The Capitals Of Huge Oil Price Shocks

In March 13th, when he received a reporter's call, Wang Xiao's voice was mute.

A few days ago, he apologized in the circle of friends. The main idea was that the recent market volatility was too intense, and all kinds of meetings and telephone calls were not able to reply to friends' consultation in time.

"My working hours basically extended to 3 in the morning," he said.

In order to guard against risks, his Futures Company has asked the whole staff to respond urgently 24 hours, or even at 0:00 am to prepare for the opening of the trading day.

The sudden collapse of international oil prices is not just about Wang Xiao's life and work.

As the "king of commodities", crude oil can produce more than 6000 kinds of products, and all related industries are undergoing profound changes.

The biggest pain of the industry today is that the huge fluctuation of international oil prices has greatly reduced their ability to evade risks, because price fluctuations have nothing to do with supply and demand.

The biggest variables are whether OPEC can restart negotiations, how the negotiations will result, whether it can reach an agreement, and how the epidemic will spread and how much it will inhibit the demand.

These problems can not be solved now, and are even more difficult to predict.

Conservative options under huge fluctuations

Beijing time on March 9th 6: 22, Brent crude oil futures fell from 45.5 U.S. dollars / barrel to 35.86 U.S. dollars / barrel, and then set a new low of 31.02 U.S. dollars / barrel.

The decline was 30% in a single day. In this process, the participants in the capital market are most directly affected by it.

Wang Yu, a crude oil trader in a Asset Management Co in Shanghai, adjusted his trading strategy this week, taking into account both internal and external markets.

"Last year's strategy was mainly to make value return around cost and some structured markets, but with the recent sharp fall in oil prices, the strategy has been completely different and has become more conservative." He said.

A direct manifestation is that Wang Yu pays more attention to arbitrage transactions across markets, across varieties and contracts, so as to avoid the risk of huge fluctuations in oil prices.

For example, domestic crude oil futures are slower than overseas markets because of the rise and fall limit, which gives birth to the arbitrage opportunities in the internal and external markets. At the same time, according to his judgment based on the expansion of the asphalt price difference, he also established an intertemporal arbitrage portfolio that shorted the June contract and made many December contracts.

As for the black department dubbed by the industry as "hedge assets", Wang Yu formed a cross species arbitrage portfolio with short selling downstream chemicals.

According to him, "overseas positions are not unilateral. Domestic positions are hedged without risk exposure."

In fact, after a sharp fall this week, international oil prices have dropped to a low level of 30 US dollars / barrel. Although they belong to both sides, they believe that the price is relatively small. But in the long run, Wang Yu is relatively optimistic about the oil price performance after the dissipation of OPEC negotiations and epidemic situation.

"I have made many contracts for far month contracts." He said that the core logic is that the current oil prices will cause shale oil, and Venezuela and other countries heavy oil production clearance, the two or three quarter of the cumulative inventory increase, the fourth quarter may be significantly reduced, next year will return to a relatively balanced supply and demand.

More conservative, there are also entities.

In twenty-first Century, the economic report reporters recently learned that under the background of the domestic oil price adjustment mechanism and the international oil price falling below 40 US dollars, some refineries in Shandong began to increase the frequency of "lock price".

"The price of US $30 is certainly low in the long run, but it is only psychological valuation, with only a small amount of lock price." A person who was in charge of the material business of a state-owned enterprise in Shandong said that after all, the spread of overseas epidemic is not over yet. There is no definite conclusion about how to negotiate OPEC.

In his view, the most obvious impact at present is the potential stock price risk of downstream enterprises. "It is good to do hedging, and the trade associations without hedging are losing more."

"Unlike a large refinery with a professional team using live prices, many asphalt companies adopt the lock price method, which is linked to domestic oil prices. Considering the start of downstream demand after the Spring Festival, many enterprises are worried that oil prices will continue to rise after the festival, so they have built up very large stocks. Chen Xilin, chairman of Taixing Petrochemical Company, said 12.

As a result, the spread of the epidemic during the Spring Festival and the slow demand for downstream demand, coupled with the impact of the recent decline in crude oil on the price of bitumen, did not cause heavy losses to traders who had no risk management.

Asphalt is also one of the most obvious products that can be affected by the drop of crude oil. As of 13, the 2006 contract of domestic asphalt futures has fallen to 2118 yuan / ton, down 25% from last Friday.

Industry chain is mixed with sorrow and joy

Like oil, gold has its own dual attributes of commodities and finance. So after the international oil price hit a historical decline, people including Wang Xiao began to remind them of the potential risks of proliferation.

Overturn the impact of escalating overseas epidemic, the recent decline in European and American stock markets, and reached a climax on the 13 day, multinational stock market fuse.

Although there is a market view that A shares at this time of the risk avoidance function, the two market trend also shows a rare tenacity, but how many will still be a certain impact, such as the continuous outflow of funds in the north, as well as the 13 early morning stock index sharply lower opened, reflecting the sudden collapse of oil prices on the capital market impact.

For the industry, the price of US $30, which is difficult to be settled in the short term, such as the OPEC negotiations and the uncertainty of the spread of the epidemic, will prompt the redistribution of profits in the industry chain. The general direction is to shift from upstream to downstream, such as refining and chemical products in the middle reaches, and domestic transportation costs will also be significantly reduced.

"From refinery to terminal is good, because spot price adjustment is relatively lagging behind, and is seriously lagging behind." Chen Xilin said.

Just because the recent A shares belong to a systemic fall, the performance of the middle and lower reaches is not very satisfactory.

Statistics show that this week, the SW oil production sector fell 2.06%, while the SW oil processing sector dropped to 10.71% during the same period.

By contrast, the performance of the terminal industry is relatively "reasonable". SW shipping has gone up 4.9% against the market and air transport has fallen by 1.7%.

As far as the fundamentals are concerned, when the oil price is in a low position, although the profits of integrated petroleum companies such as 601857.SH and Sinopec (600028.SH) will be transferred internally, there will be a certain risk of inventory fall.

In the overall business level, the profitability of both companies declined to varying degrees during the fall from September 2014 to early 2016.

The net profit of PetroChina dropped from 107 billion 200 million yuan in 2014 to 35 billion 700 million yuan in 2015. The Sinopec maintained a similar trend. It only benefited from refinery operations and terminal sales outlets.

Oil suit ecology

The oil service industry, as a supporting industry, will decline synchronously due to the decrease in capital expenditure of these companies.

Taking PetroChina's petrochemical oil service (600871.SH) as an example, in 2016 and 2017, there was a large loss of 16 billion 115 million yuan and 10 billion 583 million yuan respectively due to delayed performance.

The above expectations have been reflected in overseas markets. For example, Schlumberger, an oil service giant listed on the US stock market, closed at $14.42 in March 12th, down 39.53% from last Friday's closing price.

In terms of A shares, petro-chemical oil service fell 9.91% this week and 601818.SH decreased by 14.95%. This also reflects the strong and weak differences between the two markets in the recent Sino US stock market.

As for the middle reaches of the refining and chemical industry, because the raw materials are mainly dependent on imports, the current round is expected to fully enjoy the benefits of falling oil prices. Only considering the factors such as pricing mode, procurement cycle and so on, it is necessary to maintain a relatively low oil price for a long time, which will bring support to its operation ability.

In the short term, in addition to the obvious benefits of refined oil being lower than the US $40 / barrel price adjustment, other petroleum chemicals are facing the emotional impact brought by the decline in international oil prices.

The drive to lower the cost of the middle and lower reaches is a relatively long and slow process, which requires the gradual transmission of the industrial chain, reflecting the lag in the performance of the listed companies.

For example, the aviation industry accounts for about 30% of its total fuel cost. If oil prices can remain low for a long time, it will undoubtedly help to ease the cost and cash flow pressure of airlines.

However, it only provides a breathing space. After all, the impact of the epidemic on the aviation industry is more significant.