Oil Price Tumbled And Demand Weakened

The immediate cause of the current plunge should be changes in global oil supply expectations.Mr Trump claimed to be the main culprit for the fall in oil prices as he temporarily exempted eight countries and regions from buying Iranian oil and asked Saudi Arabia to increase production, boosting global oil supplies.

At the same time, according to the EIA, according to data from 18 years American daily output has reached 11.35 million barrels of crude oil in August, an increase of 1.3 million barrels, 17 at the end of the new drill in October 1577, increased by 30% than in March, which means that the supply of oil continues to increase, so as to make the world's oil supply increased more than expected.

The global economic slow down has weakened oil demand In addition to the short-term increase in supply, another important driver of the decline in oil prices is actually the decline in demand.

The organization for economic cooperation and development (oecd) has lowered its forecast for world economic growth next year, xinhua reported Thursday.The report notes that strong global growth has recently peaked and downside risks have increased as a result of rising trade tensions, tighter financial conditions and slowing growth in emerging economies.The world economy is expected to grow 3.7 percent this year and 3.5 percent annually in 2019 and 2020.Among them, the growth forecast for 2019 was 0.2 percentage points lower than the forecast in September.

Slower economic growth will have an impact on the price of crude oil, which is reflected in all aspects. Take daily life as an example, usually economic downturn will be accompanied by lower income of individuals and enterprises, while people's lower income will reduce their consumption of cars and oil, and the decrease of car sales will again affect the growth of oil consumption.According to data released by the China automobile association, auto production in October was 2.3345 million units, down 10.05 percent from a year earlier.Sales totaled 2.3801 million units, down 11.70% from a year earlier.In the first 10 months of this year, production and sales fell 0.4% and 0.1%, respectively, from a year earlier.Production and sales growth continued to fall, negative growth for the first time this year.As such, positive growth for the full year is highly unlikely.As a result, slower economic growth will reduce the demand for oil, thus causing prices to fall.

There are pros and cons to every situation. Some people will benefit from lower oil prices, while others will suffer from lower oil prices.

The worry should be in the upstream sector, where falling oil prices could lead to a sharp fall in revenues and profits.For example, in the oil exploration industry, China currently produces about 1.4 billion barrels of oil per year. If the oil price drops by 20 dollars per barrel, the oil exploration industry will lose about 28 billion dollars in profits, equivalent to 200 billion yuan.

In terms of consumption, China consumes 5 billion barrels of oil a year. At the rate mentioned above, the price reduction will bring about 700 billion yuan of cost savings to the downstream industry, which far exceeds the income decline of the upstream industry.From a macro point of view, so a drop in oil prices is beneficial to the economy of China, especially in the downstream industry belongs to the low bargaining power of private enterprises, a drop in oil prices the cost of reducing will provide a better living space for private enterprises, it also conforms to the recently introduced a series of supporting document conveys the spirit of corporation development.


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