International oil prices plummeted for two consecutive days! Has the global economic crisis emerged? Exclusive interview with Dong Xiucheng, professor of foreign economics and w88
(Source: Ifeng.com Finance "No. 4 Qiyang Road" 2020-04-22)
Since this year, "black swans" have occurred in the global financial market. The US stock market has been circuit breaker four times in 10 days and the Federal Reserve's "zero interest rate" policy is still lingering. The crude w88 casino games market on the other side has also begun to rewrite history in a hurry.
On April 20, local time, the price of West Texas Light crude w88 casino games futures in the United States went out of a jaw-dropping market. The settlement price of May (WTI5) closed at -$37.63 per barrel. It plummeted by more than 300% during the session, reaching the lowest level. It was quoted at -$40.32 per barrel; this is the first time that w88 casino games futures have fallen into negative trading since they began trading on the New York Mercantile Exchange in 1983. It also means that w88 casino games sellers would rather sell to sellers at a discount, and the cost of w88 casino games transportation and storage has exceeded the value of the w88 casino games itself.
On the evening of the 21st, Beijing time, investors’ panic selling spread to the contract for June delivery. June WTI crude w88 casino games futures once plunged more than 60%, refreshing the contract’s intraday record low to $6.57/barrel. The U.S. crude w88 casino games fund even hit a circuit breaker downwards; further away, the price of July WTI futures also fell by about 31%, closing at a price of $18.04/barrel. Coincidentally, the June futures price of London Brent crude w88 casino games, another indicator of international w88 casino games prices, also fell 10.17% to US$22.97 per barrel at 9 am local time on the 21st.
As of the early morning closing on the 22nd, Beijing time, the price of West Texas Intermediate crude w88 casino games (WTI) futures for June delivery on the New York Mercantile Exchange fell by US$8.86, or 43.4%, to close at US$11.57 per barrel; the price of WTI crude w88 casino games in May closed at US$10.01 per barrel, up by US$47.64, or 126.60%.
"Since this week, I have been witnessing history every day." This rare spectacle has made investors dumbfounded, but more questions about the collapse of w88 casino games prices are slowly emerging - why did international crude w88 casino games futures fall so hard this time? What does the emergence of "negative w88 casino games prices" mean for the global crude w88 casino games market? Is this a precursor to a global economic crisis? Will domestic w88 casino games prices be affected by this?
With these questions, ifeng.com Finance recently conducted an exclusive interviewDong Xiucheng, professor at the w88 casino of International Business and Economics at the w88 casino and researcher at the Institute for Opening up, Regarding the phenomenon of international crude w88 casino games prices suddenly going "negative" overnight, Dong Xiucheng bluntly said that it was a "shocking big event"; he said that this drop in w88 casino games prices to negative numbers is actually a continuation of the recent plunge in w88 casino games prices, which fully reflects the serious imbalance between supply and demand in the U.S. w88 casino games and gas market. "The United States is the world's largest w88 casino games and gas consumer market. Americans mainly rely on cars and airplanes to travel. However, the severe epidemic situation has led to the closure of cities in various places and the shutdown of economic activities. w88 casino games consumption has plummeted, inventory backlogs are serious, and inventory costs have skyrocketed. Once you have crude w88 casino games in your hands, the cost of keeping it is huge."
Regarding the reason for the emergence of "negative w88 casino games prices", Dong Xiucheng also said that the futures market itself belongs to the financial category, and the entities engaged in crude w88 casino games trading activities on the exchange mainly include two categories: entity enterprises and financial institutions. "There are differences in the functions of these two types of companies trading on exchanges. That is to say, w88 casino games sellers may not have w88 casino games in their hands, while w88 casino games buyers may not need w88 casino games. Entity companies mainly focus on hedging, while financial institutions mainly focus on speculation." Dong Xiucheng told reporters, "According to the rules of exchange futures contracts, delivery or settlement must be made after expiration. For traders who hold futures contracts but do not really want to obtain w88 casino games, there will always be delivery. Sell the contract before the expiration date, otherwise you will be faced with the problem of how to deal with the physical w88 casino games once the w88 casino games is in your hands. Under the current market conditions, if you have an expired crude w88 casino games contract and the inventory cost remains high, you will suffer huge losses, so you will ship the contract at all costs. Under this difficult choice of choosing the lesser of two evils and minimizing the loss, such a seemingly absurd event occurred. ”
The crude w88 casino games market has collapsed for two consecutive days, and the spot crude w88 casino games that is about to be delivered has become a "hot potato" among traders. This situation also reflects the market's deep-seated concerns about the operation of the global economy. Dong Xiucheng said frankly that the w88 casino games price plunge indicates that investors are not optimistic about the future economic development trend, have serious lack of confidence or are extremely pessimistic, and are even worried that the global economy may gradually turn from recession to depression, and worry about a repeat of the global economic depression in the 1930s. He pointed out that the w88 casino games price plunge actually means "a severe loss of some financial capital" or "evaporation of financial assets" in the futures market, which will definitely intensify the turmoil in the capital market. ”
“The collapse of w88 casino games prices has triggered the collapse of the U.S. shale w88 casino games and gas industry, which is backed by a huge capital market. A large number of shale w88 casino games and gas companies may be unable to repay due to the maturity of huge debts, resulting in a serious break in the corporate capital chain, which will directly impact the capital market.” Dong Xiucheng said, "The plunge in w88 casino games prices may cause financial crises for w88 casino games-resource countries such as Saudi Arabia, Kuwait, and the United Arab Emirates. These resource countries may sell petrodollar assets, allowing huge petrodollars to flow back to their countries, which will lead to a liquidity crisis in the U.S. financial market."
The severe oversupply situation in the U.S. w88 casino games market has obviously attracted strong attention from the Trump administration. At a press conference on April 20, local time, Trump bluntly stated that he would consider purchasing 75 million barrels of crude w88 casino games for the country's strategic reserves, "buying up" the reserve inventory, and considering stopping the delivery of w88 casino games from Saudi Arabia to the United States if the market is oversupplied. At the same time, he also claimed that the drop in w88 casino games prices was a "short-term tightening" and mainly a financial phenomenon. "Many people were found" to be short-selling, and now is a good time to buy crude w88 casino games.
So is it wise to "buy, buy, buy"? Dong Xiucheng told Ifeng.com that on the surface Trump is concerned about the U.S. w88 casino games and gas industry, but in fact he is most concerned about the huge capital behind the shale w88 casino games and gas industry, because once a debt default occurs, it will intensify the turmoil of the U.S. capital market and affect his re-election goal. "Currently, the OPEC+ production reduction agreement has been reached, but w88 casino games prices have not yet stabilized. Therefore, Trump's concerns have not been resolved. He is likely to take other measures, such as increasing the U.S. strategic petroleum reserves and purchasing large amounts of w88 casino games on the market to stabilize market supply and demand. This will of course require Congressional approval to increase the government budget before it can be implemented. "Dong Xiucheng said, "In addition, we may consider reducing crude w88 casino games imports, such as imposing import tariffs or directly stipulating the implementation of policies such as stopping the import of Saudi crude w88 casino games; we may also consider encouraging U.S. w88 casino games and gas producing states such as Texas to implement crude w88 casino games production quota reduction policies through local legislation. However, this approach runs counter to the long-standing market rules of the United States and may be very difficult to do. ”
It is worth noting that the sudden emergence of "negative w88 casino games prices" in the crude w88 casino games market is also related to the uncertainty caused by non-market factors in the past two months. On March 6 this year, after the negotiation between OPEC+ and Russia on further production restrictions broke down, Saudi Arabia subsequently launched a unilateral "price war", and the price of Brent crude w88 casino games fell below US$25 per barrel in less than two weeks; on April 2, Trump declared on Twitter that Saudi Arabia and Russia are expected to The agreement to reduce production ended the public opinion of this w88 casino games "price war". The price of Brent crude w88 casino games once jumped to 36.29 US dollars per barrel. In the end, OPEC, Russia and other w88 casino games-producing countries reached an agreement to reduce production and agreed to cut global supply by 10% in order to support w88 casino games prices during the COVID-19 epidemic.
The drop in w88 casino games prices has undoubtedly hit the U.S. shale w88 casino games and gas industry hard. Is it possible that it will lead to joint actions by Saudi Arabia, Russia and the United States in the future? Dong Xiucheng said that Saudi Arabia, Russia and the United States are currently the world's three largest w88 casino games-producing countries, with roughly the same production scale. If these three countries unite to stabilize the market, they will have great confidence in controlling market supply and demand and price levels. However, he also pointed out that there are obvious differences in the governance systems and mechanisms between the United States, Saudi Arabia, and Russia. The United States believes in the principle of market competition. The "mobility" of its crude w88 casino games production does not belong to the government but to the market. If production reduction occurs, it is also an independent market operation behavior of enterprises. Saudi Arabia and Russia can formulate production reduction plans and quotas through government administrative intervention. Their "mobility" of crude w88 casino games production comes from the government rather than the market.
“Therefore, it is unlikely that the U.S. government will directly join a non-market mechanism like the ‘Production Reduction Alliance’, and it is unlikely to establish a cooperative production reduction alliance with Saudi Arabia and Russia. However, with the evolution of w88 casino games prices and the evolution of global w88 casino games supply and demand, on the basis of the interests of both parties, Saudi Arabia and Russia will continue to cooperate to maintain reasonable prices and stabilize the w88 casino games and gas market. This will be their inevitable choice.” Dong Xiucheng said.
The following is the transcript of the interview between Phoenix Finance and Dong Xiucheng:
ifeng.com Finance:On April 20, local time, the price of U.S. May light crude w88 casino games futures WTI plummeted to a record low, plummeting $55.90 and closing at -$37.63 per barrel, a drop of 305.97%. In your opinion, why did international crude w88 casino games futures fall so sharply this time? What are the main factors causing it?
Dong Xiucheng:This w88 casino games price plummeted to negative value, which can be described as a shocking event. It is the first time since the establishment of the w88 casino games futures market. It will definitely remain in the memory of the history of the world w88 casino games market and has iconic significance. The outbreak of this "black swan" incident, or the plunge in w88 casino games prices to such an extent, is actually a continuation of the recent plunge in w88 casino games prices, which fully reflects the reality of the serious imbalance between supply and demand in the U.S. w88 casino games and gas market. The United States is the world's largest w88 casino games and gas consumer market. Americans mainly rely on cars and planes to travel. However, the severe epidemic situation has led to the closure of cities in various places and the shutdown of economic activities. w88 casino games consumption has plummeted, inventory backlogs are serious, and inventory costs have skyrocketed. Once you have crude w88 casino games in your hands, the cost of keeping it is huge.
The futures market itself belongs to the financial category. The entities engaged in crude w88 casino games trading activities on the exchange mainly include two categories: entity enterprises (w88 casino games and gas enterprises, such as w88 casino games refining enterprises) and financial institutions (investment companies, investment banks, funds, financial companies, etc.). There are differences in the functions of these two types of enterprises in exchange transactions. That is to say, w88 casino games sellers may not have w88 casino games in their hands, and w88 casino games buyers may not need w88 casino games. Entity enterprises mainly focus on hedging, while financial institutions mainly engage in speculation. According to the rules of futures contracts on the exchange, delivery or settlement must be made after expiration. For traders who hold futures contracts but do not really want to obtain w88 casino games, they will always sell the contract before the delivery date. Otherwise, once the w88 casino games is held in their hands, they will face the trouble of how to dispose of the physical w88 casino games. Under the current market conditions, if you have an expired crude w88 casino games contract that cannot be sold, and the inventory cost remains high, you will suffer huge losses, so you will ship the contract at all costs. Under this difficult choice of choosing the lesser of two evils and minimizing losses, such seemingly absurd events occurred.
ifeng.com Finance:What does “negative w88 casino games prices” mean to you? What does this landmark event reflect on the current situation of the global crude w88 casino games market that cannot be ignored?
Dong Xiucheng:The "negative w88 casino games price" incident itself is a special product under the current severe global epidemic situation, especially the current economic shutdown in the United States, and the serious imbalance between w88 casino games and gas supply and demand. The emergence of such a strange price phenomenon may not be very surprising. WTI crude w88 casino games futures prices mainly reflect the supply and demand relationship in the U.S. market. The emergence of this peculiar price event does not mean that the global w88 casino games and gas market is the same as that of the United States. In other words, we cannot regard this extreme event as a comprehensive reflection of the global w88 casino games and gas market. The thinking of "one point to make an impact" is not advisable.
However, the occurrence of this incident is enough to make us realize that the oversupply situation in the global w88 casino games market is indeed very serious. Consumption has declined rapidly due to the spread of the epidemic. If it lasts longer, the w88 casino games and gas market situation will become more uncertain, which requires great attention from all countries around the world and measures must be taken to deal with it. Whether it is an w88 casino games and gas resource country or an w88 casino games and gas consumer country, this w88 casino games price situation is actually not good, and no country can be immune to it.
ifeng.com Finance:Does “negative w88 casino games price” indicate that the global economic crisis has begun to emerge? How will the plunge in crude w88 casino games futures affect global capital markets?
Dong Xiucheng:w88 casino games prices, like the capital market, have always been an economic barometer, and its changes reflect the changing trends of the economic situation. This is an objective fact. This plunge in w88 casino games prices indicates that investors are not optimistic about the future economic development trend, have serious lack of confidence or are extremely pessimistic. They are even worried that the global economy may gradually turn from recession to depression, and are worried about a recurrence of the global economic Great Depression in the 1930s.
In addition, the crude w88 casino games futures market itself is an important part of the world financial system, and the collapse of w88 casino games prices itself is also one of the manifestations of the turmoil in the global capital market. The plunge in w88 casino games prices actually means a severe loss of some financial capital in the futures market, or the evaporation of financial assets, which will of course intensify the turmoil in the capital market. In addition, the collapse of w88 casino games prices has triggered the collapse of the U.S. shale w88 casino games and gas industry, which is backed by huge capital markets. A large number of shale w88 casino games and gas companies may be unable to repay due to the maturity of huge debts, resulting in a serious break in the corporate capital chain, which will directly impact the capital market. In addition, the plunge in w88 casino games prices may cause financial crises for w88 casino games resource countries such as Saudi Arabia, Kuwait, and the United Arab Emirates. These resource countries may sell petrodollar assets, allowing huge petrodollars to flow back to their countries, which will lead to a liquidity crisis in the U.S. financial market.
ifeng.com Finance:In response to the plummeting international crude w88 casino games prices, U.S. President Trump said that the decline in w88 casino games prices will be very short-term, and now is a good time to buy crude w88 casino games. He hopes that the U.S. Congress can provide support; at the same time, he is also studying the inclusion of up to 75 million barrels of w88 casino games in the strategic w88 casino games reserve, and will consider opinions on stopping the import of Saudi w88 casino games. What do you think of this approach?
Dong Xiucheng:Trump is paying great attention to international w88 casino games prices this time, which is obviously different from other presidents in history. For a long period of time, the U.S. government has adopted a laissez-faire attitude toward international w88 casino games prices. It has even hated OPEC, an organization that maintains w88 casino games price stability through production restrictions. It believes that such direct administrative intervention in the w88 casino games and gas market violates the rules of the market economy and is unacceptable. It has even put diplomatic pressure on OPEC many times in an attempt to hope that this organization can be disbanded as soon as possible. Since the collapse of w88 casino games prices, Trump has been very concerned. On the surface, he cares about the U.S. w88 casino games and gas industry. In fact, he is most concerned about the huge capital behind the shale w88 casino games and gas industry. He is worried that a debt default will exacerbate the turmoil in the U.S. capital market and affect his re-election goal. Therefore, President Trump had a phone call with Putin and the King of Saudi Arabia and directly intervened in w88 casino games price issues. He hoped that the OPEC+ production reduction mechanism would continue to play a role and that w88 casino games prices could be stabilized as soon as possible.
At present, the OPEC+ production reduction agreement has been reached, but the oil price has not yet stabilized. Therefore, Trump’s concerns have not been resolved. He is likely to take other measures, such as increasing the U.S. Strategic Petroleum Reserve, purchasing a large amount of oil on the market, and stabilizing the market supply and demand. This will of course require Congress to approve an increase in the government budget before it can be implemented. In addition, he may also consider reducing crude oil imports, such as imposing import levies. The implementation of policies such as tariffs or direct stipulations to stop the import of Saudi crude oil is certainly not in compliance with World w88 Organization rules, but for Trump, violating WTO rules is not unprecedented; of course, Trump may also consider encouraging U.S. oil and gas production states such as Texas to implement crude oil production quota reduction policies through local legislation. However, this approach runs counter to the market laws that the United States has long adhered to, and it may be very difficult to do.
ifeng.com Finance:After the w88 casino games war in March, OPEC and Russia just reached the largest production reduction agreement in history in April, but this failed to prevent the free fall of crude w88 casino games prices. In your opinion, judging from the current situation on the demand side of crude w88 casino games, can cutting global supply really change the direction of w88 casino games prices? How long will this drop in w88 casino games prices last?
Dong Xiucheng:The main feature of this w88 casino games price collapse is that there is a problem on the w88 casino games consumer side, that is to say, while the supply capacity remains unchanged, consumer demand has dropped off a cliff. To truly solve the problem, it is impossible to rely solely on supply-side production cuts. This is the first time in history that the OPEC+ production reduction agreement has reduced production by 6.7 million barrels per day. However, it is still difficult to make up for the rapid decline of more than 20 million barrels per day on the consumer side. The serious imbalance between supply and demand has not fundamentally changed, so it is impossible for w88 casino games prices to truly rebound to the level before the outbreak. However, after the production reduction agreement is implemented on May 1, it is expected to curb the downward trend of w88 casino games prices. w88 casino games prices may rise back to around US$30, but the probability of further rises will be very small unless a major geopolitical event occurs. Of course, how long this low w88 casino games price will last mainly depends on the duration of the epidemic, the process and time of the gradual economic recovery, etc. It is impossible to make a clear judgment at present.
ifeng.com Finance:Do you think it is possible for Saudi Arabia, Russia and the United States to work together to save the w88 casino games market in the future?
Dong Xiucheng：Saudi Arabia, Russia and the United States are currently the world's three largest w88 casino games-producing countries. Their production scale is roughly the same, basically at 11 million barrels per day. Therefore, they can be called the three major "mobile w88 casino games producers" in the global w88 casino games and gas market. In other words, if these three countries unite to stabilize the market, then they will have a lot of confidence in controlling market supply and demand and price levels. However, there are obvious differences in the governance systems and mechanisms between the United States, Saudi Arabia, and Russia. The United States believes in the principle of market competition. The "mobility" of its crude w88 casino games production does not belong to the government but to the market. If production reduction occurs, it is also an independent market operation behavior of enterprises. Saudi Arabia and Russia can formulate production reduction plans and quotas through government administrative intervention, and their crude w88 casino games production "mobility" comes from the government rather than the market. Therefore, in my opinion, it is unlikely that the U.S. government will directly join a non-market mechanism such as the "Production Reduction Alliance", and it is unlikely that it will establish a cooperative production reduction alliance with Saudi Arabia and Russia. However, with the evolution of w88 casino games prices and the evolution of global w88 casino games supply and demand, Saudi Arabia and Russia will continue to cooperate to maintain reasonable prices and stabilize the w88 casino games and gas market on the basis of the interests of both parties. This will be their inevitable choice.
ifeng.com Finance:On April 28 (next Tuesday), a new round of refined w88 casino games price adjustment window will be opened in China. What impact will this "negative w88 casino games price" have on the adjustment of domestic w88 casino games prices?
Dong Xiucheng:On April 28, domestic refined w88 casino games products reached the price adjustment window again. However, according to the current refined w88 casino games price policy, when the international crude w88 casino games price is lower than 40 US dollars per barrel, the price of gasoline and diesel will not be reduced. Therefore, when the recent w88 casino games price is basically below 40 US dollars, domestic refined w88 casino games prices will not be adjusted.
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