Oil Price Falls Again: Saudi Arabia'S Price Adjustment Ignites Demand Worries

At the end of last week, two months later, Saudi Aramco, the state-owned oil company of Saudi Arabia, once again lowered the official price of crude oil sold to Asia and the United States, triggering concerns in the global market for future crude oil market demand.

On September 9, Beijing time, the prices of Brent and WTI crude oil fell for three consecutive days. Brent crude oil price fell to 39 US dollars / barrel from 42 US dollars / barrel on the 7th, a decrease of more than 7%. Since the beginning of June, the international oil price has been stable in the range of 41-45 USD / barrel for three months. This round of decline broke the previous horizontal consolidation situation, and the oil price returned to volatility. In the night trading on the 8th, the upper limit of the 2010 crude oil futures contract of the Shanghai stock exchange closed down 8.02% to 251.0 yuan / barrel.

"In fact, this round of decline has a lot to do with the overall macro mood. Recently, US stocks began to pull back at high levels, driving investor sentiment to cool down." A central enterprise source told reporters, "coupled with the sharp reduction of official prices in Saudi Arabia and the United Arab Emirates, it has become a catalyst for this round of sharp drop in oil prices, which makes the market worry about the global demand for crude oil for a period of time in the future."

In fact, the global demand for crude oil has entered the bottleneck period. In Europe, the United States, India and other countries and regions, after a period of recovery, crude oil demand basically returned to the level of 85% before the outbreak, but it is difficult to make progress after that.

Saudi Arabia's official price cut raises concerns

On September 6, Saudi Aramco announced the price of crude oil sales. The company reduced the official crude oil sales price to Asia and the United States in October, and increased the price of some grades of crude oil in northwest Europe and the Mediterranean region.

In October, the price difference between Arab light and Oman / Dubai decreased by $1.40/barrel to 50 cents / barrel, which was the second consecutive month that the company lowered its official price to Asia, far more than last month.

"Previously, market participants had expected that Saudi Arabia would reduce about $1-1.5/barrel due to the decline of downstream demand, especially the demand for crude oil in Asia." A person engaged in crude oil market trade told reporters, "this reduction is basically within the expected range."

Because of the more price cuts this time, the demand for crude oil in the Asia Pacific region has been stimulated. He told reporters that after Saudi Arabia released the official price, traders from China, South Korea and Japan had submitted to Saudi Arabia the planned amount of crude oil purchase in October.

In China, the amount of planned procurement has been greatly increased compared with that before. "After this reduction, the economy of Saudi Crude oil has been highlighted. Coupled with lower freight, Chinese buyers are more active after the price adjustment." He said.

And he admitted that under the current market conditions, the future trend of oil prices is not optimistic. "Because China is the main engine of global crude oil demand, some factors from China have a relatively large impact on oil prices." "In fact, the crude oil purchased at the low oil prices in April and may has made the stocks relatively sufficient, and the downstream demand has basically recovered in place," he said

At present, the supply of global crude oil market is relatively sufficient, and the first stage of OPEC's production reduction will also end. The amount of reduction in the subsequent second stage will be reduced compared with that in the first stage, and the future supply will also be guaranteed. At the same time, with the end of the driving season in the United States, the global crude oil market will be under certain pressure in the short term.

China's demand falls

There is no doubt that demand from China has declined in the last two months.

On the 7th, China Customs released import and export data for the first eight months. According to the data, 47.483 million tons of crude oil were imported in August, a decrease of 7% on a month on month basis. In June this year, China's monthly crude oil imports reached 53.181 million tons, a record. However, after two consecutive months of decline, crude oil imports and crude oil demand showed a periodic decline.

"In fact, the decline in August is not surprising because the base for June and July is too high." "After the oil price bottomed out in April this year, China's crude oil purchasing enthusiasm rose. After that, the oil price returned to about $40 / barrel, and the purchasing desire decreased relatively."

According to another industry source, China's local refineries almost ran out of crude oil import quotas for the whole year in April and may this year. A large number of crude oil in the international market has been snapped up by Chinese buyers. In the future, there may even be a delay due to the backlog of port tankers.

However, despite the decline in imports in the past two months, overall, China's purchase of crude oil has increased significantly this year. According to customs data, in the first eight months, China purchased 368 million tons of crude oil, a sharp increase of 12% year-on-year, leading the world to become the country with the largest purchase of crude oil.

"In the future, the key time point is in the fourth quarter of this year. If the oil price remains low and a batch of crude oil import quotas are opened again at the policy end, the import volume may reach a new high." The people said.

When the global crude oil falls below $40 again, whether to open the floor price protection again becomes the focus of attention in the domestic market. According to the calculation of Zhuo Chuang information, at the end of September 8, according to the current crude oil price, the change rate of reference crude oil on the third working day in China is - 8.04%, and the corresponding gasoline and diesel oil is reduced by 320 yuan / ton, and the price adjustment window is 24:00 on September 18.

However, when the market generally believes that the reduction of the retail price limit of refined oil products is a foregone conclusion, the price of crude oil in Europe and the United States has fallen below the red line of floor price of US $40 / barrel, which may lead to the failure of price adjustment expectation.

In the first half of 2020, due to the impact of the new crown epidemic, international crude oil once plummeted, and the retail price limit of domestic refined oil products was not adjusted due to touching the red line of floor price for six consecutive times from March 31 to June 11. This is also the domestic floor price restart again after four years.

However, there are still seven working days to go before the domestic refined oil price adjustment window, and the international crude oil is at a low level after falling for several consecutive days. The market is paying attention to the situation of US stocks and whether it can stabilize. "If the current price of international crude oil is maintained and the fluctuation range is around $1 / barrel, the price adjustment rate of this round of refined oil will hit the floor price again in less than three months." Zhuo Chuang information analyst Yang Xia told reporters.

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