● "I'll give you money, so take the crude oil"… Crude oil price minus Corona 19

On May 20th at the New York Mercantile Exchange in the US, Western Texas heavy oil (WTI) May price fell to minus $ 37 a barrel (158.9 liters). The contract is that if you buy a crude oil futures with an imminent maturity, you can get $ 37 per barrel. The expiration of the crude oil futures that some investors bought in advance has returned, but when there is no purchase tax, the company has begun selling the crude oil futures contracted by giving money. If the purchased crude oil futures are not settled through counter-selling (sold), the crude oil must be taken over, but even the storage tank to store the crude oil has disappeared, and urgent oil futures buyers have started to dispose of the held futures contract even after giving money.

WTI prices rebounded and turned positive, but are still trading at the beginning of $ 10 a barrel. On the 12th, OPEC +, a gathering of 10 non-OPEC oil producers such as the Organization of Petroleum Exporting Countries (OPEC) and Russia, led by Saudi Arabia, agreed to cut 9.7 million barrels of crude oil a day from May, and US President Trump boosted crude oil prices They are sending tweets every day for the sake of success.

Earlier this month, when Goldman Sachs predicted that the price of crude oil could go up to one digit and, at worst, minus, most investors were dubious, but eventually Goldman Sachs' prediction came true in two weeks. As Corona 19 spread around the world, most of the economic activities such as production, distribution, and consumption stopped, and crude oil demand fell sharply. Before Corona19, crude oil consumed around the world was 100 million barrels a day. It is estimated that since Corona 19, crude oil consumption per day has declined by 29% and 21 million barrels to 70 million barrels. Given the decline in crude oil consumption since the financial crisis in 2008 was about 5 million barrels per day, it is possible to gauge the impact of the oil market impact of Corona 19.


Crude oil, pouring 100 million barrels a day from the Middle East, South America, and the deep sea oil fields in the North Sea, was called black gold, which is essential for economic activity. However, now it has become a complex that loses economic value and wants producers to surrender to each other. It is known that there are about 60 tankers that are full of crude oil and drift around the world's oceans as the oil storage facilities on land and sea are full. Market researcher Kepler estimates that as of the 27th, the crude oil loaded on a marine tanker reached 150 million barrels, an increase of 76% compared to the 1st of last month.

According to the American Petroleum Institute, US oil inventories have increased by 10 million barrels over the past week to reach 510 million barrels. Although the estimate is less than 16 million barrels, inventory growth is expected to continue for the time being. President Trump has announced that economic activity will resume on May 1, but it is expected that it will take considerable time to normalize economic activity, as the number of corona19 confirmers in the United States continues to grow to over 1 million.

Moody's predicted that crude oil reduction agreement will help regulate supply and demand in the investment guide sent on the 28th, but it is expected that it will take time to recover the price if there is no rapid increase in demand. Moody's expects the average price of Western Texas Heavy Oil (WTI) this year to be $ 30, and the average price next year of $ 40.


● Crude oil prices back 160 years ago… Will the price war end?

Crude oil prices have skyrocketed since the 1970s. Every time there is an outbreak of oil bans from Arab countries in 1973, the Iranian Revolution in 1979 and the Iran-Iraq War in 1980, the invasion of Kuwait in Iraq in 1990, the Asian financial crisis in 1997, the global financial crisis in 2008, and the Jasmine Revolution in 2010. The global financial market also skyrocketed along with the rapid fluctuation. Crude oil prices, which have plummeted since the global financial crisis triggered in the United States in 2008, have soared again due to rising demand from China and the enormous amount of money released into the commodity market to overcome the economic crisis. Amid such fluctuations in prices, OPEC countries centered on Saudi Arabia and Russia led the oil market.


However, the 'shale boom' in the United States that appeared in the 2010s has changed the landscape of the oil market. With the 'shale boom' made possible by the development of the technology for extracting oil from rock, the United States emerged as the world's largest oil producer in 2018. The United States has shifted from an oil importer to an exporter. U.S. crude oil production per day has exceeded 12 million barrels.


In 2016, Russia and Saudi Arabia formed OPEC and non-oil export countries with OPEC + as shale gas prices fell as oil production increased in Guyana, North Europe, Norway and Brazil in South America. I started to regulate the oil production. However, the cut agreement was not properly followed, and the price of crude oil was maintained at around $ 60 a barrel, which resulted in US shale gas companies' biggest profits.

When the situation went like this, Russia withdrew the agreement to cut crude oil in March. Upset by Saudi Arabia, the oil price war was declared by lowering prices and increasing supply, and crude oil prices began to plunge. Crude oil prices began to plunge as the price war between Saudi Arabia and Russia arose as the demand fell sharply as Corona 19 spread. Crude oil prices in the futures market eventually fell to minus as there was no place to accumulate soaring supply.


The British economist reported that the real price of crude oil minus the rate of inflation was at about the same level as in the early 1970s, when the US Civil War broke out in 1861 and 1861, and just before the Israeli-Arab war was announced. . Despite the development of advanced technology, crude oil prices did not drop significantly, and as demand from emerging countries such as China increased, a commodity price boom appeared in the 2000s, but he said that he could not find any long-term pattern of price changes.

Following the US crude oil drilling company Whiting Petroleum, offshore drilling company Diamond offshore also filed for bankruptcy protection. It is also predicted that if such low oil prices continue, hundreds of shale gas companies in the United States will have to go bankrupt. Crude oil consulting firm Rystad Energy predicts that if the price of crude oil is $ 20, 533 crude oil drilling companies will go bankrupt in the United States by 2021, and 1,100 will be bankrupt at $ 10. According to the analysis, if the crude oil price is $ 10, most companies with debts will have to go bankrupt or restructure.

Russia, which has $ 500 billion in foreign exchange reserves, can maintain its fiscal balance at around $ 40 a barrel, while Saudi Arabia's crude oil production price is $ 3.2 million, which is only one-third that of the United States. It is calculated that if the low price is maintained, it can last longer. In Saudi Arabia, however, it is known that the price of crude oil should be $ 84 a barrel to complete the current petroleum project.

It is also predicted that crude oil prices will rise to the US $ 40-50 level when incompetent oil producers go bankrupt or shut down oil wells, reducing supply, and resuming economic activity after Corona 19 retreats. However, it is difficult to know when the corona19 crisis, which continues to spread beyond 317 million people worldwide, will end.

It is also predicted that the demand for crude oil will change fundamentally after the corona19, as the supply of renewable energy is spreading. While more people work remotely and reduce unnecessary overseas travel, structural changes in oil demand are expected as companies switch supply lines from abroad to Korea to maintain a stable supply chain. It is an analysis that this structural change in the demand field, along with the development of high-tech energy-saving technologies, will reduce oil demand and there will be no steep rise in crude oil prices.


● Donghak Ants who are good at the stock market…

Just as it is difficult to predict whether the oil market will succeed or not, it is considered impossible to predict the long-term crude oil price. It is not known what changes the commodity markets around the world will bring to the commodity market to overcome corona19 along with changes in basic demand and supply. What is certain now is that it will take time to overcome Corona 19, and it will take considerable time and effort to overcome the economic aftereffects that Corona 19 will bring.


As Corona 19 spread to the world, KOSPI, which fell to 1,439.43 on March 19, rose to 35.3% from the bottom on April 29 at 1,947.56. In the midst of the offensive of foreigners, individual investors, so-called 'Donghak Ants', are known to have earned savory profits by playing the role of a mayor in the market.

Individual investors have invested heavily in listed index securities (ETNs) or listed index funds (ETFs), which are betting on fluctuations in crude oil prices. According to the Korea Exchange, domestic individual investors have bought over 1.3 trillion won in listed index securities (ETN) and funds (ETF) betting on rising oil futures prices from the 10th to the 24th.

The U.S. Dow Jones Index was released in April as the U.S. gradually resumed economic activity from May, and the U.S. Fed Chairman Powell said, `` We will mobilize all measures, including zero interest rates and quantitative easing until full employment and inflation normalizes. '' On the 29th, 532.65 points rose to 24,633.86. It rose 35.2% from 18,213.65 recorded on March 20th.

The price of Western Texas Heavy Oil (WTI), which once plunged to minus $ 40 on the market on the 20th, rose to $ 15 a barrel. Oil producers agreed to cut 9.7 million barrels of crude oil a day from May 1, and in the United States, which had fallen under the agreement to cut production, the amount of crude oil producers, whose profitability was worsened, went up to 13 million barrels per day in March. In the third week of April, it was reduced to 11.2 million barrels.

However, the world's demand for crude oil has decreased by more than 20 million barrels a day with Corona 19, so there is a lot of crude oil remaining despite the cut. The crude oil storage tank is also expected to become fully saturated soon, and there is also a forecast that another crude oil price drop may occur when the June oil futures expire.

Ebola remedy remedyvir has been shown to have some effect on suppressing corona19, and hopes for ending corona19 have increased as countries around the world have focused on vaccine development. However, even if the most promising scenario is applied, the prospect is that corona19 treatments and vaccines will emerge in the first half of next year. It is not known what kind of catastrophe will come from China to Europe, America, the Middle East and Asia, and now Corona19 is spreading to Africa and South America. Although there are no treatments and vaccines, as the long-term containment measures have prolonged, the economic and social impacts have increased. As a result, countries in Europe and the United States, including Corona 19, are taking risks to lift the containment measures, raising concerns about the second expansion of Corona 19.

The 'Black Swan Age', a situation in which it is difficult to predict when and where changes will take place, provides investment opportunities that are difficult to come back to, but the risks are high. Investment experts are advising that you need to take advantage of the investment opportunities that you have seized, but do not 'all-in' at any one place, but rather leave a margin to cope with any situational change.