Petrochemical Industry: Petroleum inventory is facing saturation

The global crude oil inventory is under great pressure. In the fourth quarter of 2019, the global crude oil inventory is expected to continue to decline. OPEC continues to reduce production, international oil prices continue to rise, and crude oil inventory is relatively high in history.

However, due to the sudden decline of global crude oil demand caused by the epidemic, the relatively high crude oil inventory is facing a rapid rise, so the inventory pressure is very large. According to media reports, Zhejiang free trade zone has nearly 6000 oil and gas enterprises with a total capacity of 31 million cubic meters of oil depots. At present, the product oil depots have been basically full, and most of the crude oil depots have been booked up. Since the Spring Festival, the average rent of oil tanks has increased by about 10%.

In East Asia, such as China, Japan and South Korea, the epidemic occurred earlier, the demand for crude oil was first suppressed, and the inventory rose earlier than that in other regions. This is reflected in the higher storage position of refined oil and the saturation of crude oil inventory orders. U.S. commercial crude oil inventories reached a record high in the third week of March 2017.

The latest data for the third week of March showed that the inventory was 85% of the record high, with 800 million barrels left. Assuming that the US crude oil supply exceeds 2 million barrels / day, or 14 million barrels / day per week, the inventory will reach its historical maximum in 40 days. With the decrease of global crude oil demand, the saturation of refined oil or crude oil inventory can be seen in some areas in the future, which leads to a substantial discount or negative value of local spot oil price. VLCC and other large tankers are used as floating tanks. Under the structure of long-term rising of international crude oil price, the long-term price difference of crude oil exceeds the cost of VLCC oil storage. There is room for traders to arbitrage oil storage, and more large tankers will be used to store crude oil.

Recently, the price difference between Brent futures and spot has been widened to more than $18 / barrel, which exceeds the cost of oil storage calculated by TCE freight model, so arbitrage can be realized. Some liquid chemicals related to crude oil may also be subject to saturation affected by low-cost crude oil. Some liquid chemicals related to crude oil may also be subject to inventory saturation due to short-term demand shortage, such as glycol, diethylene glycol, toluene, PX, etc. Domestic crude oil reserve engineering construction and tank operation enterprises are expected to benefit. The construction demand of domestic strategic and commercial crude oil and product oil storage tank projects is expected to increase.