（w88 slot）Low oil prices change the situation
(Source: "China Economic Times" China Economic News Network 2020-04-27)
A short-lived flash in the pan, or a comeback? International oil prices plummeted to negative values overnight, triggering a chain reaction, and the changes caused by the impact of low oil prices are fermenting. Some international oil companies are facing an existential crisis, and the restructuring of the oil industry chain is gradually emerging. "Staying through the winter" may become an inevitable choice for oil companies for a long time.
New low: 22 years later, crude oil fell below negative values and appeared in the futures market.
At 14:30 New York local time on April 20 and 2:30 Beijing time on April 21, the May settlement price of U.S. WTI crude oil futures plunged 305.97% to close at -$37.63 per barrel. This is the first time in history that oil futures have fallen into negative values since they began trading on the New York Mercantile Exchange in 1983.
Dong Xiucheng, professor at the w88 casino of International Business and Economics at the w88 casino, researcher at the Institute for Opening up, and director of the Belt and Road Energy w88 and Development Research Centersaid in an interview with a reporter from China Economic Times,There are companies that carry out hedging transactions in the futures market, as well as financial institutions for the purpose of investment or even speculation. Last week's negative oil price was the result of some financial institutions holding May contracts closing their positions at any cost, which is somewhat extreme.
On April 20, three minutes before the closing of the last delivery day of the May WTI futures contract, some small-scale panic trading drove the futures price to plummet.
In the opinion of experts interviewed by this reporter, this is a loophole in the WTI trading system and an extreme phenomenon in the rules of the futures market. Before the delivery date, no seller can be found to store oil in the oil depot and choose to sell at a discount. Therefore, negative oil prices in extreme situations are not directly related to normal crude oil prices. They are more like traders who do not understand the rules and have no physical trading capabilities, and accidentally step into the trap of the financial market.
After April 20, WTI crude oil futures experienced a rebound; at the same time, Brent crude oil futures maintained the previous trend and continued to fluctuate. On April 24, the June contract of WTI crude oil futures closed at $17.8, and the June contract of London Brent crude oil futures closed at $22.59.
Informed sources told reporters that not long ago, the international oil price fell below 30 US dollars per barrel, and some funds entered the market to buy the bottom. The Chicago Exchange once issued a negative oil price warning, but it failed to attract sufficient attention from some participants. Some participants lacked a deep understanding of the operating rules of the international crude oil futures market.
Although the emergence of negative oil prices is not the norm, in the eyes of some analysts, it is an ominous sign, reflecting cruel market forces. This power will not disappear with the expiration of a monthly contract. If the current futures market rules remain unchanged, it is possible to form a new negative oil price.
Relevant people from IHS Markit pointed out to this reporter that WTI fell into negative values, reflecting a large excess of spot supply. This cruel market force is forcing supply to adapt to the sharp decline in global oil demand.
Negative oil prices in the futures market have already appeared in some spot markets. After March, negative oil prices appeared in the crude oil spot markets in many places in the United States and Canada. Local producers paid buyers to transport the oil away to avoid shutting down oil wells.
Liao Na, executive vice president of Shanghai Ganglian Energy Information Technology Co., Ltd., pointed out in an interview with this reporter that the negative oil price in the spot market is affected by the discount relative to benchmark crude oil. The negative oil price in the futures market amplifies market perception. Demand and inventory are the core factors affecting future price trends.
w88 slot said that due to the impact of the epidemic, oil consumption in the United States has plummeted, and WTI futures have fallen to negative values, which fully reflects the reality of the serious imbalance between supply and demand in the U.S. oil and gas market.
Relevant people from IHS Markit believe that domestic crude oil orders in the United States have decreased. Until production cuts can reduce the serious oil supply glut, the current emergency situation-especially the lack of oil storage sites-will continue to exist. Production cuts and shutdowns could take 17 million barrels per day of supply off the market this spring.
Impact: Market concerns are spreading, low oil prices have impacted the international oil landscape, and some international oil companies are facing an existential crisis.
On April 17, Singaporean oil trading giant Hin Leong Group (Hin Leong), one of the world's largest physical fuel oil traders and one of Asia's largest marine fuel suppliers, and its tanker company Ocean Tanker S officially applied for bankruptcy protection in the court. This is another well-known oil company that has filed for bankruptcy protection after the US shale oil and gas driller Whiting Petroleum Company went bankrupt on April 2. Hin Leong Group said the sharp plunge in oil prices and slumping demand for fuel oil were among the reasons for the company's bankruptcy.
Historically, international oil prices have been hovering at low levels for a long time, which has caused local market turmoil.
In 2016, when international crude oil prices fell to US$30 per barrel, more than 70 North American oil and gas companies filed for bankruptcy. Currently, international oil prices have fallen below US$20 per barrel, and the U.S. shale oil industry is bearing the brunt.
Moody's statistics show that in 2020, North American oil and gas companies will have more than US$40 billion in debt due, and more than US$200 billion in debt will mature in the next four years. This result will lead to a new wave of bankruptcies in the region.
w88 slot said that the collapse of oil prices has triggered the collapse of the U.S. shale oil and gas industry, which is backed by huge capital markets. A large number of shale oil 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. It may also cause financial crises for oil resource countries such as Saudi Arabia, Kuwait, and the United Arab Emirates. The resource countries will sell petrodollar assets, which in turn will lead to a liquidity crisis in the U.S. financial market.
But the process may not be that fast. Yan Jiantao, deputy general manager of Longzhong Information, pointed out in an interview with this reporter that it is difficult for U.S. oil and gas companies to experience large-scale bankruptcies in the short term. They will use Chapter 11 of the Bankruptcy Law and other methods to reorganize and survive, reduce financing costs, and eventually get out of bankruptcy.
The stock prices of international oil giants have fallen sharply recently, including Shell, Exxon Mobil, Total, BP, etc., have announced to strengthen management and reduce expenditures.
Public information shows that Exxon Mobil has slowed down its 2020 spending plan and reduced oil and gas production; Shell has reduced its capital expenditure in 2020 from the planned approximately US$25 billion to US$20 billion or less, and has suspended its next round of stock buyback plans; Total will cut capital expenditure by US$3.3 billion, of which US$2.5 billion comes from exploration and production; BP will cut capital expenditure by 20% this year...
Yan Jiantao pointed out that in history, international oil prices have been below 20 US dollars per barrel for a long time, and the oil industry and oil companies are fully capable of adapting to the current low oil prices. But the oil price level should be 50-55 US dollars per barrel, which is a price level that is acceptable to all parties, including producers, consumers, and traders.
Conduction: The wind from one end of the Pacific Ocean has weakened when it blows to the other end. WTI fell into negative territory last week and China's domestic market was relatively stable.
Liao Na told reporters that the current demand for diesel has basically returned to the level of the same period last year, and gasoline has also returned to 70% to 80% of the same period last year. Some local refineries have obtained low-price crude oil, but the sales price has not been significantly reduced, and the profits are relatively considerable, which has alleviated the pressure of import time differences; most middlemen have scheduled and quantitative replenishment; terminal gas station shipments continue to improve.
In March, China's epidemic situation gradually eased, and demand for refined oil products recovered steadily, which slowed the impact of low oil prices on the domestic market. However, low oil prices will still affect the marketization process of China's oil and gas industry.
w88 slot believes that the direction of the oil and gas system reform of "letting go of both ends and controlling the middle" will not be affected by low oil prices. The national oil and gas pipeline network company in the middle is a natural monopoly link. The state approves pipeline transportation prices, droughts and floods Revenues are guaranteed, and the impact of low oil prices is limited. Pipeline network companies are already receiving "three barrels of oil" assets; the opening up of the upstream exploration and production links is also advancing. However, under low oil prices, private enterprises and foreign capital are less willing to enter the upstream, and breaking the monopoly requires a process.
Although there is currently no large-scale crisis in the domestic market, if international oil prices continue to be depressed, the domestic oil and gas industry will suffer overall losses.
w88 slot said that oil companies will be heading towards a situation of huge losses across the board, and the entire oil and gas exploration industry will once again enter a "cold winter". Domestic oil companies must adjust their production and operation plans in a timely manner.
“Low oil prices impact oil companies. Among them, the three major domestic state-owned oil companies have different industrial chain structures and are affected differently. CNOOC, which has the largest upstream share, has the greatest impact. Among private companies, large private refineries have a relatively smaller impact than small and medium-sized enterprises. Low oil prices bring about refinery losses. Low cost, but weak demand and sluggish market have led to greater competitive pressure; traders' profit margins have increased, and warehousing companies have the greatest demand, and the benefits are obvious; and private engineering and technical service companies in oil field services have been hardest hit. Overall, low oil prices may cause oil and gas assets to be concentrated in more competitive companies," he said.
Oil company personnel told this reporter that if low oil prices last for a long time, they hope that risk reserves, special income funds and consumption taxes can be appropriately adjusted.
Liu Yijun, a professor at China University of Petroleum, suggested in an interview with this reporter that under low oil prices, the national strategic petroleum reserve system can be innovated. Instead of carrying out strategic petroleum reserves through the previous method of building a database, a part of the national strategic reserve can now be replaced by building production capacity to achieve the purpose of involving state funds in production capacity construction. Part of the previous national strategic reserve can be used for commercial turnover. On the one hand, this has the advantage of ensuring upstream investment and is conducive to national energy security. On the other hand, it can better seize the favorable opportunity of low oil prices and make more use of international resources. At the same time, under low oil prices, we must attach great importance to the further disorderly expansion of production capacity in the refining link in the middle reaches of the industrial chain.
In March, China's three major state-owned oil companies launched campaigns to improve quality and efficiency. PetroChina formulated a special action plan to improve quality and efficiency, Sinopec launched a "100-day attack and efficiency" campaign, and CNOOC lowered capital expenditures and oil and gas production in 2020.
w88 slot pointed out that the current self-rescue behavior of "three barrels of oil" can only alleviate the impact of low oil prices to a certain extent, but cannot fundamentally solve the problem. In the future, as the global economy improves, the market supply and demand relationship will change, and the operating conditions of oil companies will also improve. He suggested that considering the previously implemented plan to increase reserves and increase production, it is mainly for enterprises to fulfill their social and policy responsibilities to ensure energy security and reduce import dependence. Under low oil prices, these adjustments are necessary.
Liao Na believes that the current pressure of low oil prices mainly lies on upstream companies. However, due to the general decline in income in all links of the oil industry chain, major midstream and downstream companies are reducing expenditures. Some private companies with high costs and relatively weak resistance to low oil prices will face impacts.
At the same time,w88 slot said that economic recession, financial turmoil in the capital market and the plummeting oil prices are closely linked. In the futures market, what can really make waves and affect the market direction is finance. The plummeting oil prices will aggravate financial instability. "Severe losses of some financial capital" or "evaporation of financial assets" in the futures market will lead to problems in some financial institutions, such as exacerbating the turmoil in the capital market.
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