Oil prices fell again, with U.S. crude oil falling 10% at one point, hitting a two-session low of $15.24. U.S. crude oil is currently trading at $15.57, a decrease of 8.09%
U.S. crude oil fell into the negative zone for an unprecedented time last week. Although U.S. crude oil subsequently rebounded from oversold and closed positive for three consecutive trading days, it still recorded a weekly decline The decline of more than 30% was due to demand concerns and oil storage space approaching the limit, which limited the room for a rebound in oil prices. Some institutions even warned that the June U.S. crude oil contract still risks falling into negative values.
However, the restart of the economy in the United States and Europe may bring some comfort to the oil market. At the same time, there is news that Saudi Arabia is preparing to implement production cuts in advance, and Russia is also preparing to halve crude oil exports in some regions. In addition, some crude oil storage providers are also trying to provide additional storage space, which may also partially alleviate the pressure on oil prices.
It is worth mentioning that the number of crude oil rigs in the United States has dropped to 378, and may fall below 300 in the future. So far this year, the number of crude oil rigs has dropped by nearly 300. Involuntary production cuts triggered by low oil prices may provide support to oil prices.
However, analysts agree that unless there is a substantial recovery in crude oil demand, the Global crude oil inventories will reach their limit at the end of May, which will cause oil prices to fall further in the short term.
The global economy has recorded the largest contraction on record and will be Continue to put pressure on oil prices
Although there was an oversold rebound after the previous sharp drop in U.S. crude oil due to expectations for the U.S. and Europe to restart their economies, U.S. crude oil prices continued to rise for the third time in the last three trading days last week. Despite the continuous rise, U.S. crude oil still recorded a weekly decline of more than 30%, as demand concerns caused by the impact of the epidemic on the economy limited the rebound of oil prices.
A survey of global analysts shows that the global economy has fallen into recession due to the epidemic and will record the largest contraction on record this year, followed by a U-shaped recovery that is likely to last for a long time.
A survey of more than 500 analysts showed that the economies of most major economies are very sluggish and their economic recovery is expected to be U-shaped.
87 of the 155 analysts surveyed (more than 55%) said that the global economy will show a U-shaped recovery. 31 analysts said it would be V-shaped, while 24 said it would be more like a hook. There are some expectations for a W or L shape.
The global economy is expected to shrink by 2.0% this year, compared with poll forecasts of 1.2% contraction three weeks ago and 1.6% growth on March 20, underscoring the rapidly deteriorating outlook. The forecast range is from growth of 0.6% to contraction of 6.0%.
The latest private sector view is less pessimistic than the International Monetary Fund’s (IMF) latest forecast of a contraction of 3.0% this year. But this is a far cry from the 3.3% growth estimated at the beginning of the year before the global outbreak.
“The global economy is plummeting at the fastest pace since World War II.” Michael Hanson, senior global economic analyst at JPMorgan Chase, pointed out. He also said that unprecedented policy support means that the global economy will begin to rebound faster than in a typical recession, but economic activity will remain sluggish until the end of 2021.
Global oil traders expect that the oil market will be oversupplied in the coming months due to the economic shutdown caused by the epidemic. Oil-producing countries may not cut output fast or deep enough to support prices.
John Kilduff, a partner at hedge fund Again Capital LLC, said, “Efforts to restrict supply will be difficult to match the drop in demand caused by the epidemic.”
Global Reserve Oil space could run out in the next three to four weeks?
Previously, as Cushing crude oil inventories were close to the limit, the market sold off the May U.S. crude oil contract in hand, which caused U.S. crude oil to fall into the negative zone. But there are more signs that the trend is getting worse.
Currently, onshore oil tanks in most parts of the United States are at full capacity, and storage space in other parts of the world is also at full capacity. Nearing the limit, desperate traders and oil producers are doing their best to store oil. There are a large number of supertankers parked off the West Coast of Los Angeles. This oil is currently backed up at sea, bringing huge costs and storage pressure.
The aviation video released by the U.S. Coast Guard on social media on April 24, local time, clearly showed that the waters near California were full, with a length of about two football fields, about 30 meters long. oil tanker. Twenty of the tankers have been parked in nearby waters for nearly a week; due to the exhaustion of storage space on the ground in California, many tankers have nowhere to go.
The OPEC+ production reduction agreement will take effect on May 1, but there are already a large number of tanker fleets going to various places, releasing more than 40 million barrels of crude oil, and most of the fleets will go to Saudi Aramco in Germany. Saskatchewan owns the Motiva refinery, but overall refinery output has dropped to 67% and may continue to decline.
If refineries are ultimately unwilling to produce crude oil, then crude oil has almost no value. If crude oil is produced but has nowhere to store it, then oil prices will fall into negative values. The key question now is how long it will be before all the world’s oil storage space is exhausted. Analysts may only have two weeks left, and in the best case, only two months. The petroleum industry infrastructure is vast and complex, and the industry faces unprecedented challenges.After plans for a Texas pipeline are approved, “all that’s left to do is add pumps to the pipeline, which is easy to do.” “We estimate it will be ready by mid-May,” a company spokesman said.
Although increasing oil storage space will help alleviate the downward pressure on oil prices in the short term. But analysts point out that 2 million barrels of space is a drop in the bucket for growing crude oil supplies. If crude oil demand never materially recovers, available storage in Cushing will be exhausted by mid-May or the end of May at the latest. Then oil prices still face the risk of falling further.
Saudi Arabia wants to cut production ahead of schedule, and Russia will halve crude oil exports from some regions to support oil prices
Saudi Aramco, Saudi Arabia’s largest oil company, has planned to start reducing production before the target date of May 1 and will achieve its production target of 8.5 million barrels per day ahead of schedule. In addition, another OPEC member, Algeria, told OPEC representatives that it would begin cutting oil production immediately.
Iraqi Oil Minister Ghaban said that once the agreement begins to be implemented, oil prices will rise. Garban expects oil prices to rise to $50 per barrel by the end of the year. Oil prices are expected to improve after the production cut agreement is implemented. He predicts that Iraq’s oil revenue will decrease by 50% year-on-year in 2020.
Angolan Minister of Resources and Petroleum Diamantino Azevedo also said last Friday, “Despite these measures taken by OPEC, oil producers in various countries should be aware that they may be required to make deeper production cuts.” Angola is a member of OPEC.
Russia’s first announcement of crude oil shipment schedule after agreeing to cut production showed that the country plans to halve oil exports from its Baltic and Black Sea ports in May this year. </p
