Core view
The tense situation in Russia and Ukraine has increased the market's concern about the uncertainty of crude oil supply. Short term speculation has become an important driver of raising oil prices. According to our calculation, financial factors have additionally pushed up oil prices by about $15. The short-term supply and demand gap still exists, and the situation in Russia and Ukraine is not yet clear. We raised the annual oil price center to $85 ~ 90 / barrel, and the high point may reach above $120. It was 100, 95, 80 and 80 in the four quarters respectively. In the second quarter, with the increase of OPEC + production and the implementation of the Iran nuclear agreement, the supply and demand gap reversed, and the oil price entered the downward channel. For the United States, the rise in energy prices will further increase the inflationary pressure in the United States, but it will not change the downward trend of inflation, and maintain the judgment that the Federal Reserve only increases interest rates once a year and the US bond yield peaked in March; For China, the rise of oil price will push up CPI. However, as the repair of core CPI is less than expected, we maintain the judgment that the central CPI of the whole year is 1.8% and will not touch the threshold of 3% within the year.
The situation in Russia and Ukraine has driven up oil prices, and short-term speculation has become the driver of oil prices
The tension between Russia and Ukraine is the core reason for the rise of oil prices. The market's concern about the uncertainty of crude oil supply has not been eliminated, and short-term speculation has become an important driver of the rise of oil prices. Russia is one of the world's major producers of crude oil, accounting for 17% and 14% of the world's natural gas and crude oil production respectively. Once Russia's crude oil supply is limited, the existing gap between supply and demand of crude oil will be rapidly enlarged. Various factors such as swift payment and settlement restrictions, Beixi No. 2 sanctions and interruption of sea merchant shipping are amplifying investors' concerns about crude oil supply. With the situation in Russia and Ukraine not yet clear, potential trade sanctions and fragile supply chains may still push up oil prices. The net long positions in WTI crude oil speculation account for 77% of the recent long positions, which has been above the historical 90% quantile. Financial factors are an important driver of the rapid rise of oil prices in this round.
The short-term supply and demand gap is still, and the long-term supply margin is better
The short-term supply and demand gap needs to be solved, and the long-term supply margin has improved. In terms of demand, the global attitude towards the epidemic has changed significantly recently. More and more countries choose to "coexist with the virus". The epidemic prevention and control measures have been significantly weakened, and the travel demand and resumption of work and production have reached a higher level. This stage is the fastest period for the release of crude oil demand month on month. Under strong demand, crude oil inventories continue to decline. Last week, API crude oil inventories in the United States decreased by 6.1 million barrels, Greatly exceeding market expectations, the US commercial crude oil inventory continues to be in a historical position. In addition, the tense situation between Russia and Ukraine has created a certain demand for "oil hoarding" in oil importing countries, and BDTI (Baltic crude oil freight rate index) has risen rapidly. In terms of supply, the output increase of OPEC + countries was lower than expected, and the implementation rate of output reduction of OPEC + countries reached 136% in February; Under the constraint of carbon neutralization, the rate of production increase in the United States is slow. In the short term, the gap between supply and demand is still 1-1.5 million barrels / day, which is basically supported by the rise of oil prices. Looking ahead, there are three main highlights on the supply side: first, OPEC + countries were originally scheduled to raise the production reduction benchmark of 1.6 million barrels / day on May 1 this year, and the output of OPEC + countries is expected to be released. OPEC + oil production increased by 420000 barrels / day in February, exceeding the planned increase for the first time since September last year, and the enthusiasm for increasing production has been improved. Second, the Iranian nuclear agreement has made good progress, and many parties have stated that it is only a few steps away from reaching it. After reaching it, Iran can increase the supply of more than 1 million barrels / day. According to public data, some of Iran's oil has been stored on cruise ships, which can be released quickly to alleviate the current tension of crude oil. Third, the supply of shale oil in the United States is also recovering under high oil prices. The number of oil rigs in the United States has gradually increased by 62% over the same period last year, but the output of oil rigs in the United States has not recovered for the second consecutive month. Therefore, we maintain the judgment of supply and demand gap reversal after the second quarter.
At present, the situation in Russia and Ukraine has not yet led to the contraction of exports by oil producing countries. If the tension between Russia and Ukraine further escalates and the demand for oil storage and export contraction occur in a large area, there may be a run on the crude oil market, resulting in the great stagflation in the 1970s.
It is estimated that the quarterly oil price centers of the whole year are 100, 95, 80 and 80 respectively. The Q1 peak may exceed $120. The short-term effect of the Ukrainian crisis on oil prices is mainly a pulse upward; After the normalization of the conflict (please refer to the previous report "asset trend from the common experience of confrontation between the United States and Russia") will gradually weaken its role in raising oil prices. It is estimated that the annual quarterly oil price centers are 100, 95, 80 and 80 respectively. Affected by the financial factors fermented by the crisis, the peak of Q1 may exceed $120.
From the supply side, the upward pulse comes from the uncertainty of market pricing and supply after the escalation of the conflict. After the conflict becomes normalized, the crude oil price will no longer be stimulated by this.
From the demand side, the normalization of the epidemic situation in Q1 developed countries means that the expected peak of demand repair has passed, the demand for global production and aviation has gradually returned to the pre epidemic level, and the space for demand repair will gradually narrow.
From the perspective of financial factors, after the gap between supply and demand is closed, it is expected that the sentiment of speculation will gradually weaken. At present, the net long positions in WTI crude oil speculation account for 77%, which has been above the historical 90% quantile. There may still be little room for strengthening in the short term, but the upward space is limited in the whole year
The impact of the Ukrainian crisis on inflation is greater than the total economy, raising the US inflation center, but not changing the pace of decline throughout the year
In terms of production, the degree of integration of Russia and Ukraine into the global supply chain is relatively low. From the perspective of the United States, the direct impact of the Ukrainian crisis on its total economy is relatively small. Russia and Ukraine account for only 0.8% of U.S. imports and 0.5% of exports. In the future, we still need to focus on the structural impact of the Ukrainian crisis on US inflation:
First, the rise of crude oil prices will directly lift the inflation center of the United States. The direct proportion of energy in US inflation is 7.35%, of which 4% is crude oil commodities and 3.3% is energy related derivative prices, including electricity and natural gas; In addition, the prices of transportation related items are also highly related to the price of crude oil, accounting for about 8.8%.
After the crude oil price rises sharply, it may increase the inflation center of the United States during the year, but combined with our judgment on the quarterly crude oil price, it still does not change the peak and downward trend of American inflation Q1; The Q1 high point may exceed 8.5%, and the center is expected to be in the range of 5-5.5% at the end of the year. The core driving factors for the CPI peak fall come from two aspects: first, the core determinant of the energy sub item, and the oil price is expected to gradually peak and fall; Second, the restoration of the labor participation rate will ease the pressure of wage rise. The core driving factor is the increase of residents' employment willingness after the influenza pandemic. After the sharp rise in oil prices, the short-term fed will still focus on inflation and start raising interest rates for the first time in March. On the whole, it will not change the judgment that the US bond yield peaked and fell near 2.1% at the end of Q1.
Second, the impact of local shortage of raw materials on semiconductor production. We need to pay attention to whether it will exacerbate the shortage of semiconductors and further push up the prices of cars (indirectly affect second-hand cars) and consumer electronics. Ukraine and Russia are important semiconductor grade neon producers, and neon is the key material for chip production. According to Reuters statistics, at present, Ukraine's neon production accounts for about 70% of the global neon production, and 90% of the neon used in the U.S. semiconductor industry comes from Ukraine.
Oil prices have a certain impact on China's CPI, but it is expected to remain stable throughout the year
Crude oil prices have a significant impact on China's CPI. Historically, the sharp rise of China's CPI center is driven by oil prices or pig prices. According to our calculation, every 100% increase in oil price will have a pulling effect on CPI of about 1-2 percentage points. The impact of the increase in oil price forecast on China's CPI is about 0.2-0.3%. However, since the end of October last year, the epidemic has continued to spread at many points, restricting the recovery of consumption. The repair of core CPI was less than expected and remained at the level of about 1.2% for more than half a year. In addition, China has a high self-sufficiency rate of rations and sufficient Shenzhen Agricultural Products Group Co.Ltd(000061) supply. Although a new round of pig cycle is expected to rise in the second half of the year, due to the sudden contraction of supply driven by no agricultural epidemic, we judge that the performance of this round of pig price rise cycle is relatively mild, and we maintain our view of 1.8% of the annual CPI center.
Risk tip: US and European sanctions against Russia exceeded expectations; Us and European forces fully participate in the conflict in Ukraine
