Trump and Putin had an interesting long talk. Both sides expressed different opinions.
According to foreign media reports, Russian and U.S. Presidents Vladimir Putin and Donald Trump held talks on Monday. Had a phone conversation. They expressed serious concern about the scale of the spread of the coronavirus around the world and agreed to hold joint consultations on oil market conditions. The two heads of state also discussed some issues in bilateral relations and agreed to continue personal contacts. It is reported that the lengthy phone conversation was conducted at the initiative of the United States.
The Kremlin news agency reported that a phone conversation between Russian President Vladimir Putin and US President Donald Trump focused on strengthening cooperation in the fight against the novel coronavirus pandemic.
"The two heads of state expressed serious concern about the rapid global spread of the coronavirus and informed each other of the measures taken by their respective countries to combat this threat," the Kremlin said. "They discussed options for greater cooperation between the two countries in this area. .”
After the long talk, the White House stated that the two presidents discussed efforts to prevent and control the epidemic around the world. The two leaders "agreed to work closely through the G20 to promote international cooperation to defeat the virus and revive the global economy." The leaders also discussed important bilateral and global issues last year. Presidents Trump and Putin agreed to continue to play important roles in global energy markets. Trump and Putin also discussed Venezuela during the call. Trump reiterated that the situation in Venezuela is serious and hopes to see a democratic transition to end the ongoing crisis.
Subsequently, the U.S. Department of Energy said that U.S. and Russian energy executives will discuss crude oil market volatility. On March 30, U.S. President Trump reached a consensus with Russian President Putin on the importance of stabilizing the crude oil market.
It is worth noting that the expressions of both parties are different this time. The Kremlin’s statement is more biased towards fighting the new coronavirus. The White House's statement was more biased towards the crude oil market. Moreover, after this meeting, Trump did not immediately release relevant information via Twitter. Of course, even so, international crude oil futures rebounded after the news was released. At the same time, U.S. stocks also experienced a sharp rebound overnight.
The Kremlin did not reveal exactly what the ministers will discuss, but Moscow has previously said it wants to see more countries join OPEC+ to balance global oil markets.
It is worth mentioning that although Russia has extended an olive branch several times and called for negotiations to stabilize the oil market, Saudi Arabia has remained unmoved.
The Kremlin said: "The United States and Russia exchanged views on the current global oil market conditions and agreed to hold energy ministerial consultations on this issue." Putin and Trump also agreed to continue dialogue on a personal level.
Trump told the media before his phone call with Putin that Saudi Arabia and Russia were "both crazy" in the oil price war.
Russian and Saudi Arabian crude is flooding the oil market, causing prices to collapse and threatening the highly leveraged U.S. shale industry, which has used debt to increase market share in recent years.
Crude oil demand continues to be sluggish, and oil prices fell nearly 7%, hitting an 18-year low
As global crude oil demand continues to decline, and Saudi Arabia and other OPEC+ countries prepare to increase production, international crude oil fell more than 7% on Monday, hitting an 18-year low.
As COVID-19 continues to spread and much of the world is under social isolation and corporate business activities are suspended, demand for crude oil has dropped significantly.
WTI crude oil fell 7.3% to $19.93 a barrel, falling below the $20 mark. Earlier, WTI crude oil fell to an intraday low of $19.85 a barrel, an 18-year low. Brent crude fell 12.2% to $21.89 a barrel, its lowest since 2002.
The house leak coincided with continuous rain, and the decline in crude oil demand coincided with the expiration of OPEC+ production cuts.Starting from April 1, OPEC+ oil-producing countries will be able to produce oil according to their own needs, and Saudi Arabia is one of the countries that has announced that it will increase production.
Given that both supply and demand have been hit, analysts predict that although WTI crude oil prices have fallen by 54% in March, there is still more room for downside in the future. John Freeman, an analyst at
Raymond James, said: “As the impact of the new coronavirus continues to weigh on global demand, global crude oil inventory pressure is likely to reach its limit in the second quarter of this year, which will bring about a nightmare scenario. , and crude oil may further test the $10/barrel threshold. "
As the outlook for crude oil becomes bleak, Bank of America once again lowered its oil price forecast on Monday and expected oil prices to fall to as low as $10 in the coming weeks and in the second quarter. There will also be a record drop in oil consumption.
The United States tried to intervene in the price war between Saudi Arabia and Russia
Due to weakening demand for crude oil, although OPEC proposed to further cut crude oil by 1.5 million barrels per day at the beginning of this month, Russia first refused to reduce production, which also triggered a subsequent crude oil price war. Saudi Arabia began slashing official oil prices and said it would increase production to 12.3 million barrels per day in April. Moreover, Saudi Arabia has no intention of negotiating with Russia, and Russia’s determination is also very firm. Russian Deputy Minister of Energy Pavel Sorokin said: Oil demand in the United States, Europe and Asia will decrease by approximately 15 million to 20 million barrels per day. , the epidemic has already caused us to suffer a considerable impact, but if OPEC had not said that they would increase production, we could have avoided more impacts. Oil prices of $25 a barrel, while unbearable, are not a disaster for Russia.
As oil prices continue to fall, the United States attempts to intervene in the price war between Saudi Arabia and Russia. On Monday, U.S. President Trump held a conference call with Russian President Vladimir Putin, and the two countries agreed to hold ministerial-level consultations on the crude oil market. Last week, US Secretary of State Pompeo had a conversation with Saudi Crown Prince Mohammed bin Salman.
Goldman Sachs says "Tsarist Russia" price war is irrelevant
Oil demand from commuters and airlines before the outbreak was about 16 million barrels a day, but may never return to that level in the future, Goldman Sachs analysts said on Monday. level. Goldman Sachs expects global oil demand to fall by 26 million barrels per day.
Goldman Sachs said that as major economies remain in lockdown and demand for gasoline and jet fuel continues to decline, the oil price war between Saudi Arabia and Russia has become "irrelevant" in the face of huge demand destruction.
But Goldman Sachs said the current drop in demand, refinery production cuts and other factors could lead to oil shortages in the next few years.
The root cause of the demand avalanche
The root cause of the demand collapse is an accelerated decline in consumption, which has not been seen in more than a century. The Great Crash of 1929, the two oil crises of the 1970s, and the global financial crisis are all a far cry from this. In normal times, the world consumes 100 million barrels of oil a day, and traders and analysts estimate that as much as a quarter of that demand has disappeared in just a few weeks.
The shutdown of large swaths of the global economy would be catastrophic for oil demand.
The global aviation industry is grounded, countless businesses and factories are closed, and billions of people are forced to stay at home. The reduction in commercial air travel has reduced aviation fuel use by 75%, equivalent to a reduction in oil demand of nearly 5 million barrels per day.
Chevron CEO Mike Wirth said:
"Oil demand is clearly down significantly in much of the world."
U.S. drivers are the largest source of gasoline demand, consuming more than 9 million barrels of gasoline per day, according to the EIA. . Now that several states, including California and New York, are asking people to stay home, billions of people are without the need to travel in cars, leading to a sharp drop in gasoline demand.
Italy is the epicenter of the outbreak in Europe, and the country's fuel demand has plummeted by 85%.
About 700 refineries around the world process crude oil into gasoline, diesel and other fuels.As demand for refined oil products fell sharply, they began to reduce production or even stop production altogether. In the case of India, the country's largest refinery has cut processing speeds at most plants by as much as 30%.
Due to the sharp drop in demand, oil prices in some spot markets have fallen to single digits. Western Canadian Select, a tar-blend extracted from Alberta's oil sands, fell to a record low of $4.51 a barrel on Friday. In the United States, Sour crude oil in Oklahoma and Intermediate crude oil in Nebraska are priced at US$5.75 and US$8 per barrel respectively, while light oil in Wyoming is US$3 per barrel. How does
relieve inventory pressure?
In addition to the sharp drop in demand, the problem of stocks that are about to be full has also made the oil market even worse.
With the oil supply surplus reaching 20 million barrels per day, the world will not have enough oil tanks to store the remaining oil in two or three months. For countries without access to pipelines and ports to store oil, local storage space will be exhausted within days, traders and consultants say.
At present, there are two ways to alleviate inventory pressure.
One solution is to use supertankers as floating oil storage tanks , and this has already been done. The chief executive of Frontline Ltd., the world's largest tanker owner, said on Friday he had never heard of a situation where chartering a ship would be required for long-term storage of oil. He estimates that 100 million barrels of oil will be shipped to offshore tankers for storage this week alone. However, this approach treats the symptoms but not the root cause, and can only play a mitigating role, but it is still difficult to change the oversupply situation.
Another way may be more effective, that is, to reduce production . Plains All American Pipeline LP, one of the largest pipeline companies in the United States, has asked oil producers to voluntarily reduce production to avoid overwhelming the thousands of miles of pipelines that connect wellheads to refineries. .
Goldman Sachs oil analyst Damien Courvalin said:
"In our view, the surge in inventories over the coming weeks will inevitably push local infrastructure to the limit, which will force many inland Producers shut down wells. ”
Outcome of oil market collapse – widespread shutdowns
The next phase of the oil market collapse will be widespread production shutdowns, because with prices so low, oil drillers’ only option is to The oil remains in the ground until oil prices recover and can be extracted again. There are signs that this is starting to happen.
Petrobras announced that it will reduce production by 100,000 barrels per day this year due to lack of demand. In Canada, some producers have halted production, including Glencore Plc. The world's largest commodities trading company has shut down production in Chad.
However, there are also many producers who are reluctant to shut down wells because even if they are losing money on production, some cash flow is better than none. But as more refineries shut down, pipeline systems grind to a halt and storage tanks fill, they will soon have no choice.
When oil floods the market when the world least needs it, only oil-producing countries with deep pockets or enough storage tanks can keep pumping.
Russel Hardy, head of top independent oil trader Vitol Group, said:
"We need to reduce crude oil supply by 10 million barrels per day as soon as possible. Oil prices need to fall further, falling enough to make oil-producing countries pay attention to the imbalance between supply and demand."
A wave of mergers and bankruptcies among oil companies may be coming
The rapid decline in oil prices has caused energy companies to significantly reduce capital expenditure plans, with US crude oil exploration and production companies being the hardest hit. Every time oil prices fall a little more, it becomes more difficult for oil companies to break even. Some analysts say that a wave of mergers and bankruptcies among oil companies may be coming.
Oil exploration companies shut down 40 drilling rigs across the United States last week as oil prices plummeted, marking the largest contraction since April 2015.According to data released by Baker Hughes on Friday, the number of U.S. crude oil rigs decreased by 40 to 624, the number of natural gas rigs decreased by 4 to 102, and the total number of rigs decreased by 44 to 728. Bjornar Tonhaugen, head of oil markets at
Rystad Energy, said: “The oil market supply chain has been broken due to the huge decline in oil demand. The surge in oil storage, global refinery production cuts, and the collapse of upstream suppliers have forced crude oil suppliers to Come up with all available alternatives as soon as possible. Crude oil demand is expected to drop by more than 16 million barrels per day in April."
Source: Cailianshe, Jinshi Data, China Business News, Brokerage China
.
