Why did the price of U.S. oil futures fall to a negative value?
Multiple factors exacerbate the imbalance between supply and demand in the crude oil market. Freight and storage fees have exceeded oil prices themselves
On April 20, the electronic screen of a gas station in New York, USA, showed the price of oil products for supply / Xinhua News Agency
The price of New York crude oil futures plummeted on the 20th and turned negative for the first time in history, meaning that if physical delivery was made, the seller not only did not charge a fee, but also “posted” to the buyer. Analysts believe that the main reason why New York's oil prices have fallen into the negative region is that the spread of the epidemic has led to a sudden drop in crude oil demand, but the crude oil market has a serious surplus, and multiple factors have intertwined the market supply and demand imbalance. At the same time, the contract for delivery in May is about to expire, and traders are forced to close their positions to avoid buying physical crude without inventory capacity, which also puts pressure on oil prices.
Oversupply
Future oil prices may continue to be under pressure
New York oil prices rarely fell to negative values on the 20th. As of the close of the day, the price of light crude oil futures for May delivery on the New York Mercantile Exchange fell by US $ 55.90 to close at US $ 37.63 per barrel. 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%.
Subsequently, as the market was about to officially switch the main contract, the price of light crude oil futures delivered in May on the New York Mercantile Exchange rebounded sharply, rising from $ 37.63 per barrel at the close of the 20th to above $ 1 per barrel.
The International Energy Agency, the Organization of Petroleum Exporting Countries (OPEC) and several market research institutions all believe that as the production cut agreements between OPEC and non-OPEC oil-producing countries have not yet begun, and the demand for crude oil has dropped sharply in the new crown epidemic, April is the world crude oil market. The most severe month of oversupply.
Giovanni Staunovo, an oil analyst at UBS, said the decline in the main contract of crude oil futures reflects a serious oversupply in the oil market in the second quarter. As oil inventories continue to rise in the coming weeks, crude oil futures prices for June deliveries are likely to continue to be under pressure.
ANZ commodities senior strategist Daniel Hines believes that the reason for the collapse of New York crude oil futures prices is that crude oil futures delivered in May are about to expire, and traders are forced to close their positions to avoid having no inventory capacity. Purchase physical crude oil. Due to the plunge in demand and insufficient oil storage capacity, the current spot price is extremely weak. It is expected that oil prices will remain under pressure in the next month or so.
Cause Analysis
Freight and storage fees exceed the oil price itself
Since the beginning of this year, international oil prices have been tragically slashed, and New York crude oil futures May contract prices fell to a negative value on April 20-the seller not only can not charge fees, but also "upside" $ 37.63 per barrel of crude oil. As to why there is negative oil price, Yan Jiantao, deputy general manager of Longzhong Information, interpreted that the most important factor currently affecting oil prices is not production cost, but inventory, especially in inland oil-producing areas.
According to the relevant trading rules, the US WTI crude oil May futures will be delivered on April 21. The New Crown epidemic continues, and markets in most parts of the United States are at a standstill. The few buyers of this batch of futures are only "required" entities such as refineries and airlines. However, due to the rapid expansion of production capacity brought by the previous “price war” of crude oil, global crude oil inventories will reach their maximum production capacity in May. The ultra-low oil prices and stagnant market have made oil refineries "more and more profitable," and airlines "can't buy them."
Guo Xiao, director of crude oil research at Guotai Junan Futures, analyzed, "The price of U.S. oil futures fell to a negative value, reflecting the fact that the bulls are unwilling to deliver due to the three factors of high logistics fees, high storage fees, and poor oil price expectations. Shi Jiayin, an analyst at Yangtze River Futures, believes that there is now a substantial surplus in the U.S. market, and the delivery capacity is almost full. There is an additional cost for shipping the goods out of the delivery site after long delivery; short sales are eager to ship, and excess production is pushing up storage fees.
When the oil price drops to a negative value, it means that the freight and storage fees of crude oil have exceeded the oil price itself. "At present, with the increasing pressure of global crude oil inventories and rising storage costs, even if long bulls who buy a large number of crude oil contracts enter delivery, the crude oil participating in the delivery will have nowhere to store." Wang Xiao said.
Future direction
Oil companies are ready to fight a protracted war
"Does the negative oil price mean that refueling not only does not need money, but can make money?" Faced with such doubts, industry insiders said that the so-called "international oil price" in the market currently represents only futures prices, not spot prices. Crude oil futures The contract has a life cycle. The physical delivery will be carried out after the last trading day of the monthly contract, and the market focus will naturally shift to the next contract.
At present, with the spread of the New Coronary Pneumonia epidemic in the world, global economic and trade activities have been severely hindered, and the turmoil in the international financial market has cast a shadow on the global economic prospects. The International Monetary Fund has predicted that the global economy will shrink by 3% this year, the worst recession since the Great Depression in the 1930s. Under the impact of a sharp drop in demand, prices of production materials, including crude oil and non-ferrous metals, have fallen sharply.
Experts in the domestic oil and gas industry said that the sharp drop in international oil prices has both pros and cons to the domestic crude oil industry chain. On the one hand, the plunge in international oil prices can reduce the cost of oil imports, and at the same time reduce domestic energy prices, thereby reducing logistics and industrial production costs; on the other hand, the plunge in oil prices will have an impact on the domestic oil and gas exploration and development industry. Domestically, it is also faced with the problem of high inventory levels in the refining and chemical sales links. High inventory pressure will certainly be transmitted to the upstream, which will have an impact on the domestic oil and gas industry chain.
"We do not hope for a short-term rebound in oil prices. We are currently actively adjusting equipment maintenance periods, improving product lines, and expanding domestic and foreign markets to ease operating pressures and prepare for a protracted war." Head of a petrochemical company in Shanghai Say.
On April 21, the Shanghai International Energy Trading Center issued the "Notice on Doing a Good Job in Market Risk Control." The Beijing Youth Daily reporter learned that the “Notice” stated that the international situation is complex and changeable, and there are many uncertainties that affect the operation of the market. All relevant units are requested to do a good job in risk prevention, rational investment, and maintain the smooth operation of the market. In addition, the "two barrels of oil" also stated that it firmly adheres to the bottom line that no major risks occur.
Text / Reporter reporter Zhang Xin Zhang Qin (some comprehensive Xinhua News Agency)
Background link
The production cut agreement will be officially implemented next month
The spread of the new crown epidemic has caused a severe blow to global economic activity and greatly weakened the demand for crude oil. Although non-OPEC oil-producing countries such as OPEC and Russia have recently reached an agreement to reduce production, the agreement will only formally begin implementation next month. Even if it is implemented, it may still not be enough to offset the decline in demand.
In addition, the reason for the plunge in oil prices is that the panic and uncertainty caused by the epidemic have increased investor concerns, so whether the epidemic can be contained is also one of the key factors affecting the future trend of oil prices. If the international community works together to effectively control the epidemic, this will help investors restore confidence and support the trend of oil prices to a certain extent.
Recently, as OPEC and non-OPEC oil-producing countries have been unable to reach an agreement on production cuts, and the new crown epidemic has led to a drop in demand, international crude oil prices have fluctuated dramatically, affecting the global market.
Non-OPEC oil-producing countries such as OPEC and Russia held a video conference on April 12 to reach an agreement on crude oil production reduction. The participants decided to reduce the average daily crude oil production by 9.7 million barrels from May to June this year, and reduce the scale of production reduction from July to the end of the year. To 7.7 million barrels. According to Xinhua News Agency