The global epidemic continues to disappear repeatedly

The price of INE in the Chinese market has been very strong during the epidemic. On the one hand, it has something to do with China’s proper prevention and control during the epidemic, but more importantly, China’s buying and buying actions supported the collapse of the international energy market at that time. In the first panic of the global epidemic, with oil prices falling to 22-year lows or even negative oil prices due to individual delivery problems in recent months, Chinese oil refiners, of course, the Big Mac is naturally the national power behind it using its own financial resources. Absorb the available crude oil worldwide.

From a market perspective, this is a low-price market behavior, including a very deep spread structure that also provides ample arbitrage profits. Refiners have also actively joined the army of buying, buying, and buying. Energy security issues and the complex international environment that can be foreseen today, China taking this opportunity to import crude oil on a large scale may also contain many strategic perspectives, whether it is for its own energy security considerations or other considerations.

China does not have corresponding data to observe the strategic oil reserves and commercial inventories, so these can only be some scattered information that can be seen in the survey. The VLCC shipping from the Middle East to Asia shows that the traces of that purchase are very obvious. Clear.

With the implementation of the buy-buy-buy transaction, these oils began to arrive in China in late May. The volume and scale of these oils are very huge. Since June, China’s oil imports have been at a high level, and the tankers that transported it had to wait up to four weeks. In order to unload at Chinese ports, a large amount of crude oil destined for China is staying near the regional oil trading center Singapore. At the same time, China’s crude oil storage capacity has to be considered (of course, what is currently underway is the purpose of large-scale coastal construction of storage tanks. The main purpose is to increase the strategic crude oil reserves, from the storage tanks in the Yangtze River Delta to Dalian in the Liaodong Peninsula, and the strategic reserve pipelines in the Shandong Peninsula are all under construction and hoarding reserves).

From buying and buying to the actual spot to Hong Kong, the price of INE has also undergone a change from strong to weak
As a large number of shipments are queued to enter China for shipments, the demand in China after the epidemic has resumed is reaching a corresponding high. However, the second and third epidemics in overseas Europe and the United States have continued, which made the original expected epidemic end. The path of demand recovery has become a secondary weakness in demand.

The outbreak of the epidemic in Europe has also caused a heavy blow to the demand in the European region. The seasonal factors in the United States will also slow down with the advent of winter. Gasoline and diesel are currently facing possible seasonal accumulation of inventory. In fact, conventional seasonal destocking cannot consume the accumulated inventory caused by the shutdown of the epidemic. The incremental part accumulated due to the epidemic makes the expectation of the return of the entire inventory to the average value more cautious.

However, the price of crude oil and refined oil, which has arrived in large quantities and is still waiting for unloading, is facing the risk: China has accumulated a large amount of inventory, and it will take some time to resolve the excess inventory. If the global energy price is solely dependent on China Buying, buying, buying cannot solve the problem. Inventory and demand have been continuously interrupted by the epidemic. This has also led to the relative weakness of crude oil prices in Shanghai futures trading. The strength of the RMB has further increased this trend; now the price of INE The support of buying, buying and buying is being shifted to cover the decline.

Picture: WTI spread and structure, after August it has been unable to support
Data source: Refinitiv EIKON

In the overall market this year, among all the important FICC assets, crude oil has become the product that is closest to the end of the epidemic. Its response to the macro and liquidity is affected by severe demand. Of course, it is also the most directly close to the actual situation of global demand. When fiscal policy and monetary policy could not go further, it took the lead as the weakest product to respond. This also allows us to see the relationship between other assets and actual demand more clearly. Of course, each product There are also differences in supply factors, but this is more of a support for the crude oil market when it is too low (supply alliance agreement to reduce production, control production, and insure prices, etc.).

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