WTI crude oil futures fell to US $110.52/barrel after rising more than 5%
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Opening of high oil price channel: downstream transmission of industry is imminent, and refined oil has entered the “8-yuan era”
After breaking the $110 / barrel mark, the international oil price quickly approached the high of $120 / barrel, and the rapid rise exceeded the market expectation.
On the afternoon of March 3, Beijing time, Brent crude oil once hit a high of US $119 / barrel, the highest since the second half of 2013; WTI crude oil futures rose above the key level of US $116 / barrel, breaking the highest value since September 2008. Previously, the international oil price has increased by more than $7 / barrel for two consecutive days.
With the continuous tension between Russia and Ukraine, the market continued to worry about the obstruction of the supply of major energy and metal products, and the commodity market ushered in a wave of price rise. With the sharp rise of international oil prices, China’s refined oil prices have also ushered in “five consecutive rises”, and the refined oil prices in most parts of China have entered the “8 Yuan era”.
crude oil leads the rise in commodity prices
Despite the rapid rise of international oil prices in the short term and calls on oil producing countries to increase crude oil supply, OPEC + still adhered to its original plan and decided to increase production by 400000 barrels / day in April. In a post conference briefing, OPEC + pointed out that the current market fluctuations are not caused by changes in supply and demand fundamentals, and the change of geopolitical situation is an important reason.
On March 1, the International Energy Agency said that its member states agreed to release 60 million barrels of oil reserves to ensure the stability of the global crude oil market, but the market did not buy it from the performance of oil prices. Compared with the current growth of global crude oil consumption and potential short supply, the release of 60 million barrels of reserves is obviously lower than the market expectation.
In terms of the recent fundamentals of crude oil supply and demand, many countries have liberalized the public health blockade, and the incremental demand for refined oil has been released in advance. High oil prices have led to high refining profits and sustained growth in crude oil demand; On the supply side, the actual production capacity of OPEC + multiple oil producing countries is limited, resulting in the actual output increase lower than expected.
In addition, in recent years, low oil prices and the wave of energy transformation in various countries have led international oil giants to reduce investment in fossil energy and the lack of oil and gas infrastructure construction, making it difficult for supply capacity to recover quickly and unable to make up for the rapid recovery of demand.
As of the afternoon closing of March 3, Shanghai crude oil futures closed at 719.9 yuan / ton. Low sulfur fuel oil rose by more than 9%, and fuel oil and PTA rose by nearly 7%; Most of the base metals in China’s commodity futures market also rose. In the international market, Lun aluminum once rose more than US $3680 / ton, continuing to explore at the highest level in history; The price of Lun nickel once rose by more than 27800 US dollars / ton, continuing to brush a record high.
The Wande oil and gas index (886002. WI) rose 3.45% to 239886, and several oil and gas related stocks rose. In the Hong Kong stock market, Petrochina Company Limited(601857) (00857. HK) rose 1.18% to HK $4.3 per share, a new high since April 2019. CNOOC (00883. HK) rose 2.7% to HK $10.64 per share, a new high since February 2020.
high oil prices will gradually be transmitted downstream
Industry insiders pointed out that high oil prices may increase the cost of economic operation and lead to the intensification of global inflation. As a key chemical raw material, the rising price of crude oil will increase the cost of many industries and gradually transmit it to the downstream through the industrial chain.
Dong Xiucheng, a professor and energy economist at the National Institute of opening up of the University of international business and economics, told the 21st Century Business Herald that the rise in oil prices is good for upstream oil and gas exploration enterprises, and the integrated upstream and downstream oil enterprises are relatively less affected. For refining and chemical enterprises with a large amount of purchased crude oil, A substantial increase in procurement costs will be inevitable.
Dong Xiucheng said that the stability of international oil prices within a relatively reasonable price range can have a positive effect on oil resource countries and consumer countries, while high oil prices will have a negative impact on the global economy, increase economic operating costs and exacerbate inflation; For some countries that have not fully achieved economic recovery, the combination of economic slowdown and inflation will lead to stagflation.
“Due to the complementarity of various global energy sources to varying degrees, the significant increase in international oil prices will also promote the rapid development of renewable energy in various countries and accelerate the transformation of energy.” Dong Xiucheng said.
Crude oil is a long industrial chain from exploitation to transportation to processing and production. The rise of oil price is fed back to downstream industries, usually with a delay of one to two months.
Wang Yanting, senior analyst of jinlianchuang refined oil, told the 21st Century Business Herald reporter that at present, Chinese refineries still use the relatively low-cost crude oil purchased before. If the oil price continues to be high, it will bring significant cost increases to enterprises. The rise of oil prices has a direct impact on market sentiment. If China’s refined oil market still does not improve significantly in the off-season, the operating pressure of relevant enterprises will also increase.
In addition to the changes in the refined oil market, as crude oil is the raw material of chemical, textile and other industries, the rise of oil price will drive the increase of raw material cost in many industries and transmit it to the consumer end through the industrial chain.
As of March 1, the Baltic crude oil freight index (BDTI) reached 1449, up 100% from two weeks ago. Jinlianchuang analysis pointed out that the rise of freight rates combined with the surge of oil prices will significantly increase the cost of imported crude oil.
For oil producing countries, the rise of oil prices directly means the increase of foreign exchange income. However, for large oil importing and consuming countries, the rising cost of crude oil is a helpless reality to face.
It is noteworthy that how long will the current high oil prices last? The impact of different durations on the market will also be quite different.
China’s refined oil has entered the “8 Yuan era”
Affected by the recent continuous rise in international crude oil prices, China’s refined oil prices have also ushered in “five consecutive rises”.
On the afternoon of March 3, the national development and Reform Commission announced that since 24:00 on March 3, the prices of gasoline and diesel in China have increased by 260 yuan / ton and 255 yuan / ton respectively. Equivalent to the price increase, the price of No. 92 gasoline will be increased by 0.20 yuan per liter and that of No. 0 diesel will be increased by 0.22 yuan per liter.
With the implementation of this price adjustment, the retail price limit of refined oil in China has realized the “five consecutive rises” since the end of December last year, and the price of No. 92 refined oil in most parts of China has entered the “8 Yuan era”.
With the rise of refined oil prices, consumers’ oil costs will also increase. Taking a family car with a fuel tank capacity of 50 liters as an example, filling a tank of No. 92 gasoline will cost 10 yuan more. For large logistics transport vehicles with a full load of 50 tons, the fuel cost will increase by about 8.8 yuan for every 100 kilometers.
During the “five consecutive rises”, the retail price limit of gasoline in China increased by 1265 yuan / ton, and the retail price limit of diesel increased by 1220 yuan / ton. Equivalent to the price rise, No. 92 gasoline rose by 0.99 yuan per liter and No. 0 diesel rose by 1.04 yuan per liter.
Wang Luqing, product oil analyst of Zhuo Chuang information, said that in the short term, there is no factor leading to the decline of oil price in the international crude oil market. OPEC + increased production by 400000 barrels / day as planned, which is difficult to make up for the gap at the supply side.
“According to the current oil price level, the next round of refined oil price adjustment is still expected to increase. However, the international oil price has risen sharply for two consecutive days. Whether there will be a technical correction deserves attention.” Wang Luqing said.
In terms of the Chinese market, with the rapid rise of crude oil prices in the early stage, China’s gasoline and diesel prices have risen to a high level, but the market performance is relatively flat.
Wang Yanting said that the current gasoline market demand lacks strong support, and the overall demand tends to be flat, while the diesel terminal demand is still in the recovery stage, but the overall improvement speed is limited. China’s resource supply is relatively abundant and lacks the basic support of supply and demand. The resistance of downstream operators to high-priced resources is increasing, mostly just in need of procurement.
According to the calculation of the current price adjustment cycle of refined oil, a new round of price adjustment window of refined oil will be opened at 24:00 on March 17. (source: 21st Century Business Herald)
