{"id":1249,"date":"2020-11-26T17:00:25","date_gmt":"2020-11-26T17:00:25","guid":{"rendered":"https:\/\/campus.hesge.ch\/commodity-trading\/?p=1249"},"modified":"2020-11-26T18:05:53","modified_gmt":"2020-11-26T18:05:53","slug":"chinas-increasing-demand-and-the-second-covid-19-wave-impact-on-russian-crude-weekly-bulletin-2","status":"publish","type":"post","link":"https:\/\/campus.hesge.ch\/commodity-trading\/chinas-increasing-demand-and-the-second-covid-19-wave-impact-on-russian-crude-weekly-bulletin-2\/","title":{"rendered":"China&#8217;s increasing demand and the second covid-19 wave impact on Russian Crude. Weekly Bulletin #2"},"content":{"rendered":"\n<h2><strong>Price movement<\/strong><\/h2>\n\n\n\n<p class=\"has-normal-font-size\">Despite uncertainties about the second wave of covid-19, the fall in prices was limited due to disruptions in oil supply in several regions. Recent information about a possible vaccine and the demand for oil in China and India have supported the rising trend. Hedge funds and fund managers have slightly modified their positions in response to covid-19 uncertainties and global demand predictions, but this has not stopped the upward trend in prices. Nevertheless, the decrease in US oil stocks in coupled with the price war between Russia and Saudi Arabia is impacting the market.<\/p>\n\n\n\n<figure class=\"wp-block-gallery columns-1 is-cropped\"><ul class=\"blocks-gallery-grid\"><li class=\"blocks-gallery-item\"><figure><img loading=\"lazy\" width=\"361\" height=\"357\" src=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image1-4.png\" alt=\"\" data-id=\"1251\" data-full-url=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image1-4.png\" data-link=\"https:\/\/campus.hesge.ch\/commodity-trading\/?attachment_id=1251\" class=\"wp-image-1251\" srcset=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image1-4.png 361w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image1-4-300x297.png 300w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image1-4-100x100.png 100w\" sizes=\"(max-width: 361px) 100vw, 361px\" \/><figcaption class=\"blocks-gallery-item__caption\"><em><a href=\"https:\/\/oilprice.com\/oil-price-charts\/ ; https:\/\/www.cmegroup.com\/trading\/energy\/crude-oil\/brent-crude-oil.html(date in 2020 \/ $ per barrel)\"> <\/a><\/em><\/figcaption><\/figure><\/li><\/ul><figcaption class=\"blocks-gallery-caption\"><em><a href=\"https:\/\/oilprice.com\/oil-price-charts\/ ; https:\/\/www.cmegroup.com\/trading\/energy\/crude-oil\/brent-crude-oil.html(date in 2020 \/ $ per barrel)\">Sources: https:\/\/oilprice.com\/oil-price-charts\/ ; https:\/\/www.cmegroup.com\/trading\/energy\/crude-oil\/brent-crude-oil.html <\/a><\/em><br><em><a href=\"https:\/\/oilprice.com\/oil-price-charts\/ ; https:\/\/www.cmegroup.com\/trading\/energy\/crude-oil\/brent-crude-oil.html(date in 2020 \/ $ per barrel)\">(date in 2020 \/ $ per barrel)<\/a><\/em><\/figcaption><\/figure>\n\n\n\n<h2><strong>Differentials<\/strong><\/h2>\n\n\n\n<p>In Europe, the value of Urals (medium sour crude) is at a premium against Brent (light sweet) due to the strong demand from Mediterranean and Asian refiners. In addition, the value of Urals is supported by a lower loading in November than in October due to increased demand from Russian refineries. Furthermore, the difference between a high supply and a low demand for Brent crude coupled with an increase in American and Libyan exports add further pressure on the latter.<\/p>\n\n\n\n<h2><strong>Forward Curve<\/strong><\/h2>\n\n\n\n<figure class=\"wp-block-gallery columns-1 is-cropped\"><ul class=\"blocks-gallery-grid\"><li class=\"blocks-gallery-item\"><figure><img loading=\"lazy\" width=\"325\" height=\"291\" src=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image2-3.png\" alt=\"\" data-id=\"1252\" data-full-url=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image2-3.png\" data-link=\"https:\/\/campus.hesge.ch\/commodity-trading\/?attachment_id=1252\" class=\"wp-image-1252\" srcset=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image2-3.png 325w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image2-3-300x269.png 300w\" sizes=\"(max-width: 325px) 100vw, 325px\" \/><figcaption class=\"blocks-gallery-item__caption\">                                                                      <strong>  <\/strong><\/figcaption><\/figure><\/li><\/ul><figcaption class=\"blocks-gallery-caption\"><strong>Ice Brent Forward Curves<\/strong><br><a href=\"https:\/\/www.opec.org\/opec_web\/en\/publications\/338.html\" data-type=\"URL\" data-id=\"Sources: https:\/\/www.opec.org\/opec_web\/en\/publications\/338.html\">Sources: ICE and OPEC https:\/\/www.opec.org\/opec_web\/en\/publications\/338.html<\/a><br>(forward month\/ $ per barrel)<\/figcaption><\/figure>\n\n\n\n<p>The forward curve shows a sustained contango in October as oil supply and demand prospects deteriorated. The supply of cargoes remained modest, while floating storage in the North Sea was significant. The COVID-19 disruptions have affected trade. High stocks and the development of floating storage also had a negative impact.<\/p>\n\n\n\n<h2>Supply and Demand drivers, and stock levels<\/h2>\n\n\n\n<p>There are a few key factors that influenced the supply and demand, the first to consider is the ongoing deal of the OPEC+ members, concerning the planned reductions in oil productions. The members originally planned on cutting more of their production by 2 mbp .Though, the recent discussions, on November 17<sup>th<\/sup> were not decisive and they planned on not cutting the supply before seeing how the situation is going to evolve and postponing a decision to January 2021. As a matter of fact, Russian oil producer recently met with the country&#8217;s Energy Minister, and let hear that they were not ready to accept deeper cuts, and that all they could do was keeping on going with the actual reduction, but not more than this.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" width=\"688\" height=\"474\" src=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image3-1.png\" alt=\"ffff\n\" class=\"wp-image-1253\" srcset=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image3-1.png 688w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image3-1-300x207.png 300w\" sizes=\"(max-width: 688px) 100vw, 688px\" \/><figcaption><strong>Russian Oil Production in thousand barrels per day<\/strong><\/figcaption><\/figure>\n\n\n\n<p>Another very important point that influences the supply and demand of Russian crude oil is the ongoing \u201cwar\u201d with Saudi Arabia, where both want to become the first supplier of China, as they are taking advantage of the very low oil price. Both Saudi Arabia and Russia are trying to cope with the high demand and win the Chinese market, boosting their export to China, whose demand is still going strong despite the Covid-19 pandemic and the global demand being low. For the past year, Russia was ahead in term of export, but the latest month their first place was taken by Saudi Arabia<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" width=\"684\" height=\"264\" src=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image4-1.png\" alt=\"\" class=\"wp-image-1254\" srcset=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image4-1.png 684w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image4-1-300x116.png 300w\" sizes=\"(max-width: 684px) 100vw, 684px\" \/><figcaption><a href=\"https:\/\/in.reuters.com\/article\/china-oil-saudi-russia-graphic\/graphic-saudi-arabia-and-russia-in-tight-race-to-become-chinas-top-oil-supplier-in-2020-idINKBN2800HE\" data-type=\"URL\" data-id=\"https:\/\/in.reuters.com\/article\/china-oil-saudi-russia-graphic\/graphic-saudi-arabia-and-russia-in-tight-race-to-become-chinas-top-oil-supplier-in-2020-idINKBN2800HE\">Source: https:\/\/in.reuters.com\/article\/china-oil-saudi-russia-graphic\/graphic-saudi-arabia-and-russia-in-tight-race-to-become-chinas-top-oil-supplier-in-2020-idINKBN2800HE<\/a><\/figcaption><\/figure>\n\n\n\n<p>Asia is a very important market for Russian crude, and it doesn\u2019t only involves China, Asian country are entering a bidding war on the price to ensure that they will secure their supplies, an example being cargoes from Russia being bought at very high prices, such as Chinese and Japanese buying Russian ESPO (Eastern Siberia\u2013Pacific Ocean oil pipeline) at a five-month high premium price. What could further influence the demand and supply is the fact that Asian refiner are lacking oil supply contract from OPEC members, and they will most probably turn to Russia, who is fully able to respond as they didn\u2019t cut production as much as planned.<\/p>\n\n\n\n<figure class=\"wp-block-gallery columns-1 is-cropped\"><ul class=\"blocks-gallery-grid\"><li class=\"blocks-gallery-item\"><figure><img loading=\"lazy\" width=\"578\" height=\"287\" src=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image5.png\" alt=\"\" data-id=\"1255\" data-full-url=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image5.png\" data-link=\"https:\/\/campus.hesge.ch\/commodity-trading\/?attachment_id=1255\" class=\"wp-image-1255\" srcset=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image5.png 578w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image5-300x149.png 300w\" sizes=\"(max-width: 578px) 100vw, 578px\" \/><\/figure><\/li><\/ul><figcaption class=\"blocks-gallery-caption\">Sources: <a href=\"https:\/\/www.spglobal.com\/platts\/en\/market-insights\/blogs\/oil\/ct-opec-meetings-russian-crude-palm-oil-france-nuclear\" data-type=\"URL\" data-id=\"https:\/\/www.spglobal.com\/platts\/en\/market-insights\/blogs\/oil\/ct-opec-meetings-russian-crude-palm-oil-france-nuclear\">https:\/\/www.spglobal.com\/platts\/en\/market-insights\/blogs\/oil\/ct-opec-meetings-russian-crude-palm-oil-france-nuclear<\/a><\/figcaption><\/figure>\n\n\n\n<p>As for the demand, it could improve depending on the evolution of the Covid-19 pandemic as hope for a vaccine could improve it, but still, this remains to be seen. As of now, analysts say that the oil demand is usually low in the first quarter of the year, and the fragile oil market may not be able to absorb the additional supplies, that means that the OPEC+ deal cuts are very important and that the parties involved should respect the cuts in quantity they planned on.<\/p>\n\n\n\n<p>Finally, a last factor could also influence the demand. Northeast Asian countries, such as Japan and South Korea, are expecting very cold winters, and it could benefit Russia. In fact, some producer from far East Russia are already planning on making short haul delivery to those country and boost their kerosene output to cope with the incoming demand. And, the time necessary for a delivery from far East Russia to Northeast Asia being only around a week, compared to the 10-15 necessary from South East Asia, the concerned country will most likely take advantage of Russia\u2019s oil supply.<\/p>\n\n\n\n<figure class=\"wp-block-gallery columns-1 is-cropped\"><ul class=\"blocks-gallery-grid\"><li class=\"blocks-gallery-item\"><figure><img loading=\"lazy\" width=\"1024\" height=\"595\" src=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image6-1024x595.png\" alt=\"\" data-id=\"1256\" data-full-url=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image6.png\" data-link=\"https:\/\/campus.hesge.ch\/commodity-trading\/?attachment_id=1256\" class=\"wp-image-1256\" srcset=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image6-1024x595.png 1024w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image6-300x174.png 300w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image6-768x446.png 768w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image6-1536x893.png 1536w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/11\/Image6-2048x1191.png 2048w\" sizes=\"(max-width: 767px) 89vw, (max-width: 1000px) 54vw, (max-width: 1071px) 543px, 580px\" \/><\/figure><\/li><\/ul><\/figure>\n\n\n\n<p>As for the stock levels, Russia\u2019s energy sector being totally state controlled, and the country being the opposite of transparent, it is extremely hard to find up to date data. However, the inventory levels were of 13 billion metrics tons in the beginning of 2020, according to the US Energy Information Administration, while they were of 14,7 billion metrics in 2019.<\/p>\n\n\n\n<h2><strong>Recommendations<\/strong><\/h2>\n\n\n\n<p>The demand from Asia and the production cuts driven by members of OPEC+ have a positive impact on the market. Based on the information provided in this bulletin, we advise a long position and to be attentive to the information that will result from the next OPEC+ meeting.<\/p>\n\n\n\n<h2>Sources<\/h2>\n\n\n\n<p>\u201cOpec committee reveals no 2021 oil cut guidance as ministers will wait to decide\u201d. Consult\u00e9 les 23 et 24 novembre<br><a href=\"https:\/\/www.spglobal.com\/platts\/en\/market-insights\/latest-news\/oil\/111720-opec-committee-reveals-no-2021-oil-cut-guidance-as-ministers-will-wait-to-decide\">https:\/\/www.spglobal.com\/platts\/en\/market-insights\/latest-news\/oil\/111720-opec-committee-reveals-no-2021-oil-cut-guidance-as-ministers-will-wait-to-decide<\/a><\/p>\n\n\n\n<p>\u201cOil from Russia to US snapped up on Asia\u2019s growing appetite\u201d. Consult\u00e9 le 23 novembre.<br><a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-11-17\/oil-from-russia-to-u-s-snapped-up-on-asia-s-growing-appetite\">https:\/\/www.bloomberg.com\/news\/articles\/2020-11-17\/oil-from-russia-to-u-s-snapped-up-on-asia-s-growing-appetite<\/a><\/p>\n\n\n\n<p>\u201cOil climbs with Russia in talks on delaying OPEC output hike\u201d. Consult\u00e9 le 24 novembre<br><a href=\"https:\/\/energynow.com\/2020\/11\/oil-climbs-with-russia-in-talks-on-delaying-opec-output-hike\/\">https:\/\/energynow.com\/2020\/11\/oil-climbs-with-russia-in-talks-on-delaying-opec-output-hike\/<\/a><\/p>\n\n\n\n<p>\u201cRussia: It\u2019s Too Early To Talk About Tweaking OPEC+ Deal\u201d. Consult\u00e9 le 24 novembre<br><a href=\"https:\/\/oilprice.com\/Energy\/Energy-General\/Russia-Its-Too-Early-To-Talk-About-Tweaking-OPEC-Deal.html\">https:\/\/oilprice.com\/Energy\/Energy-General\/Russia-Its-Too-Early-To-Talk-About-Tweaking-OPEC-Deal.html<\/a><\/p>\n\n\n\n<p>\u201cCommodity Tracker: 4 charts to watch this week\u201d. Consult\u00e9 le 24 novembre<br><a href=\"https:\/\/www.spglobal.com\/platts\/en\/market-insights\/blogs\/oil\/ct-opec-meetings-russian-crude-palm-oil-france-nuclear\">https:\/\/www.spglobal.com\/platts\/en\/market-insights\/blogs\/oil\/ct-opec-meetings-russian-crude-palm-oil-france-nuclear<\/a><\/p>\n\n\n\n<p>\u201dGraphic: Saudi Arabia and Russia in tight race to become China&#8217;s top oil supplier in 2020\u201d. Consult\u00e9 le 24 novembre<br><a href=\"https:\/\/in.reuters.com\/article\/china-oil-saudi-russia-graphic\/graphic-saudi-arabia-and-russia-in-tight-race-to-become-chinas-top-oil-supplier-in-2020-idINKBN2800HE\">https:\/\/in.reuters.com\/article\/china-oil-saudi-russia-graphic\/graphic-saudi-arabia-and-russia-in-tight-race-to-become-chinas-top-oil-supplier-in-2020-idINKBN2800HE<\/a><\/p>\n\n\n\n<p>\u201cThe Battle for Dominance In China\u2019s Oil Market\u201d. Consult\u00e9 le 25 novembre<br><a href=\"https:\/\/oilprice.com\/Energy\/Energy-General\/The-Battle-For-Dominance-In-Chinas-Oil-Market.html\">https:\/\/oilprice.com\/Energy\/Energy-General\/The-Battle-For-Dominance-In-Chinas-Oil-Market.html<\/a><\/p>\n\n\n\n<p>Monthly report. Consult\u00e9 le 24 novembre<br><a href=\"https:\/\/www.opec.org\/opec_web\/en\/publications\/338.htm\">https:\/\/www.opec.org\/opec_web\/en\/publications\/338.htm<\/a><\/p>\n\n\n\n<p>Chart. Consult\u00e9s le 24 novembre<br><a href=\"https:\/\/www.cmegroup.com\/trading\/energy\/crude-oil\/brent-crude-oil.html\">https:\/\/www.cmegroup.com\/trading\/energy\/crude-oil\/brent-crude-oil.html<\/a><br><a href=\"https:\/\/oilprice.com\/oil-price-charts\/\">https:\/\/oilprice.com\/oil-price-charts\/<\/a><\/p>\n\n\n\n<p>Differential. Consult\u00e9 le 25 novembre.<br><a href=\"https:\/\/www.neste.com\/investors\/market-data\/urals-brent-price-difference\">https:\/\/www.neste.com\/investors\/market-data\/urals-brent-price-difference<\/a><\/p>\n\n\n\n<p>\u201cOPEC+ leaning towards oil cut extension, despite rally: sources\u201d. Consult\u00e9 le 25 novembre<br><a href=\"https:\/\/www.reuters.com\/article\/us-oil-opec\/opec-leaning-towards-oil-cut-extension-despite-rally-sources-idUSKBN285273\">https:\/\/www.reuters.com\/article\/us-oil-opec\/opec-leaning-towards-oil-cut-extension-despite-rally-sources-idUSKBN285273<\/a><\/p>\n\n\n\n<p>\u201cOil rally stalls on signs of more supply, demand doubts\u201d. Consult\u00e9 le 25 novembre<br><a href=\"https:\/\/www.reuters.com\/article\/us-global-oil\/oil-rally-boosted-by-surprise-fall-in-u-s-stocks-idUSKBN28603W\">https:\/\/www.reuters.com\/article\/us-global-oil\/oil-rally-boosted-by-surprise-fall-in-u-s-stocks-idUSKBN28603W<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Price movement Despite uncertainties about the second wave of covid-19, the fall in prices was limited due to disruptions in oil supply in several regions. Recent information about a possible vaccine and the demand for oil in China and India have supported the rising trend. Hedge funds and fund managers have slightly modified their positions &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/campus.hesge.ch\/commodity-trading\/chinas-increasing-demand-and-the-second-covid-19-wave-impact-on-russian-crude-weekly-bulletin-2\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;China&#8217;s increasing demand and the second covid-19 wave impact on Russian Crude. Weekly Bulletin #2&#8221;<\/span><\/a><\/p>\n","protected":false},"author":2075,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/posts\/1249"}],"collection":[{"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/users\/2075"}],"replies":[{"embeddable":true,"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/comments?post=1249"}],"version-history":[{"count":5,"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/posts\/1249\/revisions"}],"predecessor-version":[{"id":1261,"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/posts\/1249\/revisions\/1261"}],"wp:attachment":[{"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/media?parent=1249"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/categories?post=1249"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/tags?post=1249"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}