Original Domestic oil prices rise for the first time this year, Dong Xiucheng: The international production limit agreement has been extended, and oil prices will definitely rebound in the future

(Source: Sohu Think Tank 2020-06-29)

Dong Xiucheng, Director of the Belt and Road Energy w88 and Development Research Center, w88 casino

On June 28, the National Development and Reform Commission stated that starting from 24:00 on June 28, domestic gasoline and diesel prices will increase by 120 yuan and 110 yuan per ton respectively. This means that the "floor price" pattern of refined oil products that has lasted since March 17 has officially been broken.

In this regard, Dong Xiucheng, director of the Belt and Road Energy w88 and Development Research Center at the w88 casino, said that the recent increase in international crude oil prices has led to a subsequent increase in domestic refined oil prices, which is the fundamental reason for the increase in China's oil prices.

"The international crude oil price some time ago was basically between 30 and 40 US dollars, which was lower than the 'floor price' of 40 US dollars, so the domestic oil price was calculated at 40 US dollars. But a few days ago, the international oil price rose. After ten working days of calculation, the domestic oil price exceeded 40 US dollars, so it was raised." Dong Xiucheng explained.

Dong Xiucheng pointed out that there are two reasons for the rise in domestic oil prices. "First of all, OPEC+ extended the production restriction agreement that limits crude oil production to 9.7 million barrels per day from the end of June to the end of July. This shows that their expectations for the crude oil market, or the speed of improvement of the epidemic, are not optimistic. This adjustment has actually boosted market judgment."

Dong Xiucheng said that from an investment perspective, the slowdown in the development of the epidemic in China, Japan, South Korea, including Europe and other countries indicates that economic reopening will become the mainstream. The reopening of the economy will increase liquidity and bring about a rebound in the transportation industry, driving consumption upgrades. "As consumer demand rises, oil prices will rise as well."

Dong Xiucheng said frankly that the increase in domestic oil prices will have minimal impact on the Chinese economy. "In fact, the price is also very low now, and every increase is very limited. In terms of quantity and scale, the impact is very small."

Dong Xiucheng judged that as the epidemic eases and economic activities recover, oil prices will definitely rebound, but the speed of the rebound will fluctuate.

"Various economic improvement data, including some major news about the epidemic, such as the successful development of vaccines, will have a direct impact on international oil prices. But despite fluctuations, oil prices will generally rebound and rise." Dong Xiucheng said.

(Author’s affiliation: w88 casinoOne Belt, One Road Energy w88 and Development Research Center)

Attached original text link:https://m.sohu.com/a/404732503_100160903/?pvid=000115_3w_a