The expectation of raising interest rates did not offset geopolitical concerns, and international oil prices rose
This week, under the influence of the conflict between Russia and Ukraine, the market’s concern about crude oil supply soared, the Fed’s interest rate increase is expected to have limited effect on curbing oil prices, and international oil prices rose. As of January 28, Brent and WTI crude oil futures prices closed at US $90.03/barrel and US $86.82/barrel respectively. The US dollar index closed near 97.2.
The number of oil drilling rigs in the United States increased, and the crude oil inventory increased by 520000 barrels
This week, the number of active oil drilling in the United States increased by 4 to 495, and the total number of oil and gas drilling rigs increased by 6 to 610. The US crude oil inventory was 416.2 million barrels, an increase of 2.38 million barrels over the previous week; The total gasoline inventory in the United States was 247.9 million barrels, an increase of 1.3 million barrels over the previous week; Distillate oil inventory was 125.2 million barrels, down 2.8 million barrels from the previous week.
OPEC production increased in December 2021, with an increase of 167000 barrels / day to 27.882 million barrels / day compared with the previous month
OPEC output increased in December 2021, with Saudi Arabia’s output of 9.932 million barrels / day, an increase of 61000 barrels / day over the previous month; Iraq’s output was 4.27 million barrels per day, an increase of 28000 barrels per day over the previous month; Iran’s output was 2.478 million barrels per day, an increase of 8000 barrels per day over the previous month; Venezuela’s output was 681000 barrels per day, an increase of 56000 barrels per day over the previous month; Libya’s output was 1053000 barrels per day, a decrease of 84000 barrels per day compared with the previous month.
This week, naphtha, ethylene, propylene and butadiene prices rose, while pure benzene prices fell. Naphtha and PDH spreads rose while MTO spreads fell.
Geopolitical risks impact oil supply, and international oil prices continue to rise
This week, oil prices continued to rise due to supply contraction and rising geopolitical risks. On the demand side, the Omicron virus continues to spread all over the world, but the market believes that its impact on the economy and crude oil demand is relatively mild; US crude oil inventories are low, which also reflects the continuous recovery of demand. On the supply side, Kazakhstan and Libya, which had previously interrupted supply, have returned to normal production levels, but market supply concerns intensified after Hussein’s armed attack on the UAE, OPEC’s third-largest producer. Officials from about half of OPEC member states said that the 23 Nation Alliance led by Saudi Arabia and Russia may approve an increase of 400000 barrels per day in March, but the market still doubts Russia’s ability to reach production on schedule. This week, the border confrontation between Russia and Ukraine, the world’s second-largest crude oil producer, triggered concerns about military conflict and subsequent supply uncertainty. Russia is one of the world’s largest oil producers and an important supplier of crude oil and natural gas. If there is a full-scale conflict between the two countries, the West may impose oil-related sanctions on Russia, so as to further tighten global crude oil supply. This week, the FOMC meeting of the Federal Reserve announced that it would end QE and start raising interest rates in March, but the expectation of raising interest rates could not alleviate the market’s concern about the intensification of crude oil supply tension. On the whole, the risk of tight crude oil supply rises, and the oil price continues to rise. In the follow-up, we will focus on the confrontation between Russia and Ukraine, the implementation of OPEC + production increase, the progress of the negotiation of the Iranian nuclear agreement, the spread of Omikron strain, the progress of vaccination and the development of covid-19 specific drugs.
Investment suggestions: we expect that the overall pattern of crude oil supply and demand will be good in the future. China will continue to enhance China’s energy production guarantee capacity and accelerate the development and application of advanced exploitation technologies for oil and gas and other resources. Therefore, we continue to be optimistic about the prosperity of the oil and gas sector. It is suggested to pay attention to the following subscripts: first, the upstream sector, PetroChina, Sinopec, CNOOC, Enn Natural Gas Co.Ltd(600803) ; Second, oil service sector, China Oilfield Services Limited(601808) , Offshore Oil Engineering Co.Ltd(600583) , Cnooc Energy Technology & Services Limited(600968) , Sinopec Oilfield Service Corporation(600871) , Bomesc Offshore Engineering Company Limited(603727) ; Third, large private refining and chemical sector, Hengli Petrochemical Co.Ltd(600346) , Rongsheng Petro Chemical Co.Ltd(002493) , Jiangsu Eastern Shenghong Co.Ltd(000301) , Hengyi Petrochemical Co.Ltd(000703) , Tongkun Group Co.Ltd(601233) ; Fourth, light hydrocarbon cracking sector, satellite chemistry and Oriental Energy Co.Ltd(002221) ; Fifth, coal to olefins, Ningxia Baofeng Energy Group Co.Ltd(600989) ; The sixth and third largest chemical white horse, Wanhua Chemical Group Co.Ltd(600309) , Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) and Jiangsu Yangnong Chemical Co.Ltd(600486) .
Risk analysis: geopolitical risk, the spread of Omicron strain, and the rapid growth of OPEC + production.
