International oil prices rose strongly during the Spring Festival, hitting new highs in more than seven years. Boosted by this, the domestic energy and chemical sector saw general gains on Monday. Among them, the main crude oil contract 2203 rose by 4.52%, the main high-sulfur fuel oil contract rose sharply by 3.07%, and the main low-sulfur fuel oil contract rose by 5.71%. In addition, the main LPG contract 2203 closed at the daily limit and closed at 5126 yuan/ton, leading the gains in the energy sector. All other chemical products recorded increases.
For crude oil, the market’s continued concerns about supply have pushed up international oil prices. In addition to geopolitical risks, snowstorms in many places in the United States have caused widespread power outages. The market is worried that the Permian Basin, the largest shale oil and gas producer in the United States, will be like the situation at the beginning of last year. There is a massive production outage. OPEC’s failure to produce crude oil in accordance with production quotas worsened the supply-demand gap. Data released by Iraq’s National Oil Marketing Organization SOMO showed that Iraq’s crude oil production in January was well below the quotas set by OPEC and production reduction partners. At the same time, Kazakhstan wants to keep more of its crude oil for domestic use. According to a survey by Bloomberg, the 13 OPEC members increased their production by only 50,000 barrels per day in January; the 10 OPEC countries in the OPEC+ alliance increased their output by 160,000 barrels per day, about two-thirds of their target. On the demand side, as the global economy recovers, traffic activities increase significantly and demand for crude oil is strong. The EIA report shows that crude oil inventories continue to decline.
“During the Spring Festival holiday, international oil prices broke upward after consolidation, with the center of gravity rising sharply and reaching a new high in the past seven years. As the leader in the chemical industry, crude oil’s strong rebound led to a general rise in domestic chemical products, with varieties highly correlated with oil prices having the largest increase. before.” said Xia Congcong, an analyst at Founder mid-term futures.
The United States said it would send nearly 3,000 additional troops to Poland and Romania, further intensifying friction with Russia, and Libya also experienced supply disruptions again, which boosted market concerns about tight supply. Oil prices last Thursday and next week Five broke the deadlock and rose sharply again, especially U.S. WTI crude oil performed even stronger. The reason was that in addition to the tense geopolitical situation, a cold wave swept across the northeastern United States, and investors became increasingly worried that continued cold weather might affect Texas. The state’s oil and gas supplies are increasing demand for energy products used as heating fuel, exacerbating tensions in global crude oil markets. WTI crude oil has also further narrowed its price difference with Brent crude oil to within $1/barrel.
However, Yang An, head of energy and chemicals at Haitong Futures, told reporters that not all news in the market is bullish for oil prices. On February 4, as the negotiations to resume the 2015 Iran nuclear deal entered a critical stage, news broke that the Biden administration had decided to lift some related sanctions against Iran. This made investors reconsider the possibility of the return of Iranian crude oil. It is said that At present, Iran still has 1.3 million barrels of idle production capacity waiting to return to the market. Previously, the Iranian Student News Agency quoted the head of the National Iranian Oil Company Mohsen Khojastehmehr as saying that oil production does not face any problems and can be completed before the end of the current Iranian calendar (March 20, 2022). reached the level before the United States re-imposed sanctions in 2018.
“Currently, global crude oil inventories are at a low level in more than seven years, and supply pressure is not great. Until there are no substantial negative factors, the market focus is still on concerns about the stability of the supply side. Therefore, geopolitical factors, bad weather and other factors that affect supply Factors can easily stimulate bullish enthusiasm in the market. As oil prices cross 90 US dollars/barrel, it is increasingly possible to break through the integer mark of 100 US dollars/barrel. Therefore, investors still need to be careful not to rush to guess the top. However, we must also pay attention to the As oil prices reach highs, the negative feedback on supply and demand will become more and more obvious. Based on the full-year outlook, it is still a high probability that supply growth will exceed demand, and high oil prices may push this situation to occur faster.” Yang An said.
In addition to the positive effects of rising crude oil prices, LPG’s own fundamentals also provide strong support. Li Yanjie, an energy analyst at CITIC Futures, believes that the strong daily limit increase of LPG futures on the first day after the holiday was mainly affected by rising costs and improved demand. From the cost side, the Saudi CP in February announced at the end of January increased, with propane at US$775/ton, an increase of US$35/ton from the previous month; butane at US$775/ton, an increase of US$65/ton from the previous month. Saudi Arabia’s CP exceeded expectations in February, and LPG cost support increased, driving the price center of gravity upward. From the demand side, after the Spring Festival holiday, downstream operations resumed operations one after another, and the demand for replenishment was strong. The drop in domestic temperatures this week temporarily boosted fuel demand, and LPG spot prices rose, driving futures prices to rise.
“For the chemical sector, the first trading day after the holiday was mainly a compensatory increase driven by the rise in crude oil. It should be noted that the impact of post-holiday replenishment on various varieties is also emerging, but as the market gradually returns to normal, various varieties The trend will be differentiated, and those with really strong fundamentals may still rise further, but some varieties with weak fundamentals may turn around.” Yu Pengsen, a researcher at Zhaojin Futures, said.
In Yang An’s view, for asphalt, fuel oil, PTA and other varieties that are highly correlated with crude oil, the price rise and fall rhythm largely depends on the performance of crude oil. Relatively speaking, asphalt is under pressure due to the start of local refining. It is relatively small and is expected to maintain a relatively strong situation. As it enters the high-price area, fuel oil will have a relatively difficult time following the rise and its performance is likely to be weaker than that of crude oil. “Opening from the first day after the holidayJudging from the extent of the supplementary increase, it basically matches the increase in external crude oil prices during the holidays, and the demand for the supplementary increase is basically met in one step. In the future, each variety will still return to its own supply and demand side. “He said.
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