(International Watch) Analysis of Three Question Marks Behind the "Diving" of International Oil Prices
China News Agency, Beijing, March 10th: Analysis of the three question marks behind the "diving" of international oil prices
China News Agency reporter Liu Xu
Following the failure of OPEC and Russia to reach an agreement to reduce crude oil output by 1.5 million barrels per day, Saudi Arabia immediately started a crude oil price war. According to the trading data on the 9th, the first working day after the negotiations broke down, international oil prices "flash collapsed", and the global market oil benchmark Brent crude oil price fell by more than 30%, with the lowest price in the day reaching 31.02 US dollars per barrel. The decline in oil prices has caused the global related futures and stock markets to plummet, and global financial markets have shown turbulence.
Why did oil prices suddenly dive?
On the surface, the immediate cause of the plunge in oil prices was that Russia withdrew from OPEC and non-OPEC (OPEC +) production reduction agreements, and Saudi Arabia launched a price war to seize market share to put pressure on Russia.
In addition, due to the global epidemic of new crown pneumonia, crude oil originally showed a significant downward trend. The United States "Foreign Policy" magazine pointed out that the new crown pneumonia epidemic caused a sudden slowdown in global economic activity, which is particularly evident in the demand for oil. British financial data company Markit predicts that global demand for crude oil will decrease by nearly 4 million barrels a day in the first quarter of this year. "This is an unprecedented quarterly decline record." Iranian Petroleum Minister Zanganeh also said recently that the new crown pneumonia epidemic has reduced oil. Demand and lead to an imbalance between supply and demand in the oil market.
Professor Ding Long of the National Open Research Institute of the University of International Business and Economics analyzed in an interview with the China News Agency that under the appearance of the collapse of the OPEC + mechanism, the root cause of the sudden drop in oil prices was the unhealthy supply-demand relationship in the international crude oil market. Ding Long pointed out, "In the context of the rapid development of new energy and shale oil, the oversupply of the crude oil market, the production limit and price protection mechanism masked the crisis and distorted the true supply and demand relationship in the market. The day when the existing system collapses will come sooner or later. "So, this crisis has declared the end of OPEC's mission, and the unsustainability of the OPEC + mechanism heralds the early end of the oil age."
What is the impact of the plunge in oil prices?
From the market reaction point of view, oil prices as one of the global economic barometer, crude oil market volatility and epidemic spread globally, which has caused a huge impact on global stock markets. On the 9th, the Middle East stock market suffered a plunge at the opening of the market. More than half of the major global stock market indexes such as the British FTSE 100, German DAX, French CAC40, Nikkei 225, and Australian Standard & Poor's 200 fell more than 6%. It once fell 7%, which rarely triggered the fusing mechanism.
From a long-term perspective, analysts generally believe that the economies of oil-producing nations, including Saudi Arabia and Russia, will face severe challenges. The future gaming relationship between the three super-oil-producing nations of Saudi Arabia, Russia and the United States deserves high attention.
Ding Long pointed out in this analysis that after the shale oil revolution, the world ’s energy structure has become a “three-legged” pattern of OPEC oil producers led by Saudi Arabia, non-OPEC oil producers led by Russia, and emerging oil producers led by the United States. The impact of the plunge in oil prices has the greatest impact on these three parties: Saudi Arabia and Russia ’s economies rely heavily on oil export revenues and are unable to withstand low oil prices for a long time; for the United States, low oil prices will cause shale oil to face industry-wide losses, while the oil and gas industry It is a new economic growth point in the United States and an investment hotspot in the past few years. Compared with the possible increase in consumer spending caused by falling oil prices, the damage to the US economy may be more serious.
CNN specifically stated in an article entitled "Low Oil Prices Will Harm the U.S. Economy." Although drivers, airlines, and other oil users may save a lot of money from drastically reduced prices, in the entire oil market, Bankruptcy, loan defaults, job losses, suspension of capital expenditures, and other economic ripple effects are likely to occur.
Where is the price of oil going?
Tom Kloza, head of global energy analysis at Oil Price Information Services, said recently, "We are in a price war." "This is a short-term war, or is it a protracted war? I do n’t Yes, I only know that this is truly unprecedented. "As Cloza asked, how this" price war "will end is the focus of public opinion.
Analysts believe that Saudi Arabia's low-cost strategy is not a long-term solution, regardless of the financial dependence on crude oil or the cost of crude oil profit and loss. Ding Long also pointed out that Saudi Arabia ’s slightly overly aggressive measures have caused international oil prices to fall to a level unbearable to all oil producing countries, and Russia may return to the negotiating table, when the rebound in oil prices will eventually come.
However, some analysts reminded that Saudi Arabia and Russia have great differences in terms of production reduction, and that the global epidemic has not yet been fully and effectively controlled. It is difficult to boost market demand for a while, so it is difficult for the parties to negotiate to reach agreement again in the short term. During this period, countries need to beware of possible "black swan" incidents during low oil prices. Once geopolitical conflicts occur, global economic performance may be affected by a new round of shocks. (Finish)