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92 Gasoline Again Fell Back To 7 Yuan, Will The Domestic Oil Price Be Far From 6 Yuan?
- Nov 07, 2018 -

Introduction: In fact, we can see that the so-called domestic oil price of China is greatly affected by the international oil price. Whether the oil price can return to 7 yuan, or even 6 yuan, is largely due to the influence of international oil price fluctuations.

Oil prices have shown a downward trend in the past few days. Although we see the oil price drop is not too big. But after all, it has been falling, not rising again, which makes many driver friends feel very happy. The next price adjustment window for domestic refined oil was opened on December 2, 2018. That is to say, the price adjustment for domestic refined oil will definitely reduce the price of oil.

In October, international oil prices fell from a four-year high, the biggest monthly decline since mid-2016, by more than 10%. From the point of view of supply and demand, the global economic growth is weak, the emerging market economy is turbulent, and the indicators of oil demand growth are not performing well, but the signs of supply growth are strengthening, and the oil market in 2019 may again be in surplus.

In fact, we can see that the so-called domestic oil price of China is greatly influenced by the international oil price. Whether the oil price can return to 7 yuan or even 6 yuan is largely due to the fluctuation of international oil price.

Since this year, we have seen a process of accelerating the rise of international oil prices, but since October, international oil prices have begun to decline from the highest point. In fact, the main reasons are as follows:

First of all, the world's economic expectations are beginning to fall short of expectations. Originally, we all expected that China or the international economic growth will be better in 2018. Especially the developed economies represented by the United States will have a big growth, but what we actually see is that the U.S. economy is beginning to show a downward trend. Even the US stock market has fallen sharply. This uncertainty of the world's economic development expectations directly drags down the uncertainty of international demand. Additionally, Monday's economic problems have led to an obvious shortage of demand in international oil prices.

Second, the supply of international oil also has a very big impact. On October 23, Saudi Energy Minister Falkh publicly stated that in order to compensate for the decline in supply, Saudi crude oil production will continue to increase from 10.7 million barrels, which are now close to the highest level in history, to 11 million barrels a day. In addition, the country has the capability to further increase the daily output of crude oil to 12 million barrels within 3 months. At the same time, the supply of crude oil in the United States and Russia is also increasing. Data show that U.S. crude oil stocks have been rising for five weeks, and crude oil drilling is also increasing, with the number of drilled wells reaching its highest level in three and a half years.

As we all know, the price of oil is determined by both supply and demand. When the demand is insufficient and supply increases, it will inevitably lead to the decline of international oil price, which is an important reason for the current decline of international oil price. But we also need to understand that international oil prices are not likely to continue to decline. This decline is different from the rapid decline of international oil prices after they reached their peak in 2008. To some extent, we can think that the current international oil prices are hovering in a stable range. However, as long as it does not break through the lower limit of the interval, it is difficult to enter a complete downward channel. So we think that although the international oil price has declined, there is still a certain gap between the domestic oil price in one to six years. We have not seen any signs that will push the international oil price down continuously and rapidly.