ChinaNews Client Beijing, April 21 (Zhang Xu) In 2020, we continue to witness history! After witnessing several meltdowns of US stocks, this time, we witnessed "negative oil prices."
On April 20, local time, international oil prices set a new record, and the price of WTI, a light crude oil futures in the United States, plunged to a record low in May, falling to a negative value for the first time in history.
WTI May crude oil futures day K-line source: Wind
On the same day, the price of May US light crude oil futures, which was about to expire, plunged by about 300% to close at -37.63 USD per barrel. This is the first time oil futures have fallen into negative trading since they began trading on the New York Mercantile Exchange in 1983. On the same day, the price of London Brent crude oil futures delivered in June fell by 2.51 US dollars to close at 25.57 US dollars per barrel, a decrease of 8.94%.
Why did it plummet and there was a "negative oil price"?
Goldman Sachs said that the plunge in oil prices is an unprecedented oversupply in the oil market.
Market analysts believe that the OPEC and major oil-producing countries' production cuts will only start on May 1st. However, due to the recent epidemic, the sharp drop in demand has led to a surge in stocks, and the market's supply and demand has been seriously unbalanced, leading to a sharp drop in oil prices. .
The latest report of the International Monetary Fund (IMF) predicts that the global economy will contract by 3% in 2020. OPEC ’s monthly report on the oil market released last week predicts that the global average daily oil demand will decrease by 6.85 million barrels in 2020. This will be the first annual decline in global oil consumption since 2009 and the financial crisis; the average daily global oil demand will decrease by 2,000 in April. Ten thousand barrels, the largest decline in history.
The plunged contract is the May New York Mercantile Exchange light crude oil futures contract that will expire soon. Under normal circumstances, the price difference between the two crude oil futures contracts that will be changed monthly will not be too large, but the US crude oil futures that are about to expire The difference between the May contract and the June contract has exceeded $ 10. It is very rare for investors to double the cost if they want to maintain the same position.
Inxis, chief global market strategist of Axicorp Financial Services, believes that the market believes that the production cut agreement is not enough to balance the crude oil market. At present, investors are selling at all costs and no one is willing to deliver.
Due to the impact of the new coronary pneumonia epidemic, most parts of the United States are still in a state of ban. The main buyers of US crude oil futures contracts in May are entities that actually receive delivery, such as refineries or airlines. But the oil storage facilities of these institutions are full, and few buyers are willing to pay for the futures of this contract.
US Energy Information Administration (EIA) data shows that US crude oil inventories have increased for 12 consecutive weeks and have climbed to a new high of nearly 3 years.
As of the week of April 10, US crude oil inventories increased by 19.24 million barrels from the previous week, far exceeding the expected 11.76 million barrels, the previous value increased by 15.177 million barrels. U.S. crude oil inventories have been growing for 12 consecutive weeks, and the gains continue to hit record highs. Total crude oil inventories have reached their highest level since June 2017, while US gasoline inventories are at record highs. The storage tanks in Cushing, Oklahoma have now reached 69%, up from 49% four weeks ago. Under such circumstances, crude oil producers can only cut oil production in the next few months and lower crude oil prices in recent months to cut inventories and reduce production costs.
S & P Global Platts Energy Information analyst Chris Midgley said that Cushing is an inland city, and the crude oil storage capacity is likely to fill up within 3 weeks. Once filled, it will be more difficult for WTI crude oil futures contracts to be physically delivered.
Data map: The gas station staff is refueling the vehicle. Zhang Yunshe
What does "negative oil price" mean?
A negative oil price means that the cost of transporting oil to a refinery or storage has exceeded the value of oil itself, and many small and medium-sized oil companies will face bankruptcy risks.
According to media reports, the US epidemic has caused problems such as poor infrastructure and transportation and logistics, and crude oil is difficult to export or store. Closing wells and shutting down production purely for economic reasons is risky, so production continues. If the storage capacity of the storage tank is insufficient or the storage cost is too high, the producer would rather accept the negative oil price and have to lose money to let the buyer pull away.
However, it should be noted that a negative number does not mean that everyone will refuel for free in the future. The only thing that has fallen to a negative value is the May light crude oil futures contract that expires immediately, not the spot price of crude oil. The trading price of the US oil June futures contract is still at Above $ 20, Brent crude oil is still trading at more than $ 25.
Judging from the market reaction, on the 21st of Beijing time, international oil prices rebounded, and the main contract of NYMEX crude oil futures is now up more than 7%, reported at around 22 US dollars / barrel. The main contract of Brent crude oil futures is now up more than 1.5%, reported near 29.6 US dollars / barrel.
Trump: a good time to bargain on crude oil
According to foreign media reports, US President Trump said that the fall in oil prices will be very short-term; negative oil prices reflect financial market conditions, not oil market conditions. Now is a good time to buy crude oil, and I hope Congress will support it. Research is under way to include up to 75 million barrels of oil in the strategic oil reserves; consideration will be given to stopping the import of Saudi oil.
However, Xingzheng Futures believes that under the severe pessimism on the demand side, after entering May, the reduction in global supply under the production reduction agreement will not change the direction of oil prices. It is expected that oil prices will maintain a pattern of wide fluctuations at the bottom.
Amrita Sen, chief oil analyst at EnergyAspects, an independent research and consulting firm, said that the reduction in output is far from enough. Global energy demand in April may fall by 25 million barrels per day compared with the same period last year. Taking into account the impact of the global economy on the epidemic, the recovery of crude oil demand will be very gradual, so these production cuts at best only provide short-term support for oil prices, but will not cause oil prices to rise.
Will domestic oil prices be affected?
A new round of domestic product oil price adjustment window will open at 24:00 on April 28. According to Longzhong Information, as of April 20, the comprehensive change rate of crude oil was -7.4%, which is expected to correspond to a reduction of 245 yuan / ton, but this round A high probability will trigger the protection mechanism without adjustment.
According to the "Petroleum Price Management Measures", the average price of international crude oil to which domestic refined oil prices are attached is lower than the "floor price" of US $ 40 per barrel, and domestic oil prices will not be adjusted. The unadjusted part will be handed over to the central treasury in full in accordance with the regulations and included in the general public budget management.
Prior to April 15, domestic oil prices were not adjusted due to the "floor price" of the average international crude oil price of less than US $ 40 per barrel, which was the second consecutive unadjusted. Historically, in the fall of international oil prices in 2016, the domestic price adjustment of refined oil products had "six consecutive stops" due to the "floor price" mechanism. (Finish)