The European crude oil market has unexpectedly become weak recently.

Although Europe has never been a key driver of the global crude oil market and its consumption has remained stable for most of the time, the significant decline in crude oil consumption in recent months may not bode well for the European economy as a whole.

Most noteworthy, according to S&P, the rating company, crude oil consumption in Germany is declining sharply, with a year-on-year decline of 302,000 barrels per day in December, and a decline of more than 100,000 barrels per day in the 10th consecutive month from an annual perspective.

Just last November, Germany seemed to be the only European country with relatively strong demand for crude oil. But by December, Germany was also “occupied”. In the same month, consumption in France fell by 124,000 barrels a day, in the Netherlands by 85,000 barrels a day, in Italy by 38,000 barrels a day and in Britain by 36,000 barrels a day.

From the perspective of European countries belonging to OECD, overall crude oil demand fell by 755,000 barrels per day in December.

S&P believes that Europe is the biggest threat to global crude oil demand.

With the global economic slowdown, large international organizations and crude oil producers have lowered their expectations for global crude oil demand this year. OPEC cut crude oil demand by 50,000 barrels a day this year, and EIA cut by the same margin.

In the middle of this month, EIA lowered its global crude oil demand growth forecast of 50,000 barrels per day in 2019 to 1.49 million barrels per day year, and lowered its global crude oil demand growth forecast of 50,000 barrels per day in 2020 to 1.48 million barrels per day year.

The biggest question is whether the downward adjustment of crude oil demand expectations by major international organizations is a temporary adjustment or the beginning of more downward expectations.

Prospects for Europe’s largest economy are declining

As Wall Street reported last week, the German Business Climate Index fell to 98.5 in February from 99.3 in January, a bigger decline than expected, with the market generally predicting 99. The lowest level since January 2015.

Meanwhile, the initial value of PMI in German manufacturing industry fell to 47.6 in February from 49.7 in January, a 74-month low, which was lower than the market expectation of 49.7. Germany’s manufacturing output index fell to 48.0 from 50.3 in January, a 74-month low. Export orders fell the most in more than six years.

Phil Smith, chief economist at IHS Markit, pointed out that factors contributing to the slowdown in German manufacturing orders included uncertainties in trade tensions, a weak automotive sector and growing competition within Europe.

Key economic data across the euro area are also disappointing. Industrial output in the euro area fell by 0.9% in December, twice as much as expected, and the biggest annual decline since 2009.

Fertilizer Export Data of China

According to the statistics of the Chinese Customs, in January 2019, China exported 2.28 million tons of fertilizers (in kind, the same below).

Among them, 590,000 tons of urea and 390,000 tons of diammonium phosphate were exported. Compared with the same period in 2018, the export volume of fertilizers (including fertilizer grade ammonium chloride and potassium nitrate) increased by 62.8%, urea export volume increased by 312.8% and diammonium phosphate export volume increased by 59.6%.

In January 2019, China’s exports of potassium sulfate and nitrogen, phosphorus and potassium ternary compound fertilizers were 7203 tons and 40608 tons respectively, up 1703.3% and 1163.1% respectively from the same period last year. Since January 2019, China has stopped imposing temporary export tariffs on potassium fertilizers and ternary compound fertilizers to boost exports.

Fertilizer Import Data in China

On the import side, 1.28 million tons of fertilizers were imported in January 2019. Among them, 1.08 million tons of potassium chloride and 150,000 tons of nitrogen, phosphorus and potassium ternary compound fertilizer were imported.

The import of potassium chloride increased by 14.4% and the ternary compound fertilizer of nitrogen, phosphorus and potassium increased by 35.7% over the same period.

On February 24, the PX commodity index was 70.20, unchanged from yesterday, down 31.45% from the peak of 102.40 points in the cycle (2013-02-28), and up 54.12% from the low of 45.55 points on February 15, 2016. (Note: Period refers to 2013-02-01 to date).

Recently, the domestic market price trend of p-xylene has been temporarily stable. Pengzhou Petrochemical Plant has been running steadily in the field. Urumqi Petrochemical Plant has started 50% of its operation. Fuhaichuang Aromatic Hydrocarbon Plant has been restarted. Other plants have been running steadily for the time being. The domestic market supply of p-xylene is normal. The market price trend of p-xylene is temporarily stable. The opening rate of PX plant in Asia is about 80%. On February 22, the closing price of p-xylene in Asia dropped by 4 US dollars per ton. The closing price was US$109-1101 per ton FOB Korea and US$118-1120 per ton CFR in China. More than 50% of the domestic units need to be imported. The decline of foreign prices has a negative impact on the domestic market price of p-xylene. The domestic market price maintained 8,800 yuan per ton.

On February 22, the price of WTI crude oil in April rose to 57.26 U.S. dollars per barrel, an increase of 0.3 U.S. dollars. Brent crude oil in April rose to 67.12 U.S. dollars per barrel, an increase of 0.05 U.S. dollars. crude oil price rose slightly, which has a certain supporting effect on the price of downstream petrochemical products. The price trend of xylene market is temporarily stable. Recently, the textile industry has declined, PTA prices shocked on the 25th. The average price of East China is around 6400-6550 yuan per ton. As of the 22nd, the domestic PTA start-up rate is about 80%, the polyester industry start-up rate is about 77%. In addition, the guerrilla production and sales rate is low. The PTA market price shocks. It is expected that the price of PX market will rise slightly in the later period.

Saudi Arabia’s energy minister, Khalid al-Falih, said Wednesday that Saudi Arabia, a major member of OPEC, had received promises from OPEC members and their oil-producing allies to cut oil production in accordance with current production agreements, according to Prussian Energy

He said there was “no doubt” that some major producers were complying with their reduction commitments and agreed to implement them between January and June.

“I’ve talked to many ministers who have made slow progress in achieving their goals in January and are committed to implementing their commitments quickly in the next six months,” Falih said on the sidelines of an industry event in New Delhi.

Saudi Arabia is the driving force behind the recent 1.2 million barrel/day cut, which aims to boost oil prices. Oil prices plunged from $86 a barrel in October to $50 a barrel at the end of 2018.

Just a week before Falih’s comments, OPEC Secretary-General Mohammad Barkindo urged OPEC Member States and their 10 allies to “remain firm in achieving the target of reducing production”. Previous reports have suggested that some producers, especially Russia, Iraq and Nigeria, have failed to meet their targets.

OPEC research estimates that its 14 member countries produced 30.81 million barrels a day in January, down nearly 800,000 barrels from 31.6 million barrels in December.

Oil trading volumes are close to their highest level since November last year due to trade optimism and the impact of the shutdown of Saudi Arabia’s world’s largest offshore oil field to tighten supply, Bloomberg reported.

Futures prices in New York rose another 1% after rising 5.4% last week. Meanwhile, Saudi Arabia is said to be repairing a damaged cable that limits production in the Saffanian oil field.

Crude oil prices have soared by about 24% this year as Saudi Arabia and Russia pledged to expand production cuts, alleviating fears that record U.S. production will lead to a global oversupply of crude oil. This further increases investors’risk preference.

As OPEC and its allies accelerate the implementation of the output reduction agreement reached in December last year, concerns about the intensification of the trade war and the global economic slowdown are fading. In its report, OPEC said that a new round of oil supply cuts had begun strongly and Saudi Arabia had promised to reduce production to above the agreed level.