European and American sanctions against Russia increased, and WTI oil prices soared to a new high since 2011
This week, the conflict between Russia and Ukraine continued, and the European and American sanctions against Russia were comprehensively increased. The market was further worried that the escalation of sanctions would affect crude oil, and the WTI oil price soared to a new high since 2011. As of March 4, Brent and WTI crude oil futures prices closed at US $118.11/barrel and US $115.68/barrel respectively, and the US dollar index closed near 97.7.
The number of oil drilling rigs in the United States decreased, and crude oil inventories decreased by 2.6 million barrels
This week, the number of active oil drilling wells in the United States decreased by 3 to 519, and the total number of oil and gas drilling rigs was the same as last week to 650. U.S. crude oil inventories reached 413.4 million barrels, down 2.6 million barrels from the previous week; The total gasoline inventory in the United States was 246 million barrels, 470000 barrels less than the previous week; Distillate oil inventory was 119.1 million barrels, a decrease of 570000 barrels compared with the previous week.
In January 2022, OPEC output increased by 64000 barrels / day to 27.981 million barrels / day compared with the previous month
OPEC output increased in January 2021, with Saudi Arabia’s output of 9.999 million barrels / day, an increase of 54000 barrels / day over the previous month; Iraq’s output was 4.245 million barrels per day, a decrease of 26000 barrels per day; Iran’s output was 2.503 million barrels per day, an increase of 21000 barrels per day over the previous month; Venezuela’s output was 668000 barrels per day, a decrease of 50000 barrels per day compared with the previous month; Libya’s output was 1.008 million barrels per day, a decrease of 45000 barrels per day compared with the previous month.
This week, the prices of naphtha, ethylene, propylene, butadiene and pure benzene rose, while the price difference of naphtha, PDH and MTO fell.
Geopolitical risks significantly pushed up oil prices and made progress in Iran’s nuclear negotiations
This week, the military conflict between Russia and Ukraine continued, the progress made in the Iranian nuclear negotiations could not offset the increase in the geopolitical risk premium, and the WTI oil price hit a new high since 2011. European and American financial sanctions against Russia were launched this week, and the market was worried that the sanctions would affect crude oil; As one of the major oil producing countries, Russia exported about 4.9 million barrels per day of crude oil in January 2022. If Russian crude oil cannot enter the international market, the global crude oil supply will be greatly reduced. This week, other crude oil suppliers released their production increase expectations. IEA announced the release of 60 million barrels of crude oil reserves, and OPEC + maintained its target of increasing production by 400000 barrels / day in April. According to Bloomberg survey data, OPEC increased production by 380000 barrels / day in February, the largest increase since July last year, exceeding its production increase allocation of 250000 barrels / day; Iran’s nuclear negotiations have made significant progress and an agreement is expected to be reached. Iran’s crude oil production before sanctions is about 3.8 million barrels / day. If the United States cancels sanctions against Iran, Iran will release more than 1 million barrels / day of crude oil supply, which will appropriately alleviate the reduction in supply caused by the obstruction of Russian crude oil trade. Looking forward to the future, we believe that under the background of the continuous conflict between Russia and Ukraine, the market’s concern about the escalation of sanctions is unlikely to be alleviated, but the progress of the Iran nuclear negotiations is expected to alleviate the market’s concern about the tight supply of crude oil, and the international crude oil will fluctuate at a high level. In the follow-up, we will focus on the conflict situation between Russia and Ukraine, the sanctions policies of Europe and the United States against Russia, the progress of the negotiation of the Iranian nuclear agreement, the implementation of OPEC + production increase, the spread situation of Omicron virus strain, the progress of vaccination and the development of covid-19 specific drugs.
Investment suggestion: we expect that the global crude oil supply and demand pattern will remain tight in 2022, with geopolitical risks superimposed, and the oil price will remain high. Therefore, we continue to be firmly optimistic about the prosperity of the petrochemical sector. We suggest 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 olefin, 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.
