The good news in the crude oil market has just passed one day, and new variables have arisen…
On the evening of April 4, OPEC officially announced that it would postpone the emergency meeting originally scheduled for April 6 to April 9. Then, in the early morning of April 5, Beijing time, news came out in the market that officials from the United States and Canada were discussing using oil tariffs to end the “price war.” According to reports, if Saudi Arabia and Russia cannot quickly reach an agreement to reduce production, the United States will impose tariffs on oil imports from Saudi Arabia and Russia.
Early this morning, US President Trump held a press conference at the White House. Trump said the U.S. economy must restart and did not want to wait for months. Don’t care about OPEC, they are destroying themselves. If there have to be tariffs on crude oil imports, I will do it at all costs.
Analysis points out that the COVID-19 epidemic has forced more than 3 billion people around the world to quarantine or live at home. Global oil demand is expected to decrease by 15 million barrels per day in the second quarter. 20 million barrels per day, the decline may reach 20% or more. Such a sudden drop in oil demand has had a huge impact on the United States, which has recently become the world’s largest oil producer. The Trump administration, which has always spared no effort to support traditional fossil energy, has to change its course and try to use diplomacy. Efforts and domestic policy adjustments will be made to alleviate the unprecedented pressure of oversupply and save the shale oil industry from disaster. However, the United States’ efforts to bring OPEC+ to reduce production may not achieve the expected results. “It is easy to bloom but difficult to bear fruit.”
The cumulative number of confirmed cases worldwide exceeds 1.19 million. According to real-time statistics from Johns Hopkins University in the United States, as of 5:19 on April 5, Beijing time, the cumulative number of confirmed cases of COVID-19 worldwide exceeded 1.19 million, reaching 1,192,028, and the cumulative number of deaths reached 64,316. The United States has the largest number of confirmed cases of COVID-19 in the world, with more than 300,000 cases.
OPEC official announcement: OPEC+ emergency meeting postponed to April 9
On the evening of April 4, OPEC officially announced that in order to allow sufficient time for oil-producing countries to discuss production reductions, the OPEC+ emergency meeting will be postponed to April 9.
On April 4, the Norwegian Oil Minister stated that Norway would consider cutting oil production if the committee agreed. At the same time, Norway was in dialogue with other oil-producing countries.
Kazakhstan exempts export taxes on petroleum products in response to fluctuations in international oil prices. According to China News Service, Kazakhstan is one of the world’s major oil-producing countries. Affected by the plunge in international oil prices, the country’s oil revenue has dropped significantly since the beginning of this year. In order to promote oil exports, the Kazakhstan government decided to exempt petroleum products from export taxes from April. The Ministry of Trade and Integration of Kazakhstan announced on April 4 that the Kazakh government will exempt export taxes on petroleum products from April 1, and the “zero tariff” policy will continue until the end of this year.
On April 4, Azerbaijan’s Ministry of Energy stated that existing oil market problems not only affect OPEC countries, but also other oil-producing countries. Solidarity among oil-producing countries is the only way to resolve the current market situation. Azerbaijan is ready to further support OPEC and non-OPEC frameworks and undertake additional commitments.
The United States and Canada jointly exert pressure to reduce production and consider taxing oil from Saudi Arabia and Russia
According to reports on April 5, Beijing time, officials from the United States and Canada are discussing using oil tariffs to end the “price war.” If Saudi Arabia and Russia cannot quickly reach an agreement to reduce production, tariffs will be imposed on oil imports from Saudi Arabia and Russia.
The governor of Alberta, Canada’s largest oil-producing province, said that he has discussed with Washington the imposition of oil tariffs on Russia and Saudi Arabia, but he still welcomes OPEC+’s agreement to reduce production. “OPEC+ ignited the price war, and now they must be responsible for extinguishing it.” U.S. officials confirmed that the Energy Department is studying whether tariffs could force Saudi Arabia and Russia to make peace. But discussions on tariff measures are still in their early stages, and there are still other options.
In the early morning of April 5, Beijing time, US President Trump held a press conference at the White House. Trump said the U.S. economy must restart and did not want to wait for months. “Don’t care about OPEC, they are destroying themselves. If I have to impose tariffs on crude oil imports, I will do it at all costs,” Trump said.
The U.S.’s efforts to coordinate OPEC+ production cuts are “easy to bloom but difficult to bear fruit”
The COVID-19 epidemic has forced more than 3 billion people around the world to quarantine or live at home. Global oil demand is expected to decrease by 15 million barrels per day to 20 million barrels per day in the second quarter, and the drop may reach 20% or more.
The sudden and massive drop in oil demand has had a great impact on the United States, which has recently become the world’s largest oil producer and has always spared no effort to provide traditional fossil energy. The supportive Trump administration had to change course and try to use diplomatic efforts and domestic policy adjustments to alleviate the unprecedented pressure of oversupply and save the shale oil industry from disaster.
Even if the United States intends to join the Vienna League’s production reduction efforts in some form, it still needs to overcome geopolitical tensions with traditional oil exporters such as Saudi Arabia and Russia, and domestically needs to obtain oil. the company’s commitment and support, and circumvent antitrust laws.
The United States has recently been actively coordinating oil-producing countries such as OPEC and Russia to reduce production, but it is difficult to achieve substantive results.It is doubtful that the United States, as the largest oil producer, needs to make concessions and jointly bear the impact of the epidemic. It is expected that Trump can use the diplomatic influence of the United States to eventually push relevant parties to reach some kind of “agreement” and add a diplomatic achievement to him, but it is unlikely that an agreement will be reached in a short time. If oil prices fall sharply again or oil storage facilities are filled, upstream companies will have to cut production on their own.
Austria’s JBC Energy said on April 3 that considering that the U.S. Congress was still trying to promote the anti-OPEC bill 13 months ago, it is ironic that the United States is now asking for OPEC’s help. Meaning. When Saudi Arabia released news on April 2, it specifically called for OPEC to hold an emergency meeting with its partners and other countries, which can be understood as the possibility of the United States joining this meeting. After all, the Texas Railroad Commission has held informal talks with OPEC.
Texas Railroad Commission member Ryan Seaton said on April 2 that he had spoken with Russian Energy Minister Alexander Novak and both sides agreed to prevent the spread of the novel coronavirus. The epidemic requires unprecedented international cooperation. The two sides discussed a plan to reduce global supply by 10 million barrels per day and looked forward to a phone call with Saudi Crown Prince Mohammed bin Salman.
Seton said on April 3 that the economic impact of the current epidemic may be the worst in human history, and the abnormal environment requires extraordinary measures. If an extraordinary international agreement is reached, the United States will be part of it.
Phil Flynn, senior analyst at the American Price Futures Group, said on April 3 that Trump said he might cut production by 10 million barrels per day to 15 million barrels. The numbers suggest U.S. oil companies may have to participate in production cuts. This means that the White House may issue an emergency order to allow U.S. energy companies to ignore antitrust laws and cut production to support oil prices.
Flynn said he is now paying attention to whether oil prices can rise above $30 a barrel. If there are 10 million barrels per day of production cuts, oil prices will not fall below $20 per barrel.
JBC Energy believes that any expectation that the news will dispel the threat of full oil tanks is seriously premature. Convening a meeting will take time, and there is no guarantee it will be successful in achieving the level of production cuts Trump has claimed. Since Saudi Arabia has made it clear that it will not cut production alone, a 10 million barrel per day production cut will require substantial participation from non-OPEC oil-producing countries, and cannot be solved by just talking. The market is running out of time as the demand destruction caused by the COVID-19 pandemic has begun to reach high levels.
Paul Sankey, executive director of Ruihui Financial Group, said that OPEC and its partners have no choice. The relevant rhetoric is just window dressing. The market itself will reduce production, and the intensity of the market reduction will be It is larger than any production reduction agreement reached by OPEC and production reduction partners.
Bjonar Tonhaugen, senior vice president and head of oil markets at Rystad Energy, said that Trump’s statement on production cuts on April 3 may be “ It’s nonsense.” Reaching such a complex agreement will take time, and it’s too early to propose an agreement now.
JBC Energy said that taking into account Saudi Arabia’s increase in production, the world’s crude oil supply increased by only 1.1 million barrels per day in the second quarter compared with the same period last year. OPEC+ supply-side production cuts will be used to solve the supply and demand caused by the demand side. Imbalance is a difficult task. Unless Saudi Arabia and Russia completely stop producing crude oil, the chance of this plan working is very small, and it is extremely impossible to expect Saudi Arabia and Russia to completely stop production.
JBC Energy said that it is highly unlikely that all the details will be finalized in the short term through any formal OPEC+ agreement to truly significantly reduce oversupply. So what is likely to happen is that short-term tasks are left to free market forces and the focus is on reducing oil inventories in the second half of the year.
Ahem Kamal, head of Middle East and North Africa research at Eurasia Group, a US political risk analysis agency, said that the most likely outcome is to reach a large-scale OPEC+ production reduction agreement , while the United States is also cutting production. Alternatively, negotiations may fail to reach an agreement on production cuts. The least likely outcome is that OPEC+ reaches an agreement to cut production without the United States participating at all. Even if OPEC+ reaches a production reduction agreement on its own, the scale of the production reduction will be more limited, far less than 10 million barrels per day.
In addition, because the Trump administration failed to obtain a budget from Congress to pay for the absorption of domestically produced crude oil as a strategic crude oil reserve, the U.S. Department of Energy turned to allow U.S. energy companies on the 2nd Use existing storage capacity to store your own crude oil to profit when oil prices rise.
However, the US’s trump card is to threaten to pass anti-OPEC bills to pressure Saudi Arabia to end the price war in order to save the US shale oil industry. The bill allows U.S. companies to launch antitrust lawsuits against OPEC and prohibits any foreign organization from colluding to manipulate energy prices.
The U.S. Congress has repeatedly tried to promote anti-OPEC bills. In April last year, Saudi Arabia was dissatisfied with the United States’ push for an anti-OPEC bill. Some analysts said that if the bill is passed, Saudi Arabia will consider stopping using US dollars to settle oil, and the petrodollar system may be shaken. </p
