After the outbreak of the new crown epidemic, international oil prices once fell into negative values. As a result, OPEC members and non-OPEC countries in the alliance continued to reduce production, thus promoting the gradual return of oil prices.
Now, as global inventories return to normal levels, the “inflection point” of supply and demand is getting closer and closer.
On June 1 (local time), international oil prices rose sharply. Among them, Brent crude oil, which has the highest correlation with the trend of domestic crude oil futures, rose to 71.34 US dollars per barrel during the session, a record high of nearly Two-year high.
Behind the breakthrough in international oil prices is the confidence that OPEC+ on the supply side has determined to expand production has brought to the market. OPEC+ said on Tuesday it agreed to continue easing restrictions on oil production, increasing daily crude oil production in July by an additional 841,000 barrels after increasing daily crude oil production in May and June, and expected oil demand to increase rapidly later this year.
Judging from changes in inventory data, it has now returned to normalcy before the outbreak. IEA (International Energy Agency) data shows that as of March this year, OECD (OECD) oil inventories fell by 25 million barrels to 2.95 billion barrels, reaching the five-year center level.
The 21st Century Capital Research Institute believes that after the global COVID-19 epidemic has been effectively controlled as a whole, the oversupply of international crude oil has disappeared, and it does not even rule out the subsequent shortage of supply. The capital market has predicted that there may be a supply gap in the second half of the year.
If oil prices rise beyond expectations in the future, and taking into account the large number of downstream industries, it may also bring a new round of “imported inflation” risks to the domestic market.
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From oversupply to supply and demand balance
The price operation mechanism of international oil prices is more complex than that of other commodities, but the core is still the relationship between supply and demand.
For example, in the early days of the epidemic in 2020, when oil prices fell into negative values and global oil tanks faced the risk of “explosion”, OPEC+ responded with a record production reduction plan.
“In May 2021, in the OPEC+ production reduction alliance, the implementation rate of OPEC countries was as high as 124%, which was mainly due to Saudi Arabia’s voluntary additional production reduction of 1 million barrels per day. In the alliance The implementation rate of production reduction by non-OPEC countries has also reached 90%.” Tianfeng Securities pointed out.
As the previous large-scale production cuts continued, international oil prices gradually rebounded.
As of June 2, the main 08 contract of Brent crude oil has risen to a maximum of US$71.34/barrel, while its settlement price at the end of 2020 was only US$51.35/barrel.
Let’s look at the supply side first. U.S. shale oil, an important variable that previously affected oil prices, has not yet seen large-scale production increases due to its relatively conservative capital expenditures. The overall production and supply elasticity It is lower, so OPEC+’s voice and control over the international crude oil market are also stronger than during the shale oil expansion stage.
Judging from OPEC+’s latest statement, the organization has begun to gradually withdraw from early production cuts and shift to increasing production. The organization agreed to increase daily crude oil production in July by 841,000 barrels, following the increase in daily crude oil production in May and June.
After the news of increasing production, the price of Brent crude oil still exceeded US$70, which also reflected the market’s expectations for an improvement in the demand side in the future. Even if OPEC+ switches to increasing production, its supply Nor may it be able to meet demand-side growth.
The basis for giving confidence to all market parties is the effective control of the epidemic in the Asia-Pacific region represented by China, the world’s largest consumer country, and the large-scale vaccination of vaccines in Europe, the United States and other countries. It will gradually lead to an improvement in terminal demand.
Although the epidemic in India has had a huge impact on local demand, according to IEA estimates, oil demand in the United States, China and Europe will recover “strongly”, and the oversupply of oil has Cease to exist.
In addition, the IEA also predicts that global oil demand may return to pre-COVID-19 levels within a year.
In fact, before OPEC+ confirmed its production increase plan in July, the OPEC+ Joint Technical Committee had already predicted that oil demand would increase by 6 million barrels per day in the second half of the year.
By the end of July, global oil inventories will be lower than the above-mentioned five-year average level for the period 2015-2019; between September and December this year, crude oil inventories will decrease by at least 200 barrels per day Thousands of barrels.
In addition, support from the liquidity level will not disappear in the short term. Although U.S. inflation has risen rapidly recently, it is still in the discussion stage and it will take time to truly implement it. .
Supported by multiple factors, the upward trend of international oil prices is difficult to change.
The idea of “super cycle” emerges
The rise in oil prices is relatively certain, but the key is that the sustainability and height of the problem cannot be predicted.
However, considering that commodities such as London copper and iron ore have reached record highs, and that international oil prices have reached a height of 147.5 US dollars per barrel, the current potential of 70 US dollars per barrel The room for growth will inevitably trigger the market’s imagination about a “super cycle”.
Looking back at history, the last super cycle of crude oil was from 2000 to 2008. During this period, Brent crude oil soared from less than 30 US dollars to over 140 US dollars.
As for the supporting factors of this round of rising market, or the necessary conditions for the rise, CITIC Futures attributed it to “strong demand.””Weak supply and weak US dollar, all three are indispensable.”
Looking at these three conditions, the current and medium- and long-term support cannot be compared with the rising market ten years ago.
The first is demand. Affected by the epidemic, it will take some time for the global economy to recover. Although demand for oil products has rebounded, it will be difficult to restore demand for some crude oil. In the short term, It is difficult to achieve, and demand returns to marginal weakening.
In the long term, due to the constraints of carbon neutrality policies, demand for crude oil, led by transportation, will gradually be replaced by new energy sources, and oil products There is insufficient upward momentum in demand.
The second is supply. With the return of shale oil too slow, OPEC does not have to face the “prisoner’s dilemma” for the first time in the post-shale oil revolution era. ;Currently, OPEC has unprecedented reserve capacity, totaling more than 7 million barrels per day, far exceeding the current supply and demand gap.
In this context, OPEC will implement ” The policy of “increasing production and guaranteeing quota” means that OPEC will gradually release production capacity to restrain the sharp rise in oil prices, thereby achieving the purpose of delaying the return of shale oil. In addition, the recent potential release of Iran’s crude oil production capacity also indicates that the supply of crude oil this time is not stable. Weak.
It is the U.S. dollar again. In the long run, under the stimulus plan such as “big infrastructure”, the U.S. economy is expected to improve, which in turn will drive the U.S. dollar index to slowly rise.
Based on the judgment of the above basic conditions, CITIC Futures believes that this round of oil price rise is mainly caused by the temporary mismatch of supply and demand. In the short term, as the epidemic situation improves and the peak travel season arrives, oil prices will rise. There may be the possibility of a periodic breakthrough.
But in the medium to long term, with the gradual release of OPEC production capacity, the gradual return of shale oil and the potential release of Iranian production capacity, the crude oil market will return to a state of equilibrium.
Of course, the above prediction is only a reasonable prediction based on the current market situation. Future fluctuations in international oil prices will still face the implementation of the OPEC production reduction agreement. As well as the impact of many variables such as the recurrence of the new crown epidemic and the promotion of carbon neutrality.
Among them, if any variable fails to meet expectations, it may change the supply and demand of the crude oil market, which will lead to a higher-than-expected pattern of international oil prices. Rise or fall.
The impact of accelerated rise in oil prices deserves vigilance
It is difficult to determine whether international oil prices can return to the high of US$100 in the medium to long term, but institutions including the above-mentioned CITIC Futures are still optimistic about the short-term rise in oil prices.
If After Brent stabilizes at US$70 in the later period, the possibility of accelerating the rise in the later period cannot be ruled out.
In the domestic market, China, as the world’s largest crude oil importer, if the oil price rises too fast in the future If it rises, it may have an upward effect on the costs of domestic refining and chemical and other midstream and downstream enterprises.
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What needs to be pointed out Yes, overseas iron ore has triggered a rapid rise in domestic steel prices this year. The National Standing Committee has also focused on commodity price increases three times in a row, emphasizing “effective response to the rapid rise in commodity prices and its associated impacts.”
Subsequently, domestic black products with obvious “independent pricing” characteristics began to experience a systematic decline in mid-May.
In contrast, crude oil is a typical “internationally priced” variety. Although the country’s voice in this field has been strengthened since the listing of domestic INE crude oil futures, the current international oil price benchmarks are still dominated by WTI crude oil and Brent crude oil. INE crude oil more reflects the demand in the Asia-Pacific region, and it is difficult to influence global oil price fluctuations. .
In addition, crude oil is involved in many industrial chains, with hundreds of downstream sub-sectors covering a much wider range of industries than iron ore. Therefore, the potential risk of rising international oil prices also needs to be addressed. alert.
When implemented at the corporate operation level, relevant industry chain companies need to make precautions and preparations in advance. Historical data also shows that during the period of high oil prices, the profitability of some domestic refining and chemical companies was significantly affected.
From 2010 to April 2011, Brent crude oil rose from US$80/barrel to a maximum of over US$120/barrel, and then remained above US$100/barrel until September 2014. run.
During this period, the gross profit margin of PTA, the largest main product of Rongsheng Petrochemical, declined year by year, from 20.52% in 2010 to 13.01% in 2011, and then to 1.34% in 2014. %.
It was not until the oil price quickly dropped below US$60/barrel in the second half of 2014 that the gross profit margin of the company’s PTA products bottomed out and rebounded. Hengyi Petrochemical’s polyester product profit margin changes during the same period also maintained a similar trend.
Judging from the current market environment, international oil prices have accumulated considerable increases, but some domestic midstream and downstream chemical products have not yet experienced significant increases due to their own supply and demand problems.
Take the polyester industry as an example. If the international oil price rises further in the later period, it will form a strong support for the cost end of midstream and downstream products. In the later stage, if the demand side replenishes inventory and other promotions, the downstream chemical industry There will be a new round of rising prices.
Cost pressure is transmitted step by step, and we must pay close attention to the price adjustments of terminal consumer goods related to daily life, which will trigger a new round of imported inflation. </p
