“The supply and demand data in the crude oil market is terrible. We have hardly seen such a bad situation in history.” said Fatih Birol, Director of the International Energy Agency.
Global oil demand has plummeted due to the spread of the epidemic, and the price war between Saudi Arabia and Russia has exacerbated the situation. “Currently, the activities of 3 billion people around the world are affected. Therefore, the market may see a decrease in oil demand of about 20 million barrels per day.” Russian Deputy Energy Minister Pavel Sorokin also admitted on Friday that measures to control the spread of the new coronavirus have caused the United States, Oil demand in Europe and China fell by 15 million to 20 million barrels per day.
In this context, in the past week, the monthly difference in the international crude oil market has collapsed like a cliff, especially in just one week for WTI crude oil The discount fell by more than $5 in January and March, which is a very rare phenomenon in the history of crude oil. The severe decline in demand has led to a serious excess in global crude oil supply and demand, which has also suppressed international oil prices in recent months. After hitting $20, oil prices rebounded increasingly weakly. Under this situation, it will be difficult for oil prices to perform strongly in the near future. While oil prices have been weak in recent months, the collapse of the monthly spread means that the supply and demand situation in the spot market has worsened. However, it is worth noting that the trend of subsequent far-month contracts is relatively strong. Data shows that the July WTI crude oil contract is not as weak as May. In the past week, the July contract oil price rebounded by US$1.5, an increase of about 5.5%. This shows that crude oil prices are in an absolute value depression, and there are strong expectations for recovery in the future.
The epidemic has not yet been effectively controlled
According to Bloomberg News The data collected shows that as of 09:34 on March 28, Beijing time, the number of new coronavirus-infected pneumonia cases worldwide has increased to 592,000. The disease has spread to 182 countries and regions, killing 27,200 people. In addition to the worrying high fatality rate in all of Europe, especially Italy, the cumulative number of confirmed cases of COVID-19 in the United States has exceeded 100,000, ranking first in the world. According to data from Johns Hopkins University, as of 17:13 ET on the 27th, there were 100,717 confirmed cases of COVID-19 in the United States, 1,544 deaths, and nearly 20,000 new cases per day. At the same time, the testing capacity for the new coronavirus in the United States has begun to increase, but as of March 26, only New York State has tested more than 100,000 people, and 36 states have tested less than 10,000 people. Obviously, the impact of COVID-19 on the world continues to refresh human understanding. What makes people feel desperate is that this situation currently shows no signs of slowing down. After missing the best window for prevention and control, the world is suffering a heavy price from this epidemic. The epidemic not only threatens human lives, but also has a major blow to the global economy as countries block borders to prevent and control the epidemic.
Overseas epidemic distribution map
In order not to Throwing the economy into collapse, the Group of 20 countries (G20) has stated that it will defeat the new coronavirus crisis “at all costs” and said on Thursday that it would inject $5 trillion into the global economy through national measures to mitigate its impact. The U.S. House of Representatives on Friday approved the largest aid package in U.S. history. The $2.2 trillion plan is designed to help American individuals and businesses cope with the economic downturn caused by the epidemic and provide hospitals with much-needed medical supplies. It seems that a sharp economic plunge or even recession in 2020 is inevitable. The US stock market has staged an unprecedented collapse. The continuous circuit breakers and the Thousand Points in Space have become hot topics in the market. This shows the fragility of human economic activities. The J.P. Morgan Global PMI Index plunged below 50 across the board. Against the backdrop of further deterioration in the U.S. and global markets, there is still room for the global PMI to continue to decline.
The demand side collapses and the supply side is desperate
Only 3 Months ago, major authoritative institutions generally expected to increase the average crude oil demand by about 1.2 million barrels per day in 2020 amid expectations of economic recovery. With the outbreak of the new coronavirus epidemic, major institutions have continued to lower demand expectations along the way. After entering March, the magnitude and frequency of downward revisions became faster and faster. Until now, no one believes that the crude oil market demand will grow in 2020. On the contrary, as mentioned in the opening article, the current decline in crude oil demand has reached as high as 20 million barrels per day, and under the influence of the epidemic, it is likely to further deteriorate. , especially after the United States became the country with the largest number of infections in the world. U.S. President Donald Trump said the economy is “probably” heading into recession and that the worst phase of the epidemic may not be over until August or later. A recent survey of 34 economists conducted by the Wall Street Journal predicts that the economic downturn will last at least several months and may be more severe than the global financial crisis in 2008, which means that there is a high probability of a decline in demand in the crude oil market in 2020. More than 2 million barrels per day, and the final decline depends on when the epidemic can be controlled.
The plummeting crude oil market, look It seems that the cost of processing raw materials has dropped significantly, but in fact the refined oil market has fallen even more bleakly. The cracking gap in the United States and Europe shows that processing profits have reached new lows in the past five years. Among them, the price of gasoline in the United States is even lower than that of crude oil. This is a strange phenomenon. It reflects that the epidemic has had a very serious impact on the demand side. Low oil prices trigger the crude oil reference lower limit in China’s current refined oil pricing mechanism, and the refined oil market no longer follows the downward adjustment. This has also formed a periodic processing dividend with Chinese characteristics, stimulated by high profits , local refinery companies with more flexible operating mechanisms have rapidly increased their operating rates. In just 3 weeks, the operating rate has returned from 36% to the normal area of more than 60%. Of course, this is only an opportunity under a special background. Looking at the overall demand, the recovery It is still far less than expected, which we can see from the operating rate of the main refinery.
Russia has recently He said that Russia is not fighting a crude oil price war with anyone, and balancing the crude oil market requires global cooperation. Please! Who refused to reduce production? Who made Saudi Arabia angry? Saudi Arabia is still angrily saying that Saudi Arabia and the Russian Energy Minister have not yet With regard to any possibility of expanding the size of OPEC+, it seems that the U.S. envoy will have to continue to work hard. After the collapse of negotiations on a production reduction agreement between OPEC and other oil-producing countries led by Russia, Saudi Arabia plans to restore production to 12.3 million barrels per day in April. , and even required efforts to reach 13 million barrels per day and increase daily crude oil exports to more than 10 million barrels from May. However, according to sources, Saudi Arabia’s crude oil exports in March have so far been significantly lower than this level, which is the same as in February. This may reflect lower demand from customers compared to little change. Russia’s export data has returned to the low level in recent years and is likely to decline further in the future. However, what is surprising is that U.S. crude oil exports have not been significantly affected since March. The United States has been a normal net exporter since the first quarter.
Demand has reached this level. A person familiar with the matter said that no one is discussing a significant increase in production, and even making short-term plans is quite difficult. Fedon, vice president of Russia’s Lukoil, called the current oil price a disaster and called on Russia and Saudi Arabia to resume negotiations. In the end, no matter whether an official agreement is reached or the production is reduced by default, judging from the fact that Saudi Arabia’s efforts to seize market share by expanding production have been blocked, the decline in production on the supply side is already an inevitable choice.
U.S. shale oil production fell by 100,000 barrels per day, which may not seem significant, but the latest U.S. Baker Hughes data shows that the number of drilling rigs in the U.S. has dropped off a cliff. , the negative impact of the plunge in oil prices began to be transmitted to the production chain, which is likely to be an inflection point in U.S. crude oil production.
We have already mentioned at the beginning that the near-month crude oil contract is hard to recover, but it does not mean that crude oil prices will remain low for a long time. Even if the current epidemic situation is still very serious, crude oil prices will be low this week. The monthly price still fell slightly, but the far-month contract rebounded significantly. The July contract rose 5.5% from the previous week, and the December contract rebounded 8.5%. The performance of the far-month contract shows that under the current situation of severe oversupply and demand in the crude oil market, the market’s expectations for a potential forward price return are very clear. Oil prices of US$20/barrel and below are unsustainable.
After this oil price plunge, my country’s INE crude oil futures, which have been on the market for just two years, took the lead in rebounding strongly, which is a very important guide. significance. As the benchmark oil price for consumers, INE crude oil futures have expressed a strong voice to the market this time. Although this makes many investors accustomed to the international crude oil market very uncomfortable, why are INE crude oil futures so strong. But just like our country’s outstanding performance in this epidemic, strength is justified. This is the voice of China!