U.S. oil futures plunged 305.97%, showing negative oil prices! It is the first time in history since WTI crude oil futures was established in March 1983 that investors have made significant reversals.
The settlement price of the May contract of WTI crude oil futures fell to -37.63 / barrel at the close on Monday night, a drop of more than 305.97%. The history of the closing price was negative for the first time, which also means that oil producers sell The crude oil is even posted to the broker.
The fuse that WTI crude oil prices can't sustain: the warehouse is not enough
Cushing, Oklahoma's oil storage space, an important crude oil delivery location, has rapidly declined, prompting traders to sell off. According to the rules of the New York Mercantile Exchange futures market, after the expiration of the futures, both short and long traders must accept physical delivery. This May futures, the latest delivery date is May 31, to make room for the subsequent crude oil Do warehouse.
Cushing Town has the most oil storage tanks in the world, with a crude oil storage capacity of 90 million barrels, which is equivalent to 13% of the total reserves of the United States. In addition, there are many important oil pipelines gathering here, oil refineries, suppliers, financial companies Therefore, it was named "World Pipeline Crossroads".
Before and after the production cut agreement, the prices of crude oil, such as market players, rose and stocked up wildly, causing the oil depot to be overwhelmed. According to information from the US data service company Genscape and the Energy Information Administration, in the week of April 10, U.S. crude oil inventories surged by 19.2 million barrels, a record increase, and gasoline inventories increased by 4.9 million barrels to a record 262.2 million barrels. Activity is the lowest level after 2008. As of April 17, the inventory of the Cushing region in the West Texas Light Crude Oil delivery site of the New York Mercantile Exchange increased to 61 million barrels, an increase of 9% in a week.
Depletion of demand, the imbalance of global oil supply and demand is the main reason
The deeper reason is that while the inventory is increasing, the demand for crude oil continues to shrink.
The International Energy Agency released a report on the 15th that the global crude oil demand fell by 29 million barrels a day in April, the lowest level since 1995. The report said that global crude oil demand will continue to decline significantly in May and June.
The OPEC and OPEC ’s production cuts will only start on May 1st. Recently, due to the impact of public health events, the sharp drop in demand has led to a surge in stocks. The market ’s supply and demand have been seriously unbalanced. The market soon realized that The production cuts of oil-producing countries are not enough to balance this crude oil market. Investors are now selling at all costs, and no one is willing to deliver, resulting in a sharp drop in oil prices.
Rescue the market: Expand crude oil reserves and reduce crude oil imports
At a regular press conference at the White House on April 20, Trump said he was studying to expand the country ’s strategic oil reserves and may purchase up to 75 million barrels. He also said that he is studying whether to refuse to allow the incoming Saudi oil storage. Trump also said that increasing strategic oil reserves would "stimulate higher oil prices," and that the fall in prices would be a temporary phenomenon.
The US Department of Energy has previously taken action to allow companies to rent space in strategic storage tanks. However, at present, the world's oil storage spaces are lit up with red lights, and the remaining space in the US strategic oil reserves can only accommodate 77 million barrels of oil. This makes one have to doubt that the ability of the United States to expand its oil reserves is also quite limited.
Two industry sources said on Monday that the Russian Ministry of Energy has asked domestic oil producers to reduce production by about 20% on the basis of the average daily output in February, enabling the Russian government to honor its commitments in a global agreement.
The OPEC + group composed of the Organization of Petroleum Exporting Countries (OPEC) and other oil-producing countries led by Russia agreed to reduce output by 9.7 million barrels / day in May-June in response to the oversupply caused by the epidemic crisis.
In addition, the non-OPEC + member countries such as the United States and Norway have also reduced production, and the total global oil production will be reduced by 20 million barrels per day, equivalent to one-fifth of global oil production.
Oil market trend after oil price plunge: demand is difficult to return to pre-crisis levels
Mark Lewis, global head of sustainability research at BNP Paribas Asset Management, wrote in the Financial Times: “We may have just witnessed a permanent peak in oil demand. Higher efficiency, more electric power The permanent changes in people's behavior caused by automobiles and epidemics can all lead to peak consumption.
