The gains in U.S. crude oil and cloth have narrowed, with U.S. crude oil currently trading at $14.05, an increase of 1.96%; Brent crude oil is currently at $20.7, an increase of 1.62%. The fluctuations in international oil prices have weakened due to the intertwining of long and short factors, but they are still under severe pressure amid global oversupply.
The world is in the most dramatic stage of decline in crude oil demand. It is imperative for OPEC+ and other oil-producing countries to reduce production. U.S. production has fallen by 900,000 barrels from historical highs. At the same time, even if the epidemic is still worsening, it may be imminent to restart the economy in the later stage after considering the broader negative impact of the severe economic damage.
Despite the frequent negative signals in the crude oil market, the oil market has shrugged off data showing that U.S. crude inventories have risen to a three-year high and oil demand is at record lows. U.S. President Donald Trump’s order authorizing the Navy to destroy any Iranian gunboats that harass U.S. ships at sea may also support oil prices.
Until crude oil production drops to a level that can offset the unprecedented shrinkage in demand due to the epidemic, oil prices are expected to continue to be close to or below zero.
ICE Futures Europe confirmed on Tuesday that it has taken preparation measures for the possibility of negative Brent oil prices. Meanwhile, crude oil traders are rewriting their risk models to accommodate the potential for unlimited downside.
U.S. production fell 900,000 barrels from record highs
Markets already inundated with bearish signals ignored a U.S. oil inventory report that suggested U.S. oil The four-week average of demand fell to a record low last week, while crude oil inventories hit a three-year high.
Commercial crude oil inventories excluding strategic reserves increased by 15.022 million barrels to 518.6 million barrels, an increase of 3%. The change in U.S. crude oil inventories has increased for 13 consecutive weeks, the change in U.S. gasoline inventories has increased for 4 consecutive weeks, and the change in U.S. refined oil inventories has increased for 3 consecutive weeks, hitting a new high since the week of January 17. The change in crude oil inventories in Cushing, Oklahoma, has increased for seven consecutive weeks. U.S. crude oil inventories last week increased to the highest level since May 2017; U.S. crude oil inventories in Cushing last week increased to the highest level since November 2017.
U.S. domestic crude oil production has declined for three consecutive weeks. Last week, U.S. domestic crude oil production decreased by 100,000 barrels to 12.2 million barrels per day. U.S. gasoline demand fell to a record low in four weeks. The original import volume of the United States last week A new low since 1992.
Excluding strategic reserves, commercial crude oil imports last week were 4.937 million barrels per day, which was 4.937 million barrels per day compared with the previous week. A decrease of 743,000 barrels per day. The four-week average supply of U.S. crude oil products was 15.047 million barrels per day, a decrease of 25.4% from the same period last year. U.S. crude oil exports decreased by 546,000 barrels per day last week to 2.89 million barrels per day. U.S. crude oil imports continued A decline was recorded in 5 weeks.
Oil analyst James Thornhill said that oil prices continue to recover after a crazy sell-off, but are still under tremendous pressure from the intensifying global supply glut; oil prices are expected to remain depressed until production declines enough to offset the unprecedented decline in demand. until.
Mizuho Bank said that oil prices may fall to -$100/barrel in May; at the end of March, Paul Sankey, a senior oil analyst at Mizuho Bank, predicted that oil prices are entirely likely to fall to negative numbers. Now he once again pointed out that the market Already mired in a full-blown, day-to-day market management crisis, will oil prices fall to -$100 a barrel in May? Probably.
The world is in the most severe stage of decline in crude oil demand, and production reduction is imperative
The decline in oil prices has severely damaged the economy that relies heavily on oil. Economies, if the epidemic does not improve, further production cuts have become imperative.
Saudi Arabia may extend some stimulus measures for six months and consider taking other measures to reduce government spending. The Saudi government has the financial capacity to face this crisis and is not expected to withdraw more than 110 billion from foreign exchange reserves- Saudi Arabia will rely on borrowing to finance most of its budget deficit, and the government may issue more than 220 billion Saudi riyals in bonds this year.
Analysts believe that even if OPEC+ reaches a historic agreement to cut production by about 10 million barrels per day in May, it will not be enough to offset the demand loss caused by the epidemic, which may be as high as 30 million barrels per day in the short term. .
Russian Energy Minister Novak said that global crude oil demand has dropped by about 20-30 million barrels per day. The world is in the most severe stage of decline in crude oil demand. OPEC+ and other oil-producing countries have reduced oil production in May. It may reach 15 million barrels per day to 20 million barrels per day, which will improve the situation in the oil market.
IEA Director Birol said that OPEC+ may consider further cutting production. Dialogue among global oil-producing countries is very important. Oil prices may fall further. Oil production in non-OPEC countries has dropped by 220% in the past month. million barrels per day, the three non-OPEC oil-producing countries, the United States, Canada, and Brazil, experienced the largest declines in output. It makes sense for OPEC+ to cut production as soon as possible.
Russian Energy Minister Novak said that the global aviation industry has reduced travel by 50%-60%, and we are now at the bottom of the reduction in global oil demand. Due to the decline in global crude oil demand, it is not ruled out that the reduction in May and June scale of crude oil processing.
This means that this prospect is still far away.
In addition to the feasibility of the mechanism, market reality also means that negative oil prices are not impossible: it was the rapid approach to saturation of global oil storage space that caused concerns that West Texas Intermediate oil futures fell to negative value.
Jorge Montepeque, President of General Index, said that in the North Sea, oil tankers serve as oil pipelines, so are there enough oil tankers to transport oil? If not, you have to pay higher and higher prices for these tankers, causing oil prices to get lower and lower; he helped shape the way the world assesses oil prices when he ran S&P Global Platts;
Pressure on tankers is increasing, and the oil currently stored on these tankers is estimated to be well over 100 million barrels, with another estimate even more than double this number; one of the world’s largest tanker operators, Belgian tanker operator Euronav NV, said , the current situation is driving freight rates to continue to rise, and this trend is not expected to reverse in a short time;
Global oil storage space is decreasing, and onshore oil storage facilities have either been booked. Either is filling up fast and Brent is still under pressure, even if it is more spread out compared to WTI.
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