International oil prices plummeted more than 6% overnight: China's crude oil import data for January and April came out, and Saudi Arabia bucked the trend to lower oil prices

China Times (www.chinatimes.net.cn) reporter Ye Qing reported in Beijing

Affected by the Fed's interest rate hike concerns and Saudi Arabia's cuts in crude oil prices for Asian and European customers, international crude oil prices plummeted, as of the close of the United States local time on May 9, the price of the NYMEX crude oil futures June contract fell by 6.76%, the price fell to $102.35 / barrel; ICE Brent crude oil futures July contract price fell 6.19%, the price fell to 105.43 US dollars / barrel.

Some insiders said that behind the plunge, in addition to the above factors, the decline in China's crude oil import data has also put pressure on oil prices.

China has long been the world's largest oil buyer, and changes in import data can affect the price of crude oil. According to the General Administration of Customs, China's crude oil imports in April increased by nearly 7% compared with the same period last year, but imports in January-April fell by 4.8% year-on-year.

At the same time, high global inflation levels have also exacerbated market concerns, prompting interest rate hikes to become part of monetary policy, and as liquidity gradually tightens, the market demand for crude oil will also decrease.

China's crude oil imports fell 4.8% from January to April

On May 9, Atlanta Fed President Raphael Bostic said the Fed could raise rates by a further 50 basis points over the next two to three meetings, then assess the state of the economy and inflation before deciding whether further rate hikes are needed. Bostic believes that the 50 basis point hike approved last week is already a rather aggressive move, and personally believes that the Fed does not need to take more aggressive action.

"We can keep that rate hike pace and pace and really see how the market evolves." We'll do it a couple of times, maybe twice, maybe three times , and see how the economy reacts, see if inflation continues to approach our 2% target, and then we can pause for a moment and then see how it goes. Bostic said.

It is understood that the recent global financial markets have also been uneasy by interest rate hikes and recession concerns, and the dollar index continues to reach new highs. Chen Tong, an analyst at Yide Futures, told the China Times that last week the Fed announced a 50 basis point interest rate hike and announced a plan to reduce its balance sheet, which is the Fed's largest interest rate hike since May 2000, the market's risk appetite has declined, the prices of US stocks, US bonds and commodity futures have fallen synchronously, and the logic of recession trading has heated up.

At the same time, China's containment measures against the COVID-19 epidemic have also become stricter, which has indirectly affected crude oil imports. On May 9, according to data released by the General Administration of Customs of China, China imported 171 million tons of crude oil from January to April, a decrease of 4.8% year-on-year, and the average import price was 4,323.6 yuan per ton, up 54.3%. China imported 43.03 million tons of crude oil in April.

China imported 35.866 million tons of natural gas from January to April, down 8.9% year-on-year, and the average import price was 3,842 yuan per ton, up 72.1%. China imported 8.088 million tons of natural gas in April. From January to April, China imported 7.975 million tons of refined oil products, down 0.8% year-on-year, and the average import price was 5,001.9 yuan per ton, up 36.2%. China imported 1.481 million tons of refined oil products in April.

In addition, on May 8, Saudi Aramco's latest statement decided to reduce the official price of Arab light crude oil sold to Asia in June from $9.35 / barrel to $4.4 / barrel from the average price of Dubai in Oman, which is the first time in four months that Saudi Arabia has lowered oil prices. At the same time, Saudi Aramco has also lowered the price of oil sold to northwestern Europe and the Mediterranean region.

It is worth mentioning that Saudi Aramco did not allow the United States to enjoy preferential prices, and there was no change in the price of oil sold to the United States in June. Some insiders said that this may be related to the earlier intention of the United States to legislate: the United States intends to introduce the "NOPEC" bill and sue OPEC monopoly to force these oil-producing countries to increase production. This has upset Saudi Arabia, which warned in 2019 that if the United States officially introduces this antitrust bill, Saudi Arabia will sell oil in non-dollars.

Liang Fuming, who is engaged in the refined oil trade, told the "China Times" reporter that perhaps Saudi Arabia is also aware of the problem of weakening demand. Saudi Arabia's price cuts are actually contrary to the trend of national crude oil prices, with international oil prices rising three times in May, the Price of June Light Crude Oil Futures on the New York Stock Exchange rose by $0.45, or 0.42%, and Crude Oil Futures rose $0.76 in July.

When international oil prices are rising, why did Saudi Arabia take the initiative to reduce the price of oil delivered to Asian customers? Some analysts believe that because China has been affected by the epidemic, the demand for oil has declined very seriously. There are also some views that Saudi Arabia took the initiative to lower prices, and another important reason is to maintain customers. After the Russian-Ukrainian conflict, India imported more than 40 million barrels of crude oil from Russia, because Russia gave India a discounted price, which is much lower than the international oil price, India is the third largest international oil importer, reducing the amount of oil imported from Saudi Arabia is also an adverse impact on Saudi oil exports.

In addition, Sino-Russian relations are good, China will also import a large amount of oil from Russia, and there is also news that Chinese customers can use rmb settlement to buy oil, and Russian oil will inevitably gain a larger market share in China. China is the largest oil importer, and if Saudi Arabia loses its Chinese customers, it will have to pay a greater price if it wants to regain its market position in China. Now take the initiative to reduce the price, they will not have any loss, after all, the international oil price is too high.

In the medium and long term, oil prices are easy to rise and fall

Last week, the European Commission proposed a phased embargo on Russian oil. As part of the toughest sanctions against Russia to date, that boosted Brent and U.S. crude for a second straight week of gains. However, the proposal needs to be unanimously agreed by EU member states this week.

It is understood that on May 8, local time, the leaders of the Group of Seven (G7) met with Ukrainian President Zelenskiy, and the G7 promised to gradually reduce or stop imports of Russian oil.

On the same day, the United States also announced a new round of sanctions against Russia, targeting russia's media and financial industries. According to the Japan Broadcasting Association (NHK), Japanese Prime Minister Fumio Kishida said on the 9th that he would be consistent with the members of the Group of Seven (G7) and prohibit the import of Russian oil in principle. In this regard, Jeffrey Halley, senior analyst at OANDA, said in the report that the EU and Japan will inevitably compete for more non-Russian oil supplies in the future, which will support oil prices.

However, there are also countries that oppose it, with Bulgarian Deputy Prime Minister and Finance Minister Vasilev saying that if Bulgaria cannot get an exemption from the proposed sanctions banning the import of Russian oil, Bulgaria will not support a series of new EU sanctions against Russia.

In addition, a number of European countries have proposed plans to gradually reduce their dependence on Russian oil, prompting European countries to diversify their oil import sources. To this end, the market is looking forward to the rapid return of Iranian crude oil. The EU has also been working to break the "deadlock" in the Iranian nuclear negotiations. EU Coordinator and EU External Action Deputy Secretary-General Mora is expected to visit Iran on May 10 to advance negotiations between the parties to the JCPOA.

If the Iranian nuclear negotiations can be carried out smoothly, the return of Iranian oil to the market will greatly alleviate the oil supply problem or inhibit the upward trend of oil prices. At the same time, in response to the global oil shortage during the special period of the Russian-Ukrainian conflict, the United States has previously launched the largest stockpile in history with other IEA members, and will continue to sell a total of 240 million barrels of SPR to the market.

In this regard, Chen Tong said that after the European Union proposed a gradual embargo on Russian oil imports last week, the Group of Seven countries also made similar commitments on Sunday, and it is difficult for Russian oil exports to return to their original state. Insufficient capital expenditure of oil giants, making the global crude oil medium and long-term production increase space limited, superimposed geopolitical instability factors, the current OPEC holding more than 90% of the world's idle production capacity has become a strange commodity, accelerate the willingness to increase production is insufficient.

"The U.S. shale oil industry is hit by multiple factors such as limited DUC well inventories, supply chain bottlenecks and capital constraints. Iran's insistence on backing down on the islamic Revolutionary Guard Corps's identity has raised doubts about whether the Iran nuclear stalemate can be broken. We expect that there will still be a gap between supply and demand in the oil market in the second and third quarters, and oil prices will be strongly supported near $100 / barrel. Chen Tong said.