Affected by this, international oil prices suffered a heavy blow. The main contract of WTI crude oil closed down at US$41.28 per barrel, down US$4.62, a drop of more than 10.07%, a new low since August 2016; Brent crude oil contract Berry Oil fell by more than 8%, reaching US$46.52 per barrel, setting a new low since June 2017. Brent crude oil has fallen more than 30% since its high in early January, while WTI crude oil fell nearly 1/3 during the same period.
The macroeconomic outlook is unclear, causing bets on bearish oil prices to continue to increase. Data released by research firm S3 Partners this week showed that crude oil short positions in each term have increased by more than $460 million since the beginning of February, and have tripled since the beginning of this year. XOP, an ETF fund tracking U.S. oil and gas explorers and producers, has had short positions exceeding $1 billion, close to half of its circulation.
Russia refuses to deepen production cuts
Although the recent US sanctions on Russian oil companies and Libya are increasingly tense, which once supported the market, but the rapid spread of the epidemic has continued to spread on the global economy, seriously impacting the already fragile supply and demand relationship.
As an important user, airlines have the impact on fuel demand due to the impact of the tourism industry. Many European airlines have issued performance warnings. International Air Transport Association said that the revenue loss of the entire aviation industry in 2020 is expected to be between 63 billion and 113 billion US dollars, with the impact of Asia, Europe and the United States being serious, calling on governments to pay attention to the difficulties faced by airlines.
International Energy Information Administration IEA previously lowered its global crude oil demand growth forecast in 2020 by 365,000 barrels per day to 825,000 barrels per day, the lowest since 2011, of which oil demand in the first quarter is expected to decrease by 1.1 million barrels per day, the first quarterly decline since 2009.
htmlOn the 5th, the 178th (Special) plenary session of OPEC was held. The statement after the meeting pointed out that the outbreak of COVID-19 has had a significant adverse impact on the forecast of global economic and oil demand in 2020, especially in the first and second quarters. Global oil demand growth rate is expected to be 480,000 barrels per day this year, lower than the 1.1 million barrels per day estimate in December 2019, and risks tend to decline.Statement China OPEC recommends extending the existing production cut order to the end of the year and continuing to deepen the production cut of 1.5 million barrels per day until June 30, 2020. Among the countries participating in the Declaration of Cooperation, OPEC member states will undertake a 1 million barrels per day production cut task, and non-OPEC member states will complete the remaining 500,000 barrels per day indicator. The statement reiterates that for the interests of producers, consumers and the global economy, we will continue to focus on stabilizing and balancing supply and demand relations, and we are firmly committed to becoming a reliable supplier of crude oil and products in the global market.
According to the plan, in the OPEC+ plenary meeting held on the 6th, all parties will hold final consultations on the specific scale of production cuts and quotas. However, due to Russia's attitude, the meeting agenda has been dragged down again and again. Delegates from various countries hope to convince Russia to make concessions on the issue of production cuts, but Moscow only hopes to extend the existing production cut order until June and no longer adjust the scale of production cuts.
After being postponed for nearly four hours, the OPEC+ meeting was held. Due to Russia's firm position and OPEC was unwilling to take action without Russia's participation, the meeting ended hastily without any agreement. Russian Energy Minister Novak said after the meeting that with the expiration of production cuts, Russia will no longer be subject to production restrictions from April, and the decline in international oil prices has further intensified.
Commodity analyst Carsten Fritsch pointed out that because OPEC did not reach a production cut agreement, Brent crude oil prices may fall below $40. At that time, the production of shale oil in the United States may be affected, and market supply is expected to reach a new balance.
John Kilduff, a partner at New York Energy Hedge Fund Again Capital, said OPEC is in its worst situation and the market will eventually punish these oil-producing countries.He believes that investors' disappointment may push WTI crude oil prices to around $35. Tamas Varga, chief market analyst at Oil Associates, said in an interview with the First Financial reporter that in fact, OPEC's forecast for demand may be too optimistic, and even if an agreement is reached for a production cut, it is likely that it will still be unable to balance the current market. It is particularly important to note the Libyan issue. As the current exemption for production cuts, the Libyan situation has caused abnormal production cuts in local crude oil. Once the situation can ease, a large amount of production capacity will pour into the market again, thereby aggravating the deterioration of supply and demand relations.
Libya's oil production has dropped to 120,000 barrels per day due to the domestic political situation, the lowest level since 2011, according to S&P Global Platts. Before the lockdown, Libya's daily production reached 1.2 million barrels.
negotiation doors have not been completely closed
In fact, Russia has always been vague on the issue of production cuts. On the one hand, large oil companies in the country generally believe that the epidemic has a very small impact on oil demand. The price decline is an emotional reaction of the market, which is a short-term phenomenon, and the production cut alone is used to treat the symptoms but not the root cause. On the other hand, the buffer zone for mining costs is still sufficient. Russian President Putin said on the 21st that the current oil price level is acceptable for Russia's economy. Russia has a reserve of $560 billion, and the average Brent crude oil price set in its budget for the fiscal year is $42.40 per barrel, so it can cope with the decline in oil prices caused by the epidemic.
has a different attitude from Moscow. Currently, OPEC's leader Saudi has been actively promoting the deepening of production cuts, and even proposed a temporary and separate production cut of 500,000 barrels per day. The IMF lowered Saudi Arabia's economic growth rate to 1.9% in January this year. Due to the excessive completion of OPEC+'s production cut plan, Saudi Arabia needs oil prices to reach US$83.60 per barrel this year to balance its budget.
The recent continued sluggish oil prices undoubtedly made Saudi Arabia's fiscal situation worse and made the outside world suspicious of the relationship between Saudi Arabia and Russia. Saudi Energy Minister Abdulaziz bin Salman also specifically clarified the relevant reports. RBC Helima Croft, head of global commodity strategy at RBC , said Russia's attitude may mean the meaning of OPEC+ is facing challenges.
OPEC still attaches importance to relations with Russia. OPEC Secretary-General Barkindu said on the 5th that there is no reason to doubt Russia's continued commitment to this partnership, and the Russian government has made this clear on many occasions.
Valga analyzed to the First Financial reporter that OPEC+ will not disintegrate, considering the impact of Trump 's US priority strategy on the global political environment and the impact of rising shale oil production on the market. The United States' strategic partner position in Saudi Arabia is being impacted by Russia's influence in Middle East . It can be seen that the areas of cooperation between the two countries are becoming more and more widespread, and energy is only part of it. This strategic relationship will continue, so on the issue of crude oil production, the two sides will seek a balance in the future. The door to the negotiations of
has not been completely closed. Secretary-General OPEC said after the OPEC+ meeting that he believed Russia would return to the negotiating table. UAE Energy Minister Mazruy said that although the next OPEC meeting will be held in June, as long as Russia agrees, the OPEC meeting can be held in advance. Russian Energy Minister Novak said that the date of the next OPEC meeting cannot be given. Before setting a meeting date, it is necessary to observe the situation of the new coronavirus and the response measures of other countries.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-