Negotiations held in Vienna between OPEC and its non-OPEC production-cutting allies led by Russia failed to reach an agreement last Friday. Russia opposed OPEC’s proposal to significantly reduce production to stabilize oil prices. Then last Saturday, Saudi Arabia began a promotion to increase production and reduce prices, significantly lowering the sales price of crude oil in April. When public health events affected global demand, these countries had previously tried to support the oil market. However, this rapid turnaround caused global financial markets to fluctuate sharply again. At the beginning of the week, international crude oil prices experienced a historic collapse and fell to levels not seen since February 2016. Affected by this, almost all domestic futures markets turned green, energy and chemical products plummeted, and crude oil, fuel oil, asphalt, PTA, methanol, ethylene glycol, etc. fell by the limit.
Negotiations between OPEC and its non-OPEC production-cutting allies led by Russia failed to reach an agreement in Vienna last Friday. Russia opposed OPEC’s proposal to significantly reduce production to stabilize oil prices. Then last Saturday, Saudi Arabia began a promotion to increase production and reduce prices, significantly lowering the sales price of crude oil in April. When public health events affected global demand, these countries had previously tried to support the oil market. However, this rapid turnaround caused global financial markets to fluctuate sharply again. At the beginning of the week, international crude oil prices experienced a historic collapse and fell to levels not seen since February 2016. Affected by this, almost all domestic futures markets turned green, energy and chemical products plummeted, and crude oil, fuel oil, asphalt, PTA, methanol, ethylene glycol, etc. fell by the limit.
As the leader of chemicals, crude oil’s guiding role is relatively obvious. Generally, the most direct energy products have the strongest correlation with crude oil (asphalt, fuel oil); secondly, they can only be used at present. PTA produced from crude oil; the trend of ethylene glycol and crude oil also has a very strong correlation. It can be seen from the figure that the overall trend runs almost the same, but subsequently, with the proportion of non-crude oil production paths As the price rises, the correlation may gradually weaken. In 2019, the trend of crude oil and most chemicals has weakened. With the negative pressure from external events and the adjustment of the product structure, most chemicals have been under pressure from weak fundamental expectations. However, no matter what kind of energy chemicals, When the profits of its industrial chain are pushed to a lower position, the logic of cost pricing will become stronger and the correlation with crude oil will be significantly enhanced.
At present, another major negative factor facing ethylene glycol comes from the supply side. Especially in the context of the lack of demand due to the impact of public health events this year, the pressure on the supply side has become increasingly prominent. As of now, MEG in the main port area of East China has The port inventory is about 950,000 tons, an increase of nearly 100,000 tons from last week. Based on historical data of previous years, the inventory in the first quarter is basically the high point of the year. Although it has not yet reached the historical peak of 1.4 million tons last year, the inventory is rising in the context of the release of new production capacity. Accumulation is almost just a matter of time, but this is not the main reason for the second wave of decline.
Faced with various economic indicators reaching historically low levels, the market is pessimistic about future economic scenarios. The upcoming supply torrent, overwhelmed inventories, and demand shocks caused by public health events will This will inevitably further push the already sluggish commodities into the abyss. Crude oil prices are in the process of continuing to decline and bottom out. It is recommended to wait for opportunities to stabilize. Moreover, public health events are still spreading in overseas markets, and the impact of public health events on the global economy cannot be ignored. The global risk aversion mode has been activated, and subsequent panic still dominates the market. </p
