International Oil Prices Hit A New Two-Year High And Guard Against The Risk Of A New Round Of "Imported Inflation"

After the outbreak of the new crown epidemic, the international oil price once fell to a negative value. Therefore, OPEC members and non OPEC countries in the alliance continued to reduce production, thus promoting the gradual return of oil prices.

Nowadays, with the return of global inventory to normal level, the "turning point" of supply-demand relationship is getting closer and closer.

On June 1 (local time), international oil prices soared, among which Brent crude oil, which has the highest correlation with the trend of domestic crude oil futures, rose to $71.34/barrel, a new high in nearly two years.

Behind the breakthrough in international oil prices is the confidence brought by OPEC + on the supply side to expand production. OPEC + said on Tuesday that it agreed to continue to relax restrictions on oil production, adding 841000 barrels of crude oil per day in July following the increase in daily crude oil production in May and June, and expected a rapid increase in oil demand later this year.

From the change of inventory data, it has returned to the normal before the outbreak. According to IEA data, OECD oil inventories fell 25 million barrels to 2.95 billion barrels in March, to a five-year central level.

The 21st Century Capital Research Institute believes that after the global new epidemic situation has been effectively controlled, the situation of international crude oil supply exceeding demand has disappeared, and even the possibility of subsequent supply shortage has not been ruled out. Therefore, there has been a prediction that there may be a supply gap in the capital market in the second half of the year.

If the subsequent oil price rises beyond expectations, and considering the large number of downstream industries, it may also bring a new round of "imported inflation" risk to the domestic market.

From oversupply to balance of supply and demand

The price operation mechanism of international oil price is more complex than that of other commodities, but the core is still the relationship between supply and demand.

For example, in the early stage of the epidemic in 2020, when the oil price dropped to a negative value and the global oil tanks were facing the risk of "explosion", OPEC + once responded through a record production reduction plan.

"In May 2021, OPEC countries implemented 124% of the OPEC + production reduction alliance, mainly due to Saudi Arabia's voluntary production reduction of 1 million barrels / day. The proportion of non OPEC countries in the alliance to reduce production has also reached 90%. " Tianfeng Securities pointed out.

With the sustained large-scale production reduction in the early stage, the international oil price gradually rebounded.

As of June 2, the highest price of Brent's main contract 08 has risen to $71.34/barrel, while the settlement price of Brent crude oil will be no more than $51.35/barrel by the end of 2020.

Looking at the supply side, the US shale oil, an important variable previously affecting the operation of oil prices, has not seen a large-scale increase in production due to its relatively conservative capital expenditure, and the overall production and supply elasticity is relatively low. Therefore, OPEC + has a stronger voice and control over the international crude oil market than the shale oil production stage.

According to the latest statement of OPEC +, OPEC + has begun to withdraw from production reduction in the early stage and turn to increase production. The organization agreed to increase crude oil production by 841000 barrels a day in July following the increase in crude oil production in May and June.

After the release of the increase news, Brent crude oil price still exceeded $70, which also reflected the market's expectation for the improvement of the demand side in the future. Even if OPEC + is converted to increase production, its supply may not be able to meet the demand side growth.

The basis for giving confidence to all parties in the market is that the epidemic situation in the Asia Pacific region represented by China, the world's largest consumer country, and the large-scale vaccination of vaccines in Europe and the United States will gradually lead to an improvement in terminal demand.

Despite the huge impact of India's epidemic on local demand, according to the IEA, oil demand in the United States, China and Europe will recover "strongly", and the situation of oil supply surplus will no longer exist.

In addition, the IEA also predicts that global oil demand may return to pre outbreak levels within a year.

In fact, before OPEC + confirmed its production increase plan in July, the Joint Technical Committee of OPEC + had predicted that oil demand would increase by 6 million barrels per day in the second half of the year.

By the end of July, global oil inventories will be below the five-year average for the period 2015-2019; Crude oil inventories will be reduced by at least 2 million barrels a day between September and December this year.

In addition, the support from the liquidity level will not disappear in the short term. Although the inflation level in the United States has risen rapidly recently, it is still in the discussion stage, and it will take some time for the implementation.

Supported by multiple factors, the upward trend of international oil price is difficult to change.

Reverie of "super cycle"

The rise of oil price is relatively certain. The key is that the problems of sustainability and height cannot be predicted.

However, in view of the record highs of commodities such as Lungshan copper and iron ore, as well as the international oil price reaching a height of 147.5 US dollars / barrel, and the potential rising space of current US $70 / barrel, it is inevitable to trigger the reverie of "super cycle" in the market.

In retrospect, the last super cycle of crude oil was from 2000 to 2008. Meanwhile, Brent crude oil soared from less than $30 to more than $140.

For the supporting factors of this round of rising market, or the necessary conditions for the rise, CITIC futures attributes it to "strong demand, weak supply and weak dollar, all of which are indispensable.".

Around these three conditions, the current stage and medium and long-term support can not compare with the rising market ten years ago.

The first is demand. Affected by the epidemic, it will take time for the global economy to recover. Although the demand for oil products has rebounded, it is difficult to repair some crude oil demand, which is difficult to achieve in the short term, and the demand return margin is weak.

In the long run, constrained by the carbon neutral policy, the demand for crude oil, which takes the lead in transportation, will be gradually replaced by new energy, and the demand for oil products will be insufficient.

The second is supply. Under the current situation of slow shale oil return, OPEC does not have to face "prisoner's dilemma" for the first time in the era of shale oil revolution; At present, OPEC has unprecedented reserve capacity, totaling more than 7 million barrels / day, far exceeding the current supply and demand gap.

In this context, OPEC will implement the policy of "increasing production and insuring the amount", that is, OPEC will gradually release production capacity to restrain the sharp rise of oil price, so as to delay the return of shale oil. In addition, the recent potential release of Iran's crude oil production capacity also shows that this crude oil supply is not weak.

In the long run, the U.S. economy is expected to improve under the "big infrastructure" and other stimulus plans, which will lead to a slow upward trend of the US dollar index.

Based on the judgment of the above basic conditions, CITIC futures believes that the current round of oil price rise is mainly caused by the temporary mismatch between supply and demand. In the short term, with the improvement of the epidemic situation and the arrival of the peak travel season, the oil price may have a phased breakthrough.

But in the medium and long term, with the gradual release of OPEC capacity, the gradual return of shale oil and the release of potential Iranian capacity, the crude oil market will return to equilibrium.

Of course, the above prediction is only a reasonable prediction based on the current market situation. In the future, the fluctuation of international oil price will still be affected by the implementation of OPEC production reduction agreement, repeated outbreak of the new crown, and promotion of carbon neutral.

Among them, if any variable fails to meet the expectation, it may change the supply and demand of crude oil market, and then lead to the unexpected rise or fall of international oil price.

The impact of accelerating oil price rise should be vigilant

It is difficult to determine whether the international oil price can return to the high level of US $100 in the medium and long term, but institutions including CITIC futures are still optimistic about the short-term rise of oil prices.

If Brent stands at $70 in the later period, it is impossible to rule out the possibility of acceleration in the later period.

In terms of the domestic market, as the world's largest crude oil importer, if the oil price rises too fast, it may have an upward effect on the costs of domestic refineries and other downstream enterprises.

It should be pointed out that this year, overseas iron ore has triggered a rapid rise in domestic steel prices, and the national Standing Committee has focused on commodity price increases for three consecutive times, emphasizing "effective response to the rapid rise of commodity prices and its associated effects".

Subsequently, the domestic "independent pricing" characteristics of black goods, in the middle of May began to decline systematically.

In contrast, crude oil is a typical "international pricing" variety. Although China's ine crude oil futures have been listed, China's voice in this field has been enhanced, but the current international oil price benchmark prices are still dominated by WTI crude oil and Brent crude oil. Ine crude oil more reflects the demand of Asia Pacific region, and it is difficult to control the global oil price fluctuation.

In addition, crude oil involves many industrial chains, hundreds of downstream fine molecular industries, covering a wide range of industries far larger than iron ore, so the potential risk of international oil price rise also needs to be vigilant.

To the enterprise management level, the relevant industrial chain enterprises need to make prevention and preparation in advance. Historical data also show that during the high oil price period, the profitability of some domestic refining and chemical enterprises has been significantly impacted.

From 2010 to April 2011, Brent crude oil rose from US $80 / barrel to US $120 / barrel, and remained above US $100 / barrel until September 2014.

During this period, the PTA gross margin of Rongsheng Petrochemical's largest main product decreased year by year, from 20.52% in 2010 to 13.01% in 2011, and then to 1.34% in 2014.

In the second half of 2014, the crude oil price dropped rapidly to below $60 / barrel, and the gross profit rate of PTA products of the company just bottomed out and recovered. Hengyi Petrochemical's polyester product profit margin change in the same period also maintained a similar trend.

In terms of the current market environment, the international oil price has accumulated a considerable increase, but some domestic chemicals in the middle and lower reaches have not risen too significantly due to their own supply-demand relationship problems.

Taking the polyester industry as an example, if the international oil price rises further in the later stage, it will form a strong support for the cost side of the middle and lower reaches products. In the later stage, if the demand side replenishment inventory is added, a new round of rise in downstream chemicals will appear.

We should pay close attention to the adjustment of the prices of terminal consumer goods related to daily life so as to trigger a new round of imported inflation.

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