Geopolitical risks intensified. The UAE announced its support for excessive production increase, and the oil price fell after rising. This week, the conflict between Russia and Ukraine continued, the Iranian nuclear negotiations were suspended, and the geopolitical risks faced by oil prices increased. However, the UAE announced its support for excessive production increase, alleviating the market’s concerns about crude oil supply, and the oil price fell after reaching the highest point since 2009. As of March 11, Brent and WTI crude oil futures prices closed at US $112.67/barrel and US $109.33/barrel respectively, and the US dollar index closed near 98.5.
The number of oil drilling rigs in the United States increased and crude oil inventories decreased by 1.86 million barrels. This week, the number of active oil drilling rigs in the United States increased by 8 to 527, and the total number of oil and gas drilling rigs increased by 13 to 663. The US crude oil inventory was 411.6 million barrels, down 1.86 million barrels from the previous week; The total gasoline inventory in the United States was 244.6 million barrels, down 1.41 million barrels from the previous week; Distillate oil inventory was 113.9 million barrels, a decrease of 5.23 million barrels from the previous week.
OPEC production increased in January 2022, from 64000 barrels / day to 27.981 million barrels / day compared with the previous month. OPEC production increased in January 2021, and Saudi Arabia’s production was 9.999 million barrels / day, an increase of 54000 barrels / day compared with 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, the price difference of PDH rose, and the price difference of naphtha and MTO fell.
The rise of geopolitical risks superimposed on the easing of supply concerns, and the violent shock of oil prices. This week, the military conflict between Russia and Ukraine continued, and the Iran nuclear negotiations failed to reach an agreement. However, the UAE announced its support for excessive production increase, the geopolitical risk increased, but the tense situation of crude oil supply is expected to ease, and the international oil price fluctuated violently. Geopolitically, the military conflict between Russia and Ukraine continued this week. The United States officially announced a ban on Russian crude oil imports. Europe began to allow the use of more coal and nuclear energy based on ensuring its own energy security; Since April 2021, Russia’s crude oil export volume has stabilized at more than 4.5 million barrels / day. Under the background that Russia’s crude oil may withdraw from the market, resulting in a significant reduction in global crude oil supply, the United Arab Emirates announced its support for excessive production increase, becoming the first OPEC member country to support excessive production increase since the conflict between Russia and Ukraine; As of December 2021, the UAE has a surplus capacity of 1 million barrels per day, ranking second to OPEC and second only to Saudi Arabia. If OPEC + increases production excessively under the environment of high oil prices, it will effectively alleviate the tension of crude oil supply; However, American shale oil manufacturers still lack the willingness to increase production. This week, ExxonMobil is considering selling US $5 billion of assets in the Bakken shale basin. The global oil and gas giants focus on creating shareholder returns and investing in new energy projects, and the upstream capital expenditure is low. On the whole, the long-term production capacity of crude oil is still insufficient. In addition, the termination of the Iran Vienna nuclear talks this week raised the market’s concerns about tight supply. The prospect of the geopolitical situation is unclear, and there is still the possibility of sharp fluctuations in oil prices under uncertain geopolitical risks.
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: due to the tense geopolitical situation and tight global crude oil supply and demand pattern, we expect the oil price to remain high and continue to be firmly optimistic about the prosperity of the petrochemical sector. It is suggested to pay attention to the following subscripts: first, the upstream sector, PetroChina, Sinopec, CNOOC, Enn Natural Gas Co.Ltd(600803) , Zhongman Petroleum And Natural Gas Group Corp.Ltd(603619) ; 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.
