest drop in years. Seaborne trade is likely to decline on a scale not seen since the catastrophic recession of the mid-1980s. In addition, Esben Poulsson, chairman of the International Chamber of Shipping (ICS), also predicts that global container shipping volume may drop by another 30% in the next few months.
Under such circumstances, AlixPartners, an internationally renowned consulting firm that specializes in providing corporate restructuring and financial advisory, recently stated that as the global economic outlook worsens, ocean carriers’ There is a possibility that the risk of bankruptcy will increase to some extent. In fact, recent media information stated that AlixPartners has adopted a system called “Altman Z score” to assess the possibility of bankruptcy of shipping companies. Research shows that shipping companies are facing the highest risk of bankruptcy in ten years.
In addition, the current contradiction in the entire oil market has evolved from a product glut caused by consumption downturn to a problem of gradual occupation of storage capacity. While onshore storage tank space is tight, more and more More and more cruise ships are being used to store oil products that have nowhere to put them. “While pushing up freight rates, it also suppresses the flow of arbitrage ships. For consuming areas like the Asia-Pacific, this is equivalent to tightening supply and delaying the accumulation of inventory.��Singapore (even sometimes cheaper than Singapore), while the price of high-sulfur fuel oil is much more expensive than in Singapore. As a result, the low-high-sulfur price difference of fuel oil in my country is now far lower than that of Singapore. The low-sulfur price difference of my country’s fuel oil It has even narrowed to extremely low levels. Gu Shuangfei believes that the future demand for high-sulfur fuel oil is not optimistic.
In addition, Pan Xiang added that although countries such as Saudi Arabia and Russia will reduce the production of heavy crude oil in the future, the contradiction between the lightening of the crude oil market may deepen again, driving refineries to Preference for high-sulfur fuel oil rises. However, it should be noted that the more important factor that has led to the recent decline in refinery demand for high-sulfur fuel oil is the decrease in overall refinery operations. Until the epidemic is effectively controlled and refined oil consumption rebounds significantly, global refinery operations will be forced to remain low. , the feed demand for crude oil/fuel oil will also continue to be suppressed. Therefore, he believes that even after OPEC+ implements production cuts, refinery demand for high-sulfur fuel oil will be difficult to rebound decisively. </p