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Explosion + Terrorist attack! Can oil turn a corner?
2020-03-06 16:03:11

News broke on international markets yesterday afternoon, a fire at the CARSON refinery owned by Marathon Oil, the second largest refining company. Located in California, the refinery has a capacity of 12 million tons per year. The Los Angeles Fire Department says a cooling tower exploded before it caught fire.According to the latest news, a fire at marathon's CARSON refinery has been brought under control.

Meanwhile, the security situation in the Middle East is being tested again. A motorcycle bomb has exploded in Kabul, injuring nine civilians, the Afghan interior ministry said last night. The blast came on the eve of an agreement between the United States and the Taliban, the fifth day of a seven-day campaign to reduce violence. Afghan Taliban spokesman Megahed Mujahid said after the incident that the Taliban were not behind the blast, according to the website of Afghanistan's first television station.Oil fell nearly 4 percent, asphalt more than 3 percent and oil more than 4 percent. So far this week, the main fuel contracts have fallen nearly 10 percent, crude oil has fallen more than 7 percent...Although the EIA's latest crude oil inventory increase was less than expected, oil prices were under pressure from demand concerns over the outbreak of COVID-19 and a sharp decline in risk aversion in U.S. stocks. Early this morning, WTI crude fell another 2.89 percent.U.S. crude oil inventories rose 452,000 barrels to 443.3 million barrels in the week ended Feb. 21, the EIA report showed, compared with an estimated gain of 2.467 million barrels. Goldman also cuts its 2020 oil demand growth forecast to 600,000 BPD from 1.2 million BPD and cut its 2020 Brent crude price forecast by $3 to $60 BPD.

Chaos in the Middle East, refinery accidents in the United States and the spread of disease in the Middle East, the fall and fall of crude oil can turn a corner?


The spread of the disease overseas caused market panic


Since this week, the inside and outside the crude oil futures generally oscillate down the trend. Yesterday, the domestic futures market closed relatively large area turned green, which, the energy plate overall decline significantly, fuel 2005 contract closed at 2090 yuan/ton, down more than 4.22%; The 2004 crude oil contract closed down nearly 4% at 382.4 yuan a barrel. Asphalt 2006 ended down 3.14 per cent. The main fuel contract has fallen nearly 10 percent this week, while INE crude is down more than 7 percent.



"The significant and sustained decline in oil prices has been driven by a sell-off in risky assets, including crude, driven by concerns about oil demand and a global economic slowdown in the context of a worsening outbreak overseas." Li Chenghao, a crude oil researcher at GF futures, said the sell-off was directly reflected in the correlation of risk assets, with the three major U.S. stock indexes falling in a row, the s&p 500 energy index falling to a near 10-year low, and 10-year Treasury yields falling to a 2016 low.


The oil market is severely short of demand


"At this point, the fire at marathon oil's CARSON refinery in California is not causing undue concern." Such events usually push up oil prices in a more positive phase of the market, but the fact that oil prices continued to fall after news of the refinery fire showed the market was still very pessimistic, Yang said.Furthermore, the supply and demand side of the oil market is not optimistic. The announcement came after data from the American petroleum institute showed API U.S. crude oil inventories rose 1.3 million barrels to 444.4 million barrels in the week ended Feb. 21, with an expected increase of 2.46 million barrels. Gasoline stocks rose 74,000 barrels and refined oil stocks fell 706,000 barrels.For the Chinese market, he said the outbreak has already had a severe impact on China's crude oil demand, with local refiners operating at five-year lows as demand for refined products falls and stocks build up rapidly. The sharp drop in refinery capacity resulted in a build-up of crude oil inventories on the one hand and a substantial build-up of refined products inventories on the other.



Crude oil may continue its downward search for a bottom


Countries with confirmed cases in the Middle East include Iran, Iraq, Bahrain, the united Arab emirates, Oman and Kuwait, according to Bloombergs data, but none other than Iran has been seriously affected. Of the 95 confirmed cases in Iran, 15 have been fatal, with a mortality rate of 16 percent. Based on the data, he said there may be weaknesses in the prevention and treatment of the disease in Iran, and it is necessary to be alert to the possibility of such weaknesses prevailing in middle eastern countries. As for the subsequent trend of crude oil market, Li Chenghao believes that it is necessary to pay attention to the geographical location of the worsening of the epidemic. If it happens in places with stronger demand attributes than Asia or northwestern Europe, it will further drag on prices."In general, we believe there is a high probability that oil prices will fall below the previous low in the short term, with a 'v-shaped' trend of first down and then up, with a 'V-shaped' first half of WTI and Brent at around $45 and $50, respectively, over a window of about three months."

Related tags: crude oil drop