On the first trading day after Christmas in Europe and the United States, the international financial market was “rising”, and the performance of crude oil was particularly outstanding. Oil prices were weak during Asian trading hours on Monday, falling more than 1% at one point. However, during the European and American trading hours, the “painting style” suddenly changed, and international oil prices rose rapidly. The main WTI crude oil contract once rose by more than 3% during the session, and the maximum intraday increase for the main Brent crude oil contract was close to 4%.
International oil prices soar
International oil prices rose sharply on Monday, as the market hopes that the Omicron variant will have a limited impact on global demand in 2022, even if a surge in new coronavirus cases leads to a large number of flight cancellations. The main contract of WTI crude oil futures rose by US$1.78/barrel, or 2.4%, and the settlement price was US$75.57/barrel, which was as high as US$75.99/barrel during the session; the main contract of Brent crude oil futures rose by US$2.46/barrel, or 3.2%, and settled at US$75.57/barrel. The price is US$78.60 per barrel.
DailyFX analyst Leona Liu said: “Although Omicron is spreading faster than any of the variants, the relatively reassuring news is that, at least so far, most infected people have mild symptoms.”
British Health Secretary Sajid Javid said on Monday that the British government would not impose new restrictions in England until the end of 2021.
On Sunday, American Airlines canceled more than 1,300 flights and several cruise ships had to cancel calls as the epidemic reduced the number of crew members available to work.
On Monday, world powers and Iran resumed negotiations on reviving the 2015 nuclear deal. Iran says oil exports are key and negotiations so far appear to have made little progress in boosting their exports.
Investors are also paying attention to the next OPEC alliance meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies on January 4 to decide whether to continue to increase production by 400,000 barrels per day in February.
The latest data released by the U.S. Commodity Futures Trading Commission (CFTC) shows that as of the week of December 21, speculative net long positions in WTI crude oil futures increased by 4,634 lots to 259,093 lots.
Cost drag and combined demand are weak, and the energy chemical sector is generally in the green
On Monday, chemical futures were also mostly green. The main methanol 2205 contract fell under pressure, diving more than 3% in the afternoon to close at 2529 yuan/ton. Affected by the weakness in both upstream and downstream stocks, PP and PE both fell by more than 2%. MEG also maintained a weak operation, with the main 2205 contract closing down 1.38%.
“Yesterday, most chemical products showed a downward trend of reducing positions, indicating that the market is still weak in the short term. The current expectations for a weak market outlook for crude oil and coal have seriously affected the trend of the entire chemical sector, and the overall trend is weak.” Yu Pengsen, a gold futures energy chemical researcher, said.
In fact, the current supply and demand-driven guidance for most varieties of the energy and chemical sector is not strong. Founder mid-term futures analyst Xia Congcong believes that the market has no news stimulus for the time being, and the decline is mainly due to emotional disturbance. “The focus of chemical products has moved upward in the early stage, but it has not yet shaken off the oscillation trend in the low range, and there is a lack of momentum for upward breakthroughs.”
In terms of methanol, Yu Pengsen said that it is currently mainly affected by two factors: First, domestic northwest production companies concentrated on reducing prices and stockpiling before the “Double Festival”, resulting in a decline in mainland spot market prices. Prices in the main northwest production areas have dropped to around 2,000 yuan/ton, and the corresponding price is only 2,600 yuan/ton. Over the years, the “Double Festival” in the northwest has caused a price decline, which is a normal phenomenon. It is understood that most northwest companies have pre-sold until the Spring Festival, and prices are expected to stop falling and stabilize in the near future. Second, the operating rate of methanol to olefins, the most important downstream of methanol, has been low and the losses have been serious, which has affected the demand for methanol, which has weakened the market.
In Xia Congcong’s view, the methanol market currently presents an imbalance between supply and demand. Although the supply and demand relationship has improved periodically, it has not reversed. “We are currently in the off-season of winter demand, with relatively flat fundamentals and lack of obvious positive stimulus. The upstream coal market is running weakly and steadily, and cost-side support is limited. The methanol industry is in the recovery stage, and output is expected to increase. As the year-end is approaching, the downstream market still exists The fear of falling prices has hindered the downward transmission of high-priced goods. In addition, the latest statistics show that the monthly import volume of methanol has rebounded significantly, and port inventories will enter the accumulation stage in the later period.” She said.
“The current main contradiction in the methanol market is mainly concentrated on the demand side. Although the methanol operating rate has rebounded, it is still less than 70%. The pressure on the supply side has eased in stages, while the demand in the downstream market is weak.” Xia Congcong said, whether it is emerging demand or Traditional demand is facing the problem of insufficient construction. Although the spot price of methanol has fallen, downstream production profits are still limited and some are facing losses, and the overall production enthusiasm is not high. Except for the load reduction of individual units in southern Shandong, the coal-to-olefins unit is operating smoothly, with an average operating load of 73.82%, significantly lower than the same period last year. It is difficult for traditional demand industries to improve, and the space for increasing the demand for methanol in seasonal off-seasons is limited.
However, in Yu Pengsen’s view, the current methanol fundamentals data have improved a lot. The construction start-up in the main production areas in the northwest is not very high, and there is centralized maintenance of natural gas-to-methanol equipment.Production, methanol stocks in coastal areas have dropped to the lowest in four years. Multiple methanol-to-olefin units undergoing maintenance in the port area are expected to restart next month, and the market outlook is expected to be positive. In the medium term, methanol is a small off-season around the Spring Festival, and supply and demand will not be very strong. It is reasonable that the short-term trend will be weak.
In terms of polyolefins, Everbright Futures analyst Zhou Ao said that with the successive release of new production capacity, the supply of polyolefins has gradually increased. In terms of PP, Zhejiang Petrochemical’s new second- and third-phase equipment is scheduled to start up in the near future. It is expected that the products will be put on the market in January next year after the start-up is successful, and the planned new PP production capacity in the first quarter of 2022 will be 1.45 million tons. In terms of PE, on the evening of December 22, Zhejiang Petrochemical Phase II LDPE/EVA project was successfully commissioned and commissioned. The project has an annual production capacity of 300,000 tons/year, and Zhejiang Petrochemical Phase II 350,000 tons HDPE project is scheduled to be commissioned and put into production in January next year. ; The 300,000-ton-per-year HDPE unit No. 1 of Phase II of the Zhenhai Refining and Chemical Integrated Project was put into trial operation on the afternoon of December 23, and is scheduled to be officially put into operation on January 6, 2022. The No. 2 HDPE unit with an annual output of 300,000 tons will It will be put into production on January 12, 2022. “It can be seen that both PP and PE will face greater supply pressure at the end of 2021 and the first quarter of 2022.” Zhou Ao said.
In addition, from the perspective of demand, Zhou Ao said that although the demand for PP downstream plastic weaving and BOPP industries is still there, and there is still a certain replenishment demand before the holiday, since the outbreak of the domestic epidemic, most downstream operations have maintained low inventory operations, and a large number of There is less stocking, and procurement is mainly based on demand, which has limited support for the market. In addition, production restrictions are also affecting some areas, and companies are restricted from starting operations. From the downstream perspective of PE, the demand for agricultural film has slowed down, the demand for shed film has ended, and the overall industry start-up trend has weakened. Terminal factories mostly purchase raw materials as they are used, and the support for the raw material market is limited.
“Recently, most polyolefin plants have been operating normally, new production capacity has continued to be released, and supply has maintained an increasing trend. The demand off-season continues, and currently affected by the epidemic and other factors, downstream cautiousness is more cautious, and construction starts in some areas have declined. The overall supply and demand pattern of the market is weak, and short-term accumulation Olefins still maintain a low oscillation pattern.” Zhou Ao said.
Yesterday, MEG’s main 2205 contract also weakened. “MEG futures prices have fallen significantly, mainly due to its weak fundamentals: on the one hand, thermal coal prices have fallen, and the cost support for coal-to-ethylene glycol has been weak; on the other hand, the narrow range of port destocking expectations at the port has been fulfilled on Monday, but There will be more arrivals at the port next week, expected to be 236,000 tons, and port inventory is expected to accumulate during the off-peak demand season,” said Zhai Qidi, an analyst at Founder mid-term futures.
“Prices of thermal coal origins have generally been reduced, inventories are abundant, and thermal coal has oscillated downwards. In addition to weak raw material prices, the fundamentals of ethylene glycol are also relatively weak.” Liu Siqi, an analyst at Tianfeng Futures, said that with the recent restart of the coal chemical industry, Domestic ethylene glycol load has rebounded, and downstream holidays have begun before the Spring Festival. The overall supply and demand pattern is expected to weaken. Under the weak fundamentals, ethylene glycol is running weakly.
Previously, international crude oil prices had rebounded, but some chemical products had a muted response and did not follow the rise significantly, as was the case with MEG. In this regard, Liu Siqi said that ethylene glycol maintains a weak operation, mainly due to the impact of expected storage capacity and weak thermal coal prices. “From the perspective of ethylene glycol supply and demand, coal-based equipment has been restarted recently, domestic operating rates have increased slightly, imports have maintained, new equipment is expected to have a high output, and demand-side polyester production is declining seasonally. It is expected from January to February next year Seasonal accumulation of inventory means the overall price driver is weak.”
Zhai Qidi further explained that among the current domestic ethylene glycol production capacity, coal-based production accounts for 36% and oil-based production accounts for 64%. Theoretically, both coal prices and oil prices will have an impact on the cost of ethylene glycol, and will regulate the supply of ethylene glycol through the path of “cost-production efficiency-operating rate-output”, thereby adjusting the balance between supply and demand. However, most of the current oil-to-ethylene glycol plants are integrated refining and chemical plants. Refineries generally assess comprehensive benefits and will not shut down operations due to poor production efficiency of a single product. Some of the output is adjusted by switching between products. The process of coal-making equipment is short, and its operating rate is closely related to production efficiency.
“Therefore, based on expectations of long-term overcapacity, the market has anchored coal-to-ethylene glycol units that can adjust output quickly and have relatively low costs. The spot price of ethylene glycol futures has recently followed the lead of coal and responded to rising oil prices. It’s not obvious.” Zhai Qidi said.
At present, MEG’s disk price has been consolidating at a low level for a long time. Will there be clear direction guidance in the future? Liu Siqi believes that from a balanced perspective in 2022, ethylene glycol supply and demand will maintain a cumulative inventory pattern, and expectations are poor. From a fundamental-driven perspective, it is recommended to go short on rallies, but the current price of ethylene glycol is low and the profits of each process are not high. , the space below is affected by the cost-end thermal coal, and we will pay attention to the price of thermal coal and the start-up progress of new devices in the future.
According to Zhai Qidi, given that the ethylene glycol port has recently shown signs of slow accumulation of inventory, and Zhenhai Refining and Chemical’s 800,000 tons/year unit is scheduled to be put into operation in the first quarter of next year, supply and demand pressure may further increase, and ethylene glycol production benefits will continue Low position. Taking into account the expected decline in oil prices and coal prices next year, the focus of ethylene glycol is expected to follow suit, but the specific pace still depends on costs and the progress of new production capacity.
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