Chinanews.com Client, Beijing, March 9 (Zhang Xu) Recently, Saudi Arabia "unsettled" after negotiations with Russia to reduce production by 1.5 million barrels per day (OPEC). Start the crude oil price war again.
On the 9th, both WTI crude oil futures and Brent crude oil futures, the weather vane of the global crude oil market, plummeted. WTI crude oil futures once fell below $ 30 / barrel. How long will the crude oil price war be fought? Will international oil prices continue to fall? What impact will it have on China?
WTI crude oil futures price chart.
Crude oil prices plummet, Nongfu Springs mineral water is more expensive than oil
On March 9, global financial markets fluctuated sharply. Brent crude futures fell sharply and opened lower, opening 25% lower and then falling more than 31%. WTI crude oil futures fell sharply by more than 22% at the opening, and once fell by more than 30%, falling below the round-trip mark of $ 30 per barrel.
What is the concept of international oil prices falling to about $ 30 / barrel?
A barrel of crude oil is about 158.98 liters. Based on the WTI crude oil futures price of $ 30 / barrel, the converted crude oil price is 210 yuan / barrel. The price of Nongfushan Spring mineral water of the same capacity is 635.92 yuan, which is three times the current international crude oil price, which is a veritable "water is more expensive than oil".
Affected by the crude oil price war, 9th global market risk aversion rose. US Nasdaq 100 futures and S & P 500 index futures plunged nearly 5%, and triggered trading restrictions leading to a meltdown. The Nikkei 225 Index closed down 5.07%, and the FTSE China A50 Index, Hong Kong Stock Hang Seng Index, South Korea, Germany, France and other stock market indexes generally fell sharply.
In the domestic stock market, the Shanghai Composite Index fell 3.01%, the Shenzhen Stock Exchange Index fell 4.09%, and the GEM Index fell 4.55%. Most of the domestic futures markets also fell. Among them, the energy and chemical industry fell the most, and the fuel oil, asphalt, crude oil, PTA, methanol, and ethylene glycol fell.
Why does Saudi Arabia fight a crude oil price war?
In response to the shrinking global oil demand caused by the new crown pneumonia virus epidemic, Saudi Arabia has previously proposed a larger production reduction plan of 1.5 million barrels per day. Among them, OPEC countries reduced output by 1 million barrels per day, and non-OPEC countries reduced production by 500,000 barrels per day.
If the plan is finally implemented, the total output reduction will reach 3.6 million barrels per day, a record since 2008.
According to foreign media reports, on March 6, local time, the eighth OPEC and non-OPEC (OPEC +) ministerial meeting was held in Vienna, Austria. In the end, OPEC and oil-producing allies failed to reach any agreement to reduce production. At the beginning, OPEC-related oil-producing countries may completely liberalize production restrictions.
After the meeting, Saudi Arabia started a price war. Saudi Aramco attracted customers to purchase Saudi crude oil with the biggest discount in nearly 20 years. Crude oil sold to Asia in April was lowered by $ 4-6 / barrel, crude oil sold to the United States in April was lowered by $ 7 / barrel, and the discount on flagship Arab light crude oil sold to Northwest European refiners was expanded to $ 8 / barrel. The Saudi side also said that if the market needs it, it can reach output of 12 million barrels per day.
Gu Jintao, head of BOC International's futures research department, believes that Saudi Arabia's price war is mainly caused by two factors. On the one hand, after failing to negotiate with Russia for further deepening production cuts, Saudi Arabia intends to warn Russia by suppressing oil prices and pave the way for a later agreement. On the other hand, Saudi Arabia also wants to use this price war to force shale oil production to decline and regain market share occupied by the United States.
On February 5, more than 10 ships including Yantai Port West Port, an ultra-large tanker carrying 260,000 tons of crude oil, the "World Lake" ship, and 40,000 tons of thermal coal "Ruining 2" ship were operating intensively. Photo by Hao Guangliang, China News Agency
Has the price of crude oil fallen?
Jin Jiarui, senior analyst of Jinlianchuang Crude Oil, said that the current cost of crude oil in Saudi Arabia is about $ 10 / barrel, while the cost data released by Russia last year was $ 45 / barrel, and the current cost is estimated at about $ 40 / barrel. The price is around $ 20. Therefore, the current oil price has fallen to 30 US dollars / barrel, and has reached or approached the critical point of the countries.
"However, despite the plunge in international oil prices, the crude oil producing countries cannot stop production, otherwise the previous exploration and development and scientific research investment will not be recovered."
Wu Jiarui pointed out that although the lowest price that countries can bear is speculatively nominally, it is actually not a question of affordability. Even in the case of losses, in order to maintain relations with countries and to maintain basic people's livelihood, oil production The country will have to continue to produce, which will also cause a heavy financial burden.
Fischer Global Energy Consulting (FGE) believes that if crude oil prices fall to more than $ 20 / barrel, Russia will make a compromise within three months; but if the price remains at more than $ 40 / barrel, Russia's compromise may take up to A year's time. Russia can tolerate oil prices of US $ 40 / barrel, but cannot tolerate more than US $ 20 / barrel; prices below US $ 50 / barrel will cause serious harm to OPEC, and all parties will have a strong incentive to compromise.
In recent years, the output changes of major crude oil producing areas and the trend of international oil prices. Picture from Jinlianchuang
Goldman Sachs analysts said in the latest report that the price of Brent crude could drop as low as $ 20 per barrel, which will test some oil producers. "The price war has completely changed the outlook for the oil and gas market. Goldman Sachs lowered its oil price forecasts for the second and third quarters to $ 30 a barrel."
Wu Jiarui believes that due to the superimposed negative factors, oil prices have not fallen to the end, and it is likely to be within 25 dollars in the end.
"But this time the decline in oil prices will not become a long-term trend like the collapse of oil prices in 2014." Jia Jiarui said that the purpose of increasing production in Saudi Arabia is not to hope that oil prices will fall. The reason to increase production is to force Russia to continue cooperation with OPEC. To the extent that Russia itself does not feel it can afford it, it is likely to restart the production reduction agreement.
"The next production reduction meeting is on June 9. Saudi Arabia and Russia are likely to jointly reduce production again in the near future, when oil prices may have a retaliatory rebound."
How does the plunge in crude oil prices affect China?
CCB Futures believes that according to China's current oil price management measures, when the price of anchor oil is below $ 40, domestic refined oil prices will no longer be adjusted downwards in line with international oil prices, creating policy arbitrage opportunities for refiners.
"If the oil price falls further, it will largely stimulate the purchase of crude oil by Chinese refineries, and then support the demand for crude oil. In addition, low oil prices may also stimulate China's strategic reserves."
According to data released by the General Administration of Customs, China's crude oil imports in 2019 exceeded 500 million tons for the first time, reaching 506 million tons, an increase of 9.5% year-on-year. In terms of imports in recent years, although the volume of crude oil imports has increased year by year and the base has continued to expand, the annual import volume growth rate has remained stable at about 10% year-on-year.
Industry insiders estimate that for every $ 10 drop in oil prices, Chinese companies and residents will save 107 billion yuan in expenses.
Beixin Ruifeng Fund said that China is currently the world ’s largest oil and gas importer, the second largest consumer of oil and gas, and the largest consumer of incremental oil and gas. Overall, the plunge in international oil prices has outweighed the disadvantages of China ’s development.
China ’s consumption of over 70% of its crude oil comes from imports. The plummeting oil prices have drastically reduced the cost of oil in China. In addition to the reduction in the prices of gasoline and diesel, more importantly, the cost of a series of petroleum-based industrial production raw materials such as ethylene and propylene will be reduced , Synthetic fibers, synthetic rubber, etc., and directly drive down the cost of the industrial chain downstream.
On February 20, GAC Group's self-made masks began mass production, with a daily production capacity of one million. Photo by Wang Hua
Taking medical masks, which are the most in short supply under the epidemic as an example, polypropylene, its core upstream raw material, will directly benefit from the decline in oil prices, which will lead to a reduction in the production cost of mask raw materials.
Beixin Ruifeng Fund believes that China is facing certain inflationary pressures and the impact of the uncertainty of the overseas epidemic situation. The decline in international crude oil prices will help China release internal pressure and win opportunities for economic development. (Finish)