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The deterioration of oil markets: the mechanisms of the present and foreseeing the future
The current global oil markets are linked to two different situations of price elasticity in supply and demand. The first market, which is the real market related to extraction, production and marketing, and which has a high degree of flexibility in the supply of crude oil under any amount of price. On the global demand side of this real market, it is the other. It has high levels of resilience that are similar in that of a common mutual price property in terms of the degree of demand price correlation with supply prices related to production and investment activity in the extraction fields and the liquidation sector in the world.
Nevertheless, the entirety of this movement in the supply and demand market The real is directly related to the developments in the global economy to achieve balance. Therefore, any surplus productive quantities outside the direct required needs (including storage capabilities before liquidation and other hedges) lead to significant price implications to which everyone withdraws in the collapse of the chain of contracts based on the marketing and sale of oil, and vice versa. . instead of 2.6% due to the existing corona crisis and oil price war. Noting that the world's oil production is approximately 104 million barrels of oil per day .
On the other hand, there is a second market, which is the token market for future oil contracts called the oil future market, as this market engages in parallel oil financial activities based on hedging in crude oil contracts in order to maximize profit opportunities and avoid loss through speculation with financial tools denominated in crude oil such as options and others and enjoy With a high degree of price flexibility in supply and demand, this market deals at the same time with an actual oil storage equivalent to the quantities of oil available for a working week or less of world oil production. And that the market as markets hedge Acodalmstqublaat alone has the flexibility factors Sarahalah as mentioned in the supply and demand on the real odds market in order to avoid losses and achieve profitable financial returns from using hedging instruments hedgingLike oil options and futures contracts, as we mentioned.
In other words, unlike the low price elasticities of the real production market, the oil market for future contracts derives its high price flexibility mentioned from the ability and speed to alter the financial trading strategies in that market and according to the mechanism of what is called: change of posts . If the positions in the oil contracts market change from short postions to long postionsThis comes on the basis of the broad expectations and the efficiency of the information available to dealers to conduct more hedging to maintain profit and avoid loss.
Thus this embodies the futures market as an information market and that its adequacy in reaching its prices is derived from the information available to dealers to change their positions as quickly as possible in order to avoid loss and maximize profit Again, as noted above. Thus, the market (Nymex), for example, as a market for future oil contracts for Brent crude in New York, Nymex, is one of the most important markets in the world in generating a cycle of oil assets in the range of financial market elasticities and their fluctuations affecting the western hemisphere of the world, through exchanging centers and rebuilding Trends in pricing oil operations for future quotation.
While the Tokyo market is Tocom the second wing of the pricing of contracts of oil futures in the hemisphere east of the world .
Thus the short The center here short position means re - payments for oil options at the moment to get rid of them in the hope of going down prices in the future to the bottom of the price in the oil asset cycle and then buy back contracts At the lowest prices, in the hope of increasing the value of oil assets, another ball is a hedging process in speculating with oil prices. Here the centers change to what is called the long position.
The current problem in the oil markets today is a deep decline in global oil demand and its decline to less than 70 million barrels of oil per day, which has generated a large supply of oil from available crude oils and more than 30 million barrels of oil per day. These are excess quantities offered for sale at low prices within war price policy price warThat causes pain to change ...
Indicators foreseeing the future of price movements in the oil market confirm that there is a possibility for a resumption of activity in the global economy, specifically after mid-summer 2020, and gradually, especially the start of the transportation sector by communication and movement due to its importance in consuming oil energy materials at a rate of 70% of refined oil derivatives from crude oil in the world, and from Then the glut glut in the oil market may shrink to about 10 million barrels per day instead of more than 30 million barrels currently.
And that, according to the Brent Index, prices will also rise to reach higher limits, but not exceeding $ 35-38 per barrel of oil in the shadow of stocks that will remain high, in addition to the continued presence of an oil surplus supply that will be about 10 million barrels per day out of a continuous total global production of 104 million barrels. Daily oil as we mentioned .
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