ON THE 9TH, THE WORLD CRUDE OIL FUTURES MARKET COLLAPSED, WITH LONDON BRENT CRUDE OIL FUTURES PRICES FALLING 30% AT THE OPENING, HITTING A LOW OF $31.02 PER BARREL DURING TRADING. NEW YORK LIGHT CRUDE OIL FUTURES ************* REACHED $27.96 PER BARREL, A SHARP DROP OF 32% AFTER CLOSING DOWN 10.07% LAST FRIDAY. STATISTICS SHOW THAT THIS IS THE MOST SEVERE MAJOR SHOCK TO THE WORLD OIL MARKET SINCE THE GULF WAR IN 1991. THE SHARP DROP IN OIL PRICES HAS ALSO TRIGGERED THE INTERNATIONAL FINANCIAL MARKET, WITH MAJOR STOCK MARKETS IN THE WORLD, INCLUDING EUROPE AND THE UNITED STATES, FALLING ACROSS THE BOARD. THE US S&P 500 INDEX EVEN TRIGGERED A CIRCUIT BREAKER MECHANISM. THE HUGE 'BLACK SWAN' DESCENDED, BUT THERE WAS A REASON BEHIND IT.THE DIRECT CAUSE OF THE GREAT PANIC IN THE INTERNATIONAL MARKET IS THAT THE ORGANIZATION OF THE PETROLEUM EXPORTING COUNTRIES (OPEC) AND NON OPEC OIL PRODUCING COUNTRIES LED BY RUSSIA HAVE FAILED TO REACH AN AGREEMENT ON CRUDE OIL PRODUCTION POLICIES AFTER THE END OF MARCH THIS YEAR. IN FACT, RUSSIA HAS REFUSED SAUDI ARABIA'S DEMAND FOR PRODUCTION CUTS. THIS MEANS THAT THE SAUDI RUSSIAN PRODUCTION LIMITATION AND PRICE PROTECTION ALLIANCE FORMED IN 2016 HAS COMPLETELY BROKEN DOWN. STARTING FROM APRIL 1ST, OIL PRODUCING COUNTRIES WILL NO LONGER BE CONSTRAINED BY PRODUCTION CAPS OR REDUCTIONS.IF THE BREAKDOWN OF NEGOTIATIONS WAS EXPECTED, THEN SAUDI ARABIA'S ACTIONS IMMEDIATELY SHOCKED THE MARKET EVEN MORE. SAUDI ARABIA UNILATERALLY ANNOUNCED A SIGNIFICANT REDUCTION IN CRUDE OIL PRICES FOR MARKETS SUCH AS EUROPE, THE FAR EAST, AND THE UNITED STATES STARTING FROM THE 7TH, WITH DISCOUNTS REACHING THEIR HIGHEST LEVEL IN NEARLY 20 YEARS. AT THE SAME TIME, SAUDI ARABIA HAS HINTED AT INCREASING PRODUCTION IF NECESSARY, EVEN REACHING A RECORD LEVEL OF 12 MILLION BARRELS PER DAY. SAUDI ARABIA'S HEAVY HANDED ATTACK WAS CLEARLY PREMEDITATED. FACED WITH SUCH A BLATANT PRICE WAR THREAT, RUSSIA IS NOT WILLING TO SHOW WEAKNESS AND IMMEDIATELY ANNOUNCED THAT THE RUSSIAN GOVERNMENT HAS A WEALTH FUND OF $140 BILLION, WHICH IS ENOUGH TO SUPPORT A LOW PRICE OF $25 TO $30 PER BARREL OF OIL IN THE COMING YEARS. MARKET ANALYSTS SAY THAT IT HAS LONG BEEN RUMORED THAT RUSSIA DOES NOT AGREE TO REDUCE PRODUCTION, AND SAUDI ARABIA IS ALSO DISSATISFIED. THE TWO COUNTRIES ARE NOW FIGHTING BACK AND FORTH, LIKE TWO BEHEMOTHS BREAKING INTO A PORCELAIN STORE, LEAVING ONLY A DISASTER SCENE.SUDDEN EVENTS MAY CAUSE TEMPORARY PANIC, BUT WHAT TRULY DETERMINES MARKET PRICES IS THE SUPPLY AND DEMAND RELATIONSHIP. IN HISTORY, THERE HAVE BEEN MULTIPLE INSTANCES OF OIL SUPPLY SHORTAGES DUE TO GEOPOLITICAL CRISES OR THE IMPACT OF WARS, LEADING TO SKYROCKETING OIL PRICES. AT PRESENT, THE WORLD'S OIL PRICES HAVE FALLEN INTO THE SO-CALLED "DEMAND TRAP", MANIFESTED AS INSUFFICIENT EXPECTED DEMAND BUT CONTINUOUS INCREASE IN SUPPLY, RESULTING IN A CONTINUOUS DECLINE IN OIL PRICES. THE CONTINUOUS INCREASE IN PRODUCTION BY COUNTRIES SUCH AS THE UNITED STATES AND BRAZIL, AS WELL AS THE INVESTMENT AND PRODUCTION OF NEW OIL AND GAS BLOCKS SUCH AS GUYANA, ALSO AFFECT THE OWNERSHIP OF THE INTERNATIONAL OIL MARKET SHARE. THE MARKET HAS LONG ANTICIPATED POTENTIAL OVERSUPPLY FACTORS THIS YEAR.??ACCORDING TO OPEC'S FORECAST, THE GLOBAL DEMAND FOR CRUDE OIL IS EXPECTED TO INCREASE BY 480000 BARRELS PER DAY IN 2020, LOWER THAN THE DAILY FORECAST OF 1.1 MILLION BARRELS IN DECEMBER 2019. HOWEVER, THE IMPACT OF THE COVID-19 ON THE GLOBAL ECONOMY IN 2020, ESPECIALLY IN THE FIRST HALF OF THE YEAR, MAY BE BEYOND IMAGINATION, AND IT ALSO HAS A SIGNIFICANT NEGATIVE IMPACT ON OIL DEMAND. GOLDMAN SACHS ANALYSIS BELIEVES THAT EVEN IF OPEC AND NON OPEC OIL PRODUCING COUNTRIES STILL HAVE THE OPPORTUNITY TO REACH AN AGREEMENT ON ADDITIONAL PRODUCTION CUTS, IT IS NOT ENOUGH TO PREVENT THE FREE FALL OF THE GLOBAL OIL MARKET. THE GLOBAL OIL SUPPLY SURPLUS IN THE SECOND QUARTER OF THIS YEAR IS ALREADY A FOREGONE CONCLUSION. IN THIS SITUATION, SAUDI ARABIA SUDDENLY ANNOUNCED AN INCREASE IN PRODUCTION, WITH THE CLEAR INTENTION OF LAUNCHING A COMPREHENSIVE PRICE WAR! THE TARGET SEEMS TO BE AIMED DIRECTLY AT NON OPEC OIL PRODUCING COUNTRIES SUCH AS RUSSIA, FORCING THEM TO RETURN TO THE NEGOTIATING TABLE AS SOON AS POSSIBLE AND ACCEPT THE PRODUCTION RESTRICTION AGREEMENT.CONSIDERING THE INCREASINGLY TENSE SUPPLY-DEMAND RELATIONSHIP, OPEC AND NON OPEC MAJOR OIL PRODUCING COUNTRIES ANNOUNCED AT THE END OF LAST YEAR TO INCREASE PRODUCTION CUTS. IN THE FIRST QUARTER OF 2020, THE CRUDE OIL PRODUCTION REDUCTION QUOTA WAS RAISED FROM 1.2 MILLION BARRELS PER DAY TO 1.7 MILLION BARRELS PER DAY. SAUDI ARABIA AND OTHER COUNTRIES WILL CONTINUE TO VOLUNTARILY IMPLEMENT ADDITIONAL PRODUCTION CUTS. INTERNATIONAL OIL PRICES HAVE SIGNIFICANTLY INCREASED ACCORDINGLY. AS OF DECEMBER 31, 2019, THE CLOSING PRICES OF THE MAIN CONTRACTS FOR LIGHT CRUDE OIL FUTURES ON THE NEW YORK MERCANTILE EXCHANGE AND BRENT CRUDE OIL FUTURES IN LONDON HAVE INCREASED BY APPROXIMATELY 34.5% AND 22.7% RESPECTIVELY COMPARED TO THE END OF 2018. HOWEVER, THE INCREASE IN PRODUCTION CUTS CANNOT EFFECTIVELY CHANGE THE MARKET EQUILIBRIUM, AS IT IS MORE OF A MEASURE TO ENHANCE THE IMPLEMENTATION OF THE PRODUCTION REDUCTION AGREEMENT. IN ADDITION, SAUDI ARABIA IS ALSO TRYING TO SHARE ITS BURDEN OF EXCESSIVE PRODUCTION CUTS WITH OTHER COUNTRIES. THE REALITY MAY BE THE OPPOSITE, AS IMPORTANT OIL PRODUCING COUNTRIES SUCH AS IRAQ AND NIGERIA ARE EAGERLY WAITING TO INCREASE THEIR EXPORT SHARE. MOREOVER, ANOTHER IMPORTANT PLAYER IN THE WORLD OIL MARKET IS GRADUALLY ENCROACHING ON THE TERRITORY OF THE OLD WORLD.ACCORDING TO THE ANNOUNCEMENT FROM THE US ENERGY INFORMATION ADMINISTRATION, THE UNITED STATES HAS BECOME A GLOBAL OIL PRODUCING COUNTRY. IT IS EXPECTED THAT THE DAILY CRUDE OIL PRODUCTION THIS YEAR WILL REACH 13.2 MILLION BARRELS, AN INCREASE OF 900000 BARRELS FROM 2019. THE INTERNATIONAL ENERGY AGENCY ALSO ACKNOWLEDGES THAT THE UNITED STATES IS EXPECTED TO BECOME A SUSTAINED NET EXPORTER OF OIL BY THE END OF 2020 OR EARLY 2021. FROM THIS PERSPECTIVE, THE UNITED STATES NOT ONLY WANTS TO REPLACE SAUDI ARABIA AS THE TOP OIL PRODUCING COUNTRY, BUT ALSO GRADUALLY OCCUPY THE HUGE OIL AND GAS CONSUMPTION MARKET IN EUROPE, TARGETING SAUDI ARABIA AND RUSSIA DIRECTLY. IN FACT, AS EARLY AS 2014, SAUDI ARABIA HAD AGGRESSIVELY INCREASED PRODUCTION IN AN ATTEMPT TO USE LOW OIL PRICES TO COMBAT US SHALE OIL DEVELOPMENT, BUT ULTIMATELY FAILED AND HAD TO PERSUADE 24 OIL PRODUCING COUNTRIES, INCLUDING RUSSIA, TO COLLECTIVELY IMPLEMENT PRODUCTION CUTS. THE UNITED STATES HAS NOT ONLY ACHIEVED ENERGY INDEPENDENCE BUT ALSO BECOME A NET EXPORTER OF OIL, AND ITS OIL AND GAS PRODUCTION HAS ACHIEVED GREAT SUCCESS. IN ORDER TO OCCUPY THE EUROPEAN MARKET, THE TRUMP ADMINISTRATION HAS BEGUN TO COMPREHENSIVELY EXCLUDE AND BLOCK RUSSIAN NATURAL GAS SUPPLIES TO EUROPE, FREQUENTLY LAUNCHING SANCTIONS AGAINST RUSSIAN OIL COMPANIES, INCLUDING OBSTRUCTING THE UPCOMING COMPLETION OF THE NORD STREAM 2 PROJECT.FROM THIS PERSPECTIVE, SAUDI ARABIA HAS MADE UP ITS MIND TO ABANDON THE STRATEGY OF LIMITING PRODUCTION AND ENSURING PRICES AND ENGAGE IN A PRICE WAR, WITH THE INTENTION OF KILLING TWO BIRDS WITH ONE STONE, ADVANCING AND RETREATING. AT THE SAME TIME, IT IS NOT RULED OUT THAT RUSSIA MAY COOPERATE TO PLAY DOUBLE ROLES. RUSSIA AND SAUDI ARABIA MAY COINCIDE AND USE PRICE SUPPRESSION TO SQUEEZE AMERICAN SHALE OIL PRODUCERS OUT OF THE MARKET, AT LEAST SLOWING DOWN THE PACE OF AMERICAN OIL AND GAS ENTERING THE INTERNATIONAL MARKET.IT IS EXPECTED THAT THE CURRENT CRISIS WILL CONTINUE FOR A PERIOD OF TIME UNTIL THE MARKET FINDS A NEW EQUILIBRIUM POINT AFTER A SEVERE OSCILLATION, AND THE PANIC WILL EVENTUALLY PASS. THE WORLD MARKET OIL PRICE WILL CONTINUE TO BOTTOM OUT, PERHAPS REACHING A LOW OF $20 PER BARREL. HOWEVER, IT IS WORTH CLOSELY OBSERVING HOW SEVERAL MAJOR OIL PLAYERS WILL FURTHER COMPETE IN THE FACE OF FIERCE COMPETITION AND SIGNIFICANT CONFLICTS OF INTEREST. (ECONOMIC DAILY - CHINA ECONOMIC NET REPORTER WENG DONGHUI)