After Brent crude oil dropped to a one-year low of US$53.11 on February 10, bulls continued to counterattack in the following four trading days, and the cumulative rebound from the low point exceeded US$4. For the current situation, This is a considerable rebound given the market environment, and there are obviously more bullish voices in the trading circle. The mainstream bullish voice is: Never mind the fundamentals, respect the market! Oil prices have obviously gone up! After four consecutive days of strong push up, it seems that the short sellers can no longer be suppressed, and the market mentality has improved significantly.
In addition, there is another positive signal that Brent’s difference from January to March is The discount of US$0.7 quickly recovered to the premium, as if the supply pressure in the near-end market was not as great as previously exaggerated. After the strong reaction on the market, some foreign media interpreted that traders began to evaluate signs of recovery in China’s crude oil demand.
Shandong Dilian’s procurement actions improve market expectations
According to the Argus report, due to the sharp fall in Brent crude oil and the decline in premiums for DES crude oil delivered at Shandong Port, purchasing costs are low, and some buyers have returned to those arriving in late March or April. crude oil market. The cargo arriving at the port in April is particularly attractive, with multiple crude oil transactions including Brazil’s Lula, Oman, and Gabon’s Mandji concluded within a week. Currently, there is no shortage of spot crude oil in China. Based on information from Argus and Kinchem, crude oil cargoes purchased by Chinese refineries are gradually arriving. According to Shandong port staff, the tank capacity of Shandong ports is already very tight, oil tankers are obviously pressing on the port, and the waiting time for unloading has increased. Delays at Shandong’s Dongjiakou port are currently about 15 days due to staff shortages and slowing downstream fuel demand, which has left crude oil stranded in port storage tanks and slowed the unloading of ships. Delays were shorter at other ports around Qingdao, China’s busiest oil terminal. Even in Huangdao and Yantai in northern Shandong, it takes about 10 days.
Forex foreign exchange market analyst Han Tan said that China’s independent refineries are said to have taken advantage of the recent international oil price surge. Taking advantage of the decline, they began to purchase crude oil cargoes on a large scale. China’s Shandong Shouguang Luqing Petrochemical Company purchased seven crude oil cargoes for March and April loading from Russia, Angola and Gabon, and Sinochem Hongrun Petrochemical Company also purchased a batch of crude oil cargoes from Gabon. The strong rebound in oil prices since February 10 has surprised many people. After the previous sharp decline in oil prices, China’s small independent refineries have been buying heavily in the spot market, which may contribute to the rebound in oil prices. This round of buying is in line with the current view in the market that the worst period is over. The optimistic view is that the epidemic in China is now under control and demand will soon pick up. However, some traders analyzed that several “dead cargo” shipments of crude oil purchased by Shandong Refinery were considered to be the recovery of China’s crude oil demand. Apparently, they did not fully understand China’s market conditions.
China’s INE crude oil futures positions increased significantly
It is worth noting that after the holiday China’s INE crude oil futures has seen a significant increase in positions, with the position significantly reaching a new high since its listing. The increase is not only limited to the main contract in recent months, but also the second-month contract has steadily increased its position every day, especially the ratio of positions and trading volume in the next month. The performance in many days is close to 1/2. One of the more eye-catching performances in the process of increasing positions is that the domestic opening period is stronger than the international market. This means that there are funds at the current position that are not overly bearish on the market outlook. Therefore, in the domestic crude oil futures Conducting bottom-buying operations on the market, funds increased their positions in April and May contracts, especially the layout of the May contract, which shows that funds have high expectations for the rebound in the crude oil market.
China’s refinery operating rate continues to decline
Judging from Longzhong’s research on the load of domestic refining units, as of February 13, the operating load of the atmospheric and vacuum units of the main refinery was 71.96%, down 11.88% from before the holiday and down 8% from the same period last year. A certain main operating system A has undergone three adjustments. In the end, the total crude oil processing volume decreased by 3 million tons, and the total refined oil volume decreased by 2.48 million tons. The current gasoline, diesel and coal yield has been adjusted to the lowest, and the next step will be almost non-existent. There is room for decline, and crude oil processing volume may continue to adjust in the future. The first round of crude oil processing of a main operating system B reduced 2 million tons, and the current reduction has increased to 3.5 million tons of crude oil. A major refinery C in the southwest region has just entered maintenance, but the progress may be delayed; a major refinery D along the Yangtze River was originally scheduled for a major overhaul around May, but the actual overhaul time may be postponed to September. On the whole, the spring maintenance plan of main refineries may be advanced, and more refineries will enter single unit or secondary unit maintenance in March. According to Longzhong’s estimation, main business losses due to adjustment and maintenance in February wereThe production capacity is 1.5 million tons, and the loss of production capacity in March was 3.6 million tons.
In terms of local refineries in Shandong, the current operating rate is 41.1%, down 20.82% from before the holiday, and down 36.74% from the same period last year. The daily processing volume of crude oil dropped by 99,000 tons compared with before the holiday, the daily production of gasoline dropped by 34,000 tons, and the daily output of diesel dropped by 54,000 tons compared with before the holiday. Market demand has declined, refinery transactions have been sluggish and inventories have risen. Almost all refineries have reduced production, and some have taken measures to temporarily suspend operations or shut down some devices.
At this stage, epidemic prevention and control is still at a critical stage. The impact of the epidemic on China’s demand for oil products is substantial. Especially given that China has made such a large contribution to the demand side in 2019, oil prices cannot afford to lose the boost from China’s demand. The demand for refined oil in the terminal market has dropped sharply, refinery sales have been bleak, refined oil inventories are high, operating rates have been forced to drop, and some refineries have even stopped production due to inventory shortages. On February 10, some provinces began to resume work and production, and logistics across the country recovered. Coupled with price reductions and promotions by refineries, demand began to improve. This only resulted in the transfer of refinery inventories to social pools, and terminal market demand did not improve significantly. Under heavy negative pressure, Chinese oil refining companies have entered a difficult period and are expected to suffer huge losses in February.
The intertwining of epidemic prevention and control and return to work
Current China We are now in the intertwined stage of epidemic prevention and control and returning to the city to resume work. For most regions, epidemic prevention and control is still the most important task at this stage, but the demand for companies to resume work is increasingly strong. During this transitional stage, the market is not lacking in contradictions and collisions of various opinions. For example, some people believe that China’s crude oil demand continues to deteriorate at this stage and will be difficult to improve before the end of February, and will even be difficult to return to normal in the next few months. Others believe that demand is expected to rebound sharply in the later period. This is the difference between these two views. Typical representative. The former means that the oil market will continue to be bearish for a period before demand improves, while the latter has obviously entered the market to buy bottoms or is ready to buy bottoms at any time driven by expectations. With the friction between the two views, the swing in oil prices is understandable. We believe that both views are correct. The difference is only a matter of rhythm and time. Before the demand for oil prices recovers effectively at this stage, bottoming will be the main theme. We must pay close attention to whether demand can effectively improve. Most rebounds before this It is a correction after a decline. Oil prices will continue to bottom out, and oil prices will rise only when conditions are truly met for an improvement in demand.
The current rebound in oil prices has entered a stage of more obvious differences, with Brent crude oil below $60. It will be an area of continuous long-short competition. Before it can effectively stand above 60 US dollars, it is still appropriate to treat the market qualitatively as an oversold rebound.
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