Investment and Finance
Dimitry Dimitry Dayen
Jeffrey Schulze
As the market is caught in the coronary virus crisis, OPEC+oil price war is one of the three most unfavorable potential impacts,
The remaining two are assumed that the United States blocks part of the economic field and the second wave of infections in China.
The production reduction agreement between the Organization of Organization and the reduction of production partners (OPEC+) is not supported by Russia.Russia said that it would not conform to Saudi Arabia's ultimatum, which greatly reduced its oil output, reminiscent of the collapse of Thanksgiving oil prices in 2014.Saudi Aramco lowered its prices of exported oil on its own, launched the oil price war, and the news dragged down crude oil prices plummeted.The global stock market was significantly opened.
As the market is caught in the coronary virus crisis, the OPEC+oil price war is one of the three most unfavorable potential impacts. The other two are assumed that the United States blocks part of the economic field and the second wave of infections in China.
The changes in the situation accelerated the expected interest rates of the central bank and pushed the yield of long -term bonds to zero.
Saudi Arabia originally suggested that the Oil Alliance reduced production by 1 million barrels per day, and OPEC+(mainly Russia) reduced production by 500,000 barrels per day.According to our OPEC+Vienna conference venue, Russia hopes that the US exploration and production companies will be under pressure, not OPEC+protection.Russia also hopes that the Oil League itself has more responsibility for production reduction, just like in the past four years.Saudi Arabia has hinted that it has intended to increase its production sharply from April, and thus compete with Russia for market share. OPEC+Alliance has temporarily terminated.
Petroleum demand is significantly reduced, OPEC+is unwilling to support the market, coupled with Libyan's outlook for oil production, it means that the oil inventory may accumulate to surpass the 2016 high.Readers may remember that the price of crude oil fell only slightly higher than $ 30 at that time, and since the meeting, the price of oil fell to the same level.The market needs to balance oil production in the short term, especially in US exploration and production companies to reduce production declines caused by drilling.We hope that with the decline of the coronary virus epidemic, demand can gradually rise.
See the bottom after about six quarters of the oil market
From 2014 to 2016, with the support of the United States reduced supply and the re -intervention of the oil alliance, the oil market bottomed out after about six quarters.In contrast, this time, oil prices have fallen to the level of $ 30 per barrel in a significant short period of time, so the market needs to make adjustments more quickly.Here are the potential results and inventory that we are calculated by model calculations.
In the new year, the market originally expected that China's demand growth accounted for 60 % of global demand growth.It is currently expected that China's demand in the first quarter will be significantly reduced, which will reduce the global overall daily demand by 2.4 million barrels year -on -year, which is the first time that demand has fallen since 2009.
At present, the International Energy Organization has lowered 100,000 barrels of basic predictions of global demand.However, the prediction assumptions will rise from the second quarter.Although new cases of coronary virus are decreasing, it can be seen from the demand for transportation and electricity that daily life has not returned to normal.In addition, the spread of the epidemic in the world may further crack down on the needs of Europe and other regions.
At the same time, the upgrade of Libya's civil war has significantly reduced market supply.The local situation is unstable, and the two parties are also negotiating, but Turkey and Egypt threatened to join the war.More countries involved in war will have a longer -term impact on oil supply.Looking back at the past five years, Libya's political situation has caused significant fluctuations in local oil exports.
The predicting predictive prediction of the International Energy Organization is recovered during the second to fourth quarter, but this will depend on the degree of controlling the coronary virus epidemic. Crude oil supply and demand may show two trends in the short term.
The worst situation (at present, it seems that the development is developing in this direction) is that the oil alliance increased production in the second quarter, and Libya resumed production, and the demand was gradually recovered in the second quarter (even longer).In this situation, the daily excess of the daily oil supply of oil will be as high as 3 million barrels in the second season, and the inventory will also rise to a historical high.Brent crude oil may fall to $ 30 or less per barrel, resulting in a stopping of existing production, and forcing US shale oil and gas to reduce production significantly.
The more optimistic situation is that the demand has rebounded in the second quarter, and the Oil League also decided to reduce production at the next meeting in June to offset Libyan's impact of restoring the supply of oil.This will lead to the increase in inventory in the first half of the year, and then fall from the second half of the year.Oil prices will fall in the second quarter, and then climb to the marginal cost level in the second half of 2020.
Russia and Saudi Arabia falling into oil prices will not benefit any country.
Five Light Factors make the US economy decline
Given that the output of oil in the United States may no longer increase, we prefer to be stable in financial conditions and have the ability to create free cash flow exploration and manufacturer shares.The price of crude oil is far lower than the marginal cost, usually the opportunity to enter the market. However, the price is maintained at this level or far exceeds our expectations. Once a high -leveraged credit crisis occurs, the relevant stock price will fall.
On the other hand, if the epidemic is eased, and Russia can also reconcile, demand elasticity may make the demand a stronger recovery than expected.Overall, after this round of blows, the market has added the following factor factors, which greatly increases the possibility of the US economy in decline.
■ The output of shale oil and gas fell.The drilling platform is calculated at the bottom of 2016, 50 % less than the current, reflecting a significant decrease in drilling oil activities.Although energy stocks account for only 3 % of the S & P 500 index, it accounts for 8 % of the income of index enterprises.
■ Boeing production passenger aircraft.
■ Winter climate is warmer and the demand appears in advance, but subsequent demand will be reduced accordingly.
■ The epidemic weakens consumption and business confidence, leading to a decline in consumer expenditure.
■ Tightening of the labor market and tariff -related issues have compressed the profit margin of the enterprise.
It is believed that investors will tend to avoid the stock market before confirming the development of epidemic development and the effectiveness of the United States.
(Dan is a senior analyst at Kelly's investment in the energy industry, and Schultz is Kelly Investment Investment strategist)
