Affected by factors such as the severe oversupply in the U.S. oil market, the imminent expiration of contracts, and the decision by Texas to decide whether to cut production, New York oil prices opened lower in early trading on the 20th, continued to fall during the session, accelerated their decline in late trading, and were even rarer at the close. It fell into negative territory, a drop of more than 300%.
-$37.63! New York crude oil futures prices fell into negative territory for the first time
On the 20th, light crude oil for May delivery on the New York Mercantile Exchange that will expire on the 21st Futures prices rarely fall into negative territory. As of the close of the day, the price of light crude oil futures for May delivery on the New York Mercantile Exchange fell by $55.90 to close at -$37.63 per barrel, a decrease of 305.97%. The price of London Brent crude oil futures for June delivery fell by US$2.51 to close at US$25.57 per barrel, a decrease of 8.94%.
Analysts pointed out that in the long term, the imbalance between global oil supply and demand will gradually be reflected in prices. Oil storage facilities are filling up day by day, causing oil prices to fall. In the short term, the May futures contract is about to expire, and investors will transfer their positions to the June contract. Such technical adjustments have also caused May futures prices to fall under pressure. The price of light crude oil futures for June delivery on the New York Mercantile Exchange closed at $20.43 per barrel yesterday.
However, at present, the production reduction agreement recently reached by OPEC and a number of non-OPEC oil-producing countries cannot solve the problem of supply and demand imbalance, and oil prices need to fall further. This will force more oil and gas companies to reduce or suspend production, thereby restoring the balance between supply and demand in the market.
Behind the “negative oil price”: demand avalanche, nowhere to put it
Some analysts believe that due to the epidemic, global demand for crude oil has declined. In addition, traders are worried about spot crude oil storage problems. These factors are the main reasons for the plunge in crude oil futures prices.
The “West Texas Intermediate crude oil” traded on the New York Mercantile Exchange needs to be stored in the largest crude oil storage base in the United States-the warehouse in Oklahoma. Deliveries are taking place in Cushing, yet storage space in Cushing is filling up fast. According to consensus market estimates, Cushing’s current storage capacity has reached 69%. A month ago, this number was only nearly 50%. Some market analysts predict that Cushing will run out of storage space in May.
The 21st local time is the delivery day of the May contract of New York crude oil futures. Traders are worried that there is no place to store spot crude oil, so they sell the May contract to avoid spot delivery, causing the price to collapse. . The price of Brent crude oil futures in London only fell by about 8%. This is because Brent crude oil does not limit the delivery location and can be easily transported and stored by tankers.
Bjonar Tonghajugen, Senior Vice President and Head of Oil Markets at Rystad Energy, said that the problem of global oil supply and demand imbalance has begun It really shows through the price. As crude oil production continues to remain relatively unaffected, oil storage facilities are filling up day by day. There is currently no precise estimate of how much crude oil can be stored globally. Analysts at Platts estimate it at 1.4 billion barrels, with 90% of storage space likely to be occupied by the end of April. The lack of land to store the extracted crude oil may be a big problem in the future.
The deeper reason is that while inventories are growing, demand for crude oil continues to shrink. The International Energy Agency released a report on the 15th predicting that global crude oil demand fell by 29 million barrels per day year-on-year in April, the lowest level since 1995. The report said global crude oil demand will still fall significantly in May and June. The slow implementation of the oil production reduction agreement recently reached by the Organization of the Petroleum Exporting Countries (OPEC) and a number of non-OPEC oil-producing countries, risks in implementation, and the failure of some oil-producing countries to make clear production reduction commitments have continued to put pressure on the market. .
Most market analysts also believe that the recently reached production reduction agreement will not help alleviate the oversupply of crude oil in April, and oil prices need to fall further to force more Oil and gas companies reduce or suspend production, thereby restoring the market to a balance between supply and demand.
Why did the price of crude oil futures in New York rarely fall into negative territory this time? CCTV reporter Xu Dezhi conducted an analysis.
Reasons for the collapse of oil prices:
1. The global spread of the new coronavirus pneumonia epidemic As a result, the demand for crude oil has plummeted, and the recent production reduction agreement reached by the crude oil organization OPEC and Russia is not enough to deal with it, so oil prices have been hovering at historically low levels.
2. From the perspective of the United States, the surge in U.S. inventories has reached aWith a record high, this summer we will face the challenge of running out of oil storage facilities and having “no place to store oil”. Data from the U.S. Department of Energy showed that oil storage tanks in Cushing, Oklahoma, are now 69% full, up from 49% four weeks ago, as U.S. oil storage facilities are filling up rapidly. Under such circumstances, crude oil producers can only cut inventory and reduce production costs by cutting oil production in the next few months and lowering crude oil prices in recent months.
3. Finally, the May U.S. crude oil futures price delivery date is April 21. When the futures contract moves to another month, the price usually jumps.
Three major reasons have caused U.S. crude oil prices to fall into negative numbers for the first time, which means that the cost of transporting oil to refineries or storage has exceeded the cost of the oil itself value.
Where will oil prices go next?
1. A global commodity strategist from a capital company told the U.S. financial media CNBC that the current crude oil market is still in a state of surplus, and it is currently not possible to see any decline in the oil market in the short term. have eased, so we are worried about the near-term oil prospects.
2. Bloomberg quoted analysts as saying that people’s mentality is generally bearish at present, and investors are worried that it will be difficult to solve the large inventory in the short term, so there is a shortage of goods in the market. Sell-off, everyone wants to get rid of the crude oil and cannot find buyers.
3. However, some analysts believe that futures contracts are linked to a specific delivery date. There is no demand for May oil futures contracts as the coronavirus pandemic spreads around the world, so producers are willing to spend money to get rid of this excess crude oil. But after April 21, the June futures price will return to more than 20 US dollars per barrel. After liquidating existing crude oil positions in the coming months, oil prices will return to normal in the long term.
Lv Jianzhong, Vice President of China Petroleum Economics and Technology Research Institute: The impact of the new pneumonia epidemic is different from previous oil price drops. But demand is growing. A careful analysis of the round of oil price declines from 2008 to 2014 to 2016 shows that the demand side is growing. This is due to the financial crisis or the oil price drop caused by the squeeze-out of the oil price bubble. Its sales are No problem, this time is different. This time, both the supply side and the demand side are weak at the same time, and the demand side is in serious crisis. Then everyone on the supply side is engaged in an irrational game. In the end, the price of oil fell sharply, and we actually couldn’t find the market. When we could find the market at that time, when the price of oil was US$100 and US$30 per barrel, its sales did not change significantly, and the market did not shrink.
This time due to the severe shrinkage on the demand side, the oil price fell and rose. In fact, the response of demand to oil price was very insensitive, and there was no correlation between them. Now, if the basic oil price drops to 8 US dollars, it will not increase consumption. Now even if the oil price rises to 50 US dollars, it may still consume such a large amount, because the demand is relatively rigid and is falling rigidly. This production reduction plan is not enough to support the contraction on the demand side.
Han Xiaoping, Chief Information Officer of China Energy Network: At the time when oil prices plummeted, the death toll in the United States exceeded 40,000, and the number of infections exceeded 750,000. If this matter expands further, the production demand of the entire United States may come to a standstill. At this time, it may be meaningless to sell the oil to anyone. When the impact of the epidemic on the entire economy and society will weaken, demand may grow. Even if demand grows, based on the current oil price, it may be difficult for oil prices to exceed US$40. </p
