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Trump says Russia and Saudi Arabia may reach a production agreement crude oil market rebounds sharply
Apr 2,2020 14:28CST
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Source:SMM
The content below was translated by Tencent automatically for reference.

SMM4, March 2: this year, the global epidemic hit manufacturing and shipping industry superimposed Saudi and Russian crude oil price war, oil prices plummeted to multi-year lows. Just days after the standoff between the two sides, Trump suddenly said that Russia and Saudi Arabia would soon reach an oil deal. Today, oil and gas reform plate change pull up, Zhongman oil rose by the limit, Bacon energy rose 8.94%, intercontinental oil and gas rose 4.39%, Tongyuan oil, Hengtai Aipu and so on. In the futures market, Brent crude rose more than 10 per cent to $27.23 a barrel, while WTI crude rose 8.27 per cent to $21.95 a barrel. Crude oil futures expanded to 8% to 283 yuan per barrel.

The agreement expires and the Middle East continues to increase production.

Starting from April 1, OPEC and non-OPEC oil-producing countries have failed to reach a consensus that they will no longer be subject to production caps or production cuts. International oil prices fell to an 18-year low and have tumbled more than 60 per cent since the start of the year. Saudi Aramco has asked major energy services companies to produce 12 million barrels a day "from April 1 for the foreseeable future", according to Saudi oil sources. Saudi Aramco has also asked oil clothing companies to make the necessary preparations for oil production to rise to 13 million barrels a day. The United Arab Emirates said it would increase production by 4 million barrels a day, nearly 1 million barrels a day more than the March estimate. Russia is equally unwilling to be outdone. Russian Energy Minister Novak said Russian oil production could increase by 200000 to 300000 barrels a day in the short term and 500000 barrels in the long run. Its output in February was about 11.3 million barrels a day.

Traders rush to buy crude oil freight soar

It is understood that in the composition of the cost of imported crude oil, the price of international crude oil accounts for about 77.15%, international freight, domestic sea freight and land freight account for about 8%, and the rest are taxes and agency fees. Earlier, Saudi Arabia's increase in production was accompanied by a rush to rent 25 supertankers (VLCC), causing freight rates to soar overnight, to $210000 a day from $30000 in mid-February, an increase of as much as 600 per cent. Freight rates have been rising again recently, as supply increases and traders hoard goods frantically. Shipbrokers said VLCC shipping costs from the Gulf of the Middle East to China were quoted at $180000 a day on March 31, even doubling in a week. Oil trading firms use offshore tankers to store up to 80 million barrels of oil and are looking for more because of the global glut, shipping industry sources said. Onshore oil storage sites will soon be exhausted.

VLCC (super large tanker) and ULCC (giant tanker) are the main force of offshore crude oil transportation. VLCC generally refers to tankers with deadweight tonnage between 20 and 300000 tons, which is equivalent to the shipment capacity of 2 million barrels of crude oil, while the deadweight of ULCC is generally more than 300000 tons.

Oil price war is expected to end in Russia, the United States and Saudi Arabia may shake hands and make peace.

It is reported that last night, a Kremlin spokesman said that a dialogue between Russian President Vladimir Putin and Saudi Arabia could be arranged soon. The Russian Ministry of Energy said the collapse in demand and oversupply posed long-term risks to the crude oil market, and Energy Secretary Novak and the United States Energy Secretary spoke on Tuesday about the current state of the oil market to discuss cooperation. U.S. president Donald Trump said at a White House news conference that he also expects Saudi Arabia and Russia to reach an agreement on oil production in the coming days because the current price war is bad for both sides.

Analysts are still not bullish on late oil prices

Bank of America oil and gas analysts said Saudi Aramco's current production costs totaled $8 a barrel, while Russian producers currently cost $10 to $12 a barrel. If Russia and Saudi Arabia resort to all compensation mechanisms, oil prices could fall well below $20 a barrel.

The vice president of Frost Sullivan Consulting said oil prices are likely to continue to fall, with U. S. crude oil futures even reaching $10. No one knows how low the oil price will fall, and it will only fall further, because the reality is that it will fall further. $15, $30, $10, which may be the price level we are considering.

Dow Securities strategists say President Trump will continue his dialogue with Russian President Vladimir Putin on the oil market. If any agreement is reached, Russia could demand that all sanctions against Rosneft be lifted and that the United States must also cut production. Saudi Arabia shows no sign of reconsidering an increase in supply in the coming days. In any case, supply will fall. The proposal between the US, Russia and OPEC could cut production by 4 million to 5 million barrels a day, equivalent to a 10 per cent cut in production by these major oil-producing countries. But even such a big cut in production is unlikely to give much boost to oil prices in the short term.

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