Event: with the intensification of the conflict between Russia and Ukraine and the expansion of the scope of European and American sanctions against Russia, the market has increased concerns about crude oil supply, and the international oil price has risen rapidly. As of March 4, 2022, WTI crude oil closed at $115 / barrel, a new high since 2011, and Brent crude oil closed at $118.05 / barrel, a new high in nine years.
Russia’s crude oil export ranks first in the world, and the conflict between Russia and Ukraine has a great impact on oil prices in the short term.
Russia is the world’s second largest crude oil producer after the United States, with crude oil production of 10.5 million barrels / day in 2020, accounting for 13% of global production. At the same time, Russia is also the world’s largest crude oil exporter. In 2020, the average daily crude oil export volume was 4.65 million barrels, accounting for 11% of the global crude oil export, second only to OPEC. Among them, Europe and China are the two major exporters of Russian crude oil, accounting for 50% and 32% of Russia’s total crude oil exports respectively in 2020. Due to the important position of Russian crude oil in the international crude oil supply, especially the large import dependence of Europe on Russian crude oil, if the Russian crude oil supply is blocked due to European and American sanctions against Russia, it will have a huge impact on the international crude oil supply and demand, which is also the main factor of the recent sharp fluctuation of oil prices.
The evolution of the situation in Russia and Ukraine will affect the future trend of oil prices.
From the past history of the Iraq war and the Libyan war, the impact of war and other military conflicts on oil prices is often severe, but the duration is short. After the war situation is stable, it often drops rapidly. Due to the greater importance of Russia in the global crude oil supply, the impact on the oil price may be more severe. In addition, the international crude oil has been in a tight supply and low inventory state since 2021, which further increases the volatility of the oil price. At present, the situation of the conflict between Russia and Ukraine is still uncertain, and the future trend of international oil prices still depends on the further evolution of the situation between Russia and Ukraine.
The oil price has entered the high oil price range, and the impact of various chemical industries is different.
From the perspective of the fundamentals of crude oil supply and demand, before the Russian Ukrainian conflict, the international oil price had been in a steady upward trend. Due to the continuous economic recovery after the global vaccine promotion, the increase in demand and the limited increase in supply, the international oil price rose to a high of more than US $90 / barrel. The conflict between Russia and Ukraine has further exacerbated the tension of crude oil supply in the medium and short term and raised the fluctuation range of crude oil price. As crude oil enters the high oil price range, the downstream chemical industry is affected differently. For refining and chemical enterprises, as the price of refined oil is limited by the policies of the national development and Reform Commission, too high oil price will put pressure on the profits of refining and chemical enterprises, while refining and chemical enterprises with more chemical products will be relatively less affected. For chemicals, whether the rise of crude oil price can be transmitted to the downstream through product price increase depends on the supply and demand structure of the industry and the supply of alternative routes.
Strengthen the competitiveness of coal alternative chemical routes.
As crude oil enters the high oil price range, the competitiveness of alternative routes such as coal chemical industry can be improved and is expected to benefit. China’s coal prices remain relatively stable under the regulation of policies such as the national development and Reform Commission. Coal chemical enterprises can obtain relatively low-cost raw materials and are expected to benefit from the rise of product prices with the rise of oil prices. In the long run, China’s resource endowment of “rich coal, lack of oil and less gas” determines the necessity of developing new coal chemical industry in China, and the development of coal chemical industry can be expected in the future. In addition, the profitability of propane cracking and light hydrocarbon cracking is expected to increase. As the raw materials of the light hydrocarbon route come from the by-products of shale gas production in North America, they have little to do with the price of crude oil, and the price is expected to remain stable. Therefore, the light hydrocarbon route is also expected to achieve better profitability in the high oil price stage.
Investment suggestions: it is suggested to pay attention to three main lines: first, listed companies with oil and gas resources directly benefit from the rise of oil prices; Second, the oil service industry is expected to benefit from China’s increased development of oil and gas resources; Third, leading enterprises in alternative routes such as coal chemical industry and light hydrocarbon cracking, as an important supplement to petrochemical industry, the importance of coal chemical industry is expected to increase. It is suggested to pay attention to Ningxia Baofeng Energy Group Co.Ltd(600989) , Guanghui Energy Co.Ltd(600256) , Zhejiang Satellite Petrochemical Co.Ltd(002648) .
Risk tip: industry demand declines and crude oil prices fluctuate sharply
