On March 14, U.S. and Brent oil continued to fall. As of early morning today, crude oil closed down more than 5%. U.S. oil fell below $100 per barrel for the first time in the past two weeks. WTI April crude oil futures closed down 5.78% at $103.01 per barrel, a new closing low since February 28. Brent crude oil futures for May delivery closed down 5.12% at $106.90 per barrel, setting a new closing low since March 1 set last Thursday.
Zheng Mengqi, an energy and chemical researcher at Hizheng Futures, said that the sharp drop in crude oil prices yesterday was mainly affected by many factors.
First, the conflict between Russia and Ukraine has eased slightly, and the fourth round of negotiations will begin. Both Russia and Ukraine said that the negotiations may have results in the next few days. Concerns about crude oil supply shortages have declined. Early high-risk premiums have retreated, and oil prices have fallen.
Second, Petrobras officially announced adjustments to the prices of gasoline and diesel sold by refineries to dealers, with increases ranging from 18.8% to 24.9%. Some agencies and truck drivers decided to suspend operations one after another; Italian transportation companies jointly decided to ban freight trucks. Services will be suspended nationwide starting on the 14th. The negative demand feedback brought about by high oil prices is also emerging, with high oil prices suppressing downstream demand.
Third, OPEC+ will raise its production reduction baseline in May. Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq will increase their production reduction baselines by 500,000 barrels/day, 332,000 barrels/day, 150,000 barrels/day, and 150,000 barrels/day respectively. Russia The production reduction baseline was also raised by 500,000 barrels per day. Putting aside the decline in Russian crude oil exports caused by the conflict between Russia and Ukraine, and only considering OPEC, this means that starting from May, production will increase by 1.132 million barrels per day. If the plan to increase production by 400,000 barrels per day is continued, OPEC will increase production by 1.132 million barrels per day. Above 1.5 million barrels per day. Due to the limited capacity of Angola, Nigeria and other countries to increase production, OPEC’s production increase in May is expected to be between 1.15 million barrels per day and 1.5 million barrels per day.
Looking forward to the crude oil market outlook, Zheng Mengqi believes that the main negative factor is the release of strategic oil reserves by the United States and other countries. High oil prices will not only suppress consumption, but will further affect the United States’ attitude towards Iran and Venezuela. The return of Iranian and Venezuelan crude oil to the international market will be in advance. To a certain extent, the current contradiction between supply and demand in the crude oil market has been alleviated; the main bullish factor is that the conflict between Russia and Ukraine has not yet ended. If the conflict resumes, geopolitical risks may push up oil prices again. Adding to the current low crude oil and refined oil inventories, as well as high tanker freight rates, oil prices There is some support below. “After the market gave up the high geo-risk premium in the early stage, the crude oil market returned to rationality, with bulls and shorts intertwined, and crude oil prices mainly oscillated. We need to pay attention to the results of the Federal Reserve’s interest rate meeting on the 16th. The market currently generally expects to raise interest rates by 25 basis points. , high inflation will affect the pace of the Fed’s subsequent monetary tightening.”
As for yesterday’s sharp decline in asphalt, Xinhu Futures Research Institute believes that this was affected by the correction of cost-end crude oil prices on the one hand, and on the other hand, bulls left the market affected by funds, but the most fundamental reason is still weak demand for road asphalt. At present, there is an epidemic in a large area across the country, and demand is relatively bleak. There are almost no new projects to be launched after the year. Terminals basically purchase on demand. Some refineries in Shandong are restricted in shipments due to control. Yesterday, Sinopec East China prices were reduced by 100 yuan/ton. , prices in South China were lowered by 50 yuan/ton, prices in Shandong were stable, but prices for local refining companies were lowered.
From the perspective of asphalt fundamentals, Wu Zhiqiao, senior analyst at Green Dahua Futures, pointed out that in terms of supply, as of March 11, the national asphalt operating rate was 29.2%, an increase of 2.5% month-on-month, but still 15.2% lower than the same period last year, with partial smelting in Shandong and East China Factory production is still expected to decline to a certain extent due to the impact of the epidemic. In terms of inventory, asphalt manufacturers’ inventory last week was 966,000 tons. Although it has dropped for two consecutive weeks, it is still at a high level year-on-year. Social inventory is 673,000 tons, which is in the seasonal accumulation stage, but it is low year-on-year, and the accumulation rate has slowed down. In terms of demand, asphalt consumption has certain seasonality. Generally, August to November is the peak consumption season, December to February is the off-season, and the first quarter is still the off-season. The subsequent domestic epidemic is still spreading, and the seasonal accumulation trend is still there. Therefore, the short-term asphalt supply and demand performance is weak.
Xinhu Futures Research Institute pointed out that asphalt fundamentals are weak, and the market outlook will mainly focus on changes in capital and cost-end crude oil prices. The current situation in Russia and Ukraine is still very uncertain, so crude oil prices are highly volatile, which may lead to greater fluctuations in asphalt prices.
The conflict between Russia and Ukraine has been repeated, and the prices of crude oil, natural gas, naphtha and other related energy sources have fallen externally. Propane prices have followed suit and the cost support has weakened internally. As the temperature rises, civilian demand weakens seasonally, and the downstream is resistant to high-priced LPG. In addition, chemical profits are low, especially for PDH, which suppresses chemical demand. The expectations are relatively weak, and ultimately LPG falls sharply on the domestic market.
Wu Zhiqiao’s analysis pointed out that from a cost perspective, crude oil has also experienced a correction. From the fundamentals of LPG supply and demand, combustion demand is in the off-season in March as the weather gradually gets warmer. As of March 11, the operating rate of olefin deep processing was 43.84%, a month-on-month decrease of 2.06%. The alkylation operating rate was 44%, an increase of 0.19% month-on-month. PDH operating rate was 76.63%, a month-on-month decrease of 2.05%. The outbreak of the domestic epidemic and the high cost of raw materials will still lead to losses for some devices. MTBE started operations at 56.68%, unchanged from the previous month. East China PeaceThe total inventory of Nannan Port is 778,200 tons, an increase of 33,900 tons from the previous month. Domestic liquefied gas commodity volume was 518,900 tons (including civil gas, ether, propane and butane), an increase of 3,100 tons from the previous month. Therefore, the volume of liquefied gas commodities increased slightly last week, and the main port area continued to accumulate inventory. In the medium term, the peak season for residential gas and chemical demand are expected to weaken.
Looking into the market outlook, Wu Zhiqiao said that if Iranian crude oil is released to the market as scheduled in the later period, coupled with a rebound in U.S. crude oil production, the impact of Russia’s supply cuts is expected to gradually weaken, crude oil prices will return to the logic of supply and demand, and the corresponding LPG cost support will weaken. In addition, under the fundamental expectations of increasing LPG supply and decreasing demand, it may be difficult to be optimistic about LPG in the short term. It is recommended to continue to pay attention to the price fluctuations of raw materials and the development of the domestic epidemic.
Xinhu Futures Research Institute stated that the external market has been extremely volatile, affecting the trend of LPG. However, the current LPG internal market is at a large discount to the spot and external market, and the situation in Russia and Ukraine is still relatively unclear. When replacing naphtha and natural gas, there is still a certain cost-effectiveness. It is expected that LPG will fluctuate widely in the market outlook.
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