SunSirs: Energy, Demand Falls into An Unprecedented Downturn, Saudi Arabia's Attitude of Increasing Production is Clear, Crude Oil Plummets again

On March 16, U.S. WTI crude oil futures market fell sharply, falling below $30/ barrel again, with the main contract at $28.70/ barrel, down $3.03 (-9.55%). Brent crude oil futures market prices fell sharply, with the main contract at $31.69/ barrel, down $3.75 (-10.58%). The deterioration of the global epidemic of COVID-19 in recent days has intensified people's blockade measures against the government to curb the spread of COVID-19, which may lead to a sharp contraction of economic activities, and then aggravate the general concerns of market people about the global economic recession. On Monday, Saudi Arabia reiterated its production increase plan with a clear attitude, which made the market worse.

On the macro level, on Monday, global stocks fell, following the sharp drop in the Asian and European stock markets. The U.S. stocks opened sharply lower. In just a few minutes, the S & P 500 index fell below 7%, triggering the third circuit breaker this month. After the resumption of trading, the U.S. stocks fell further rapidly. The intraday losses of the three major stock indexes were all over 10%, among which the Dow index fell more than 12%. The increased risk of the US economic recession has triggered a general bearish atmosphere in the market. Some market participants predict that the US economy will grow by 0.4% in 2020, lower than the previous growth estimate of 1.2%. The trampling down of risk assets will naturally bear the brunt of the crude oil market.

At present, the main negative crude oil factor in the market is still the spread and deterioration of the epidemic of COVID-19. Up to now, the epidemic has caused at least 174,000 people to be infected, about 6,700 people died, and the global economy has fallen into a depression. At present, especially in Europe and the United States, the epidemic situation has expanded. More and more countries have taken a blockade measure, which has severely hit the fields of aviation, transportation, etc., and the demand for crude oil is expected to drop significantly. In particular, oil prices have fallen by 50% since the beginning of the year. As the epidemic has disrupted business activities, travel and daily life, many forecasting agencies have also lowered their forecasts for crude oil demand, and the current forecast indicators have been continuously restored.

At present, the risk of the supply side is also further negative for oil prices. Saudi Arabia National Oil Company (Saudi Aramco) reiterated on Monday that it plans to increase production to a record level to occupy a larger share of the global oil market. Saudi Arabia has a clear attitude to increase production. Moreover, according to relevant consumption, the technical meeting of OPEC and non-OPEC oil producing countries planned to be held in Vienna on Wednesday has been cancelled. Saudi Arabia and Russia has not achieved further effective communication, which may lead to a huge increase in supply of Saudi Arabia and other oil producing countries, bringing a huge surplus to the global crude oil market. As a result, the pace of crude oil downward is intensified.

According to SunSirs, at present, the crude oil market is suffering from bad news, and both the supply side and the demand side tend to suffer from bad oil prices. The risk of global financial market is increasing, and the price of risk assets is declining. At present, many countries around the world have launched monetary easing policies, especially the interest rate of the Federal Reserve has dropped to a super level of 0-0.25, and there is no room for further easing in the later stage, which has defeated market confidence As the marginal benefit decreases, the role of interest rate reduction becomes smaller and smaller; moreover, due to the resonance effect of Saudi Arabia's production increase and the expected decline in demand brought by the epidemic. It is expected that the medium and short-term crude oil will remain at a low level, so it is not ruled out that further exploration is possible.

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