International oil prices have been falling steadily since they reached their highest level in the year in early October. As of November 20, light crude oil futures for January 2019 delivery on the New York Stock Exchange closed at $53.43 per barrel, down 6.59%, a new low in nearly a year, a cumulative decline of about 30%. London Brent crude oil futures for January 2019 closed at $62.53 a barrel, down 6.38%, 28% from the year's peak.
Despite reports that Saudi Arabia was willing to cut production, Brent crude oil prices fell by 1%, once to $61.58 a barrel, the lowest since December 2017. How much has the market been affected by the continuous decline in oil prices? Where will the market go after the oil price? On November 21, Guo Haitao, Dean of School of Business Administration, China University of Petroleum (Beijing), and Wan Zhe, a financial commentator, made an in-depth analysis.
　　
Why did oil prices fall all the way down after a 30% drop in more than a month?
Wan Zhe: Long-term and short-term factors are working together, and oil prices have fallen sharply.
Financial commentator Wan Zhe: In addition to the long-term factors of supply and demand, the United States has been asking the entire OPEC organization not to cut production, hoping that oil prices will remain relatively low, which is good for the economic recovery of the United States. This long-term appeal has always been there. In the medium term, the sanctions on Iran are actually the reason for the soaring oil prices in the previous period of time, but in fact, after the two sanctions, the market will feel far from the expected situation. Short-term is the incident of Saudi journalist Kashuji. Although it has twists and turns, the market is now impressed by the fact that the conflict in the Middle East will not be as severe as imagined or even lead to a supply cut, so oil prices have fallen instead.
Guo Haitao: Shale oil production in the United States has increased substantially and oil prices are under pressure
Guo Haitao, Dean of School of Business Administration, China University of Petroleum (Beijing): From the perspective of demand, the expected demand for crude oil is now declining. For example, it was expected to increase 1.5 million barrels a day this year, and now it may only be 1.45 million barrels, which has a great impact on psychology. From the supply side, the production of shale oil in the United States has risen very fast. In the past three quarters, the output of shale oil has increased by 700,000 barrels per day annually compared with the previous quarter, which has a great impact on the market.
　
How big is the impact of falling oil prices?
Wan Zhe: Watch out for weak demand behind falling oil prices
Financial commentator Wan Zhe: On the one hand, economic demand is actually declining. The recent figures of IMF have come out. The global economic growth rate next year has been further reduced. The developed countries have been reduced by 0.2%, and the developing countries have been further reduced.
On the other hand, the United States, Russia and Saudi Arabia have already produced more than 11 million barrels a day. After the sanctions imposed on Iran, global production has declined. But since May, it has not declined but risen again. It has also risen by more than 1 million barrels. In the case of weak demand, there is a little overcapacity and prices will fall. So we should not only worry about it. Just because oil prices are falling, the weakness of demand is even more alarming.
　　
Where is the market going after OPEC's upcoming annual meeting?
Wan Zhe: It's very difficult to reduce production agreement.
Wan Zhe, a financial commentator: In fact, the incentive to cut production is very inadequate. Especially, we see that even if OPEC cuts production, the United States itself is increasing production, while Russia is increasing production. This is different from the previous sanctions against Iran. The contribution of non-OPEC countries to oil production was not so great. This time, both OPEC and non-OPEC countries contributed a lot to oil production. In this case, the reduction of Saudi Arabia's output alone will probably only result in its market share being seized by other countries. In this game psychology Guided by this, I find it very difficult to reach a cut-off agreement.
Background Information & middot uuuuuuuuuuuu
Recently, Kaabi, representative of the United Arab Emirates Organization of Petroleum Exporting Countries (OPEC), said that OPEC is likely to agree to cut oil production at the upcoming meeting in early December, but the scale has not yet been determined.
He added that OPEC+Joint Ministerial Supervisory Committee (Jmmc) was still assessing the state of the global oil market and would present its latest findings at the OPEC Conference in Vienna from 6 to 7 December.
He said the UAE was committed to abiding by any OPEC decision.
It's less than two weeks before the OPEC conference. Ed. C., consultant to international futures broker Credit Pacific, said the meeting was similar to the November 2016 meeting: & ndash; & ndash; it was difficult to reach a consensus. Despite the steep drop in oil prices, Russia is reluctant to cut production drastically. They place more emphasis on market share. Their budget balances oil prices at $40 - the current price of oil still makes it profitable.
Wan Zhe, a financial commentator: Oil price is only a result. The rise and fall of commodity prices can be seen as a vane of whether a country's current demand is strong or not. On the one hand, facing overcapacity, on the other hand, facing the risk of the world economic downturn, oil prices are unlikely to rise; secondly, the global trade frictions are still fierce, and if such protectionism is still strong in 2019, the damage to the economy may be even greater. From this point of view, oil prices will be the same. Third, the uncertainty of future conflicts in the Middle East will also have a great impact on the future direction of the global economy. From these three aspects, we should be more concerned about the economy.
Guo Haitao: Decreased demand is the main reason for the fall in oil prices
Guo Haitao, Dean of School of Business Administration, China University of Petroleum (Beijing): The weakening of demand dynamics is the main reason for the decline in oil prices. Recently, including the United States, the European Union and Japan, the economic expectations for next year are worse than in 2018. The economic trend will then affect the demand for crude oil. Therefore, there are both short-term and long-term factors in the oil price market. It is not excluded that within a period of time, the oil price is in a low state of operation.。
(Comprehensive from CCTV Financial Review and Sina)