Author | Peng Qiang Tang Jing
Editor | Zhang Weixian
Picture Source | Tu Chong
Recently, the peak of oil demand in the northern hemisphere is coming, and the market's concerns about insufficient supply have pushed oil prices to continue to rise, constantly setting new highs since March.
As international oil prices continue to rise, domestic retail price limits for refined oil products will continue to rise, and the price of No. 95 gasoline in some areas may enter the "10 yuan era."
Oil price hits US$150/barrel
Although OPEC+ has proposed a plan to accelerate production increase, the market is not optimistic about the organization's actual production increase effect. Coupled with the implementation of EU sanctions on Russian oil and the arrival of the peak summer demand season in the northern hemisphere, international oil prices continue to rise. , continues to reach new highs since March.
As of the close on the morning of June 9, Beijing time, the price of WTI crude oil futures for July delivery rose 2.26% to close at US$122.11/barrel; the price of Brent crude oil futures for August delivery rose 2.5% to close at US$123.58. /bucket.
The impact of the current high oil prices on the economy, finance and life is gradually emerging. On June 7, the World Bank further lowered its forecast for global economic growth in 2022, predicting that the global economic growth this year is expected to be 2.9%, while its forecasts in January and April this year were 4.1% and 3.2% respectively. In addition, the OECD has also lowered its economic growth forecast, predicting that the global economy will grow by 3% this year, lower than the 4.5% forecast in December last year; the OECD predicts that global economic growth will slow down further in 2023, and the forecast is lowered from the previous 3.2% to 2.8%.
Economies from Europe to North America are being hit by high oil, gas and electricity prices.
Jin Lianchuang analysis pointed out that this year will be extremely difficult for the crude oil market. The epidemic situation in many parts of the world is still on the verge of a counterattack. New strains of the virus are also spreading in some countries, and there is great uncertainty in economic growth. The game between Europe, the United States, etc. and Russia has also brought many unexpected impacts to the global market.
In terms of oil supply, OPEC+’s control over crude oil supply has exceeded its capabilities. Officials of the organization said that currently, except for Saudi Arabia and the United Arab Emirates, which still have some idle production capacity, and Iraq and Kuwait, which still have limited room to increase production, the remaining member states are in oil production. has reached its limit.
With the peak summer crude oil consumption season in the northern hemisphere, travel demand in Europe and the United States will increase significantly. China's crude oil demand is also continuing to recover. It is expected that crude oil consumption from June to September will continue to remain high.
Jin Lianchuang pointed out that according to past experience, North America has a high incidence of hurricanes in the summer. Once a hurricane hits the Gulf of Mexico, it will cause a large area of refinery supply interruption, thus leading to further tension in oil supply.
The relevant person in charge of the International Energy Agency recently pointed out in an interview with S&P Global Platts that the current high oil prices have caused damage to market demand, and consumers are adjusting themselves based on factors such as energy prices, income, consumer confidence, and alternative energy. demand for crude oil.
The U.S. Energy Information Administration (EIA) predicts that the average price of Brent crude oil will reach US$108/barrel in the second half of 2022, and the average price will drop to US$97/barrel in 2023. EIA stated that sanctions and related actions against Russia will directly affect Russian oil production and its sales in the global market.
Citibank, JPMorgan Chase, Goldman Sachs and other institutions have also successively raised their expectations for international oil prices. Oil trader Tiafigura pointed out that global oil supply has been tense due to insufficient investment for many years. Export sanctions against Russia have exacerbated this tension. Oil prices may rise to US$150/month in the next few months. The barrel is even taller.
Refined oil prices will rise for the tenth time this year
According to calculations by commodity information agency Jinlianchuang, as of June 9, the seventh working day of this round of price adjustment cycles, the average price of reference crude oil varieties was 118.91 US dollars per barrel, and the rate of change 5.28%, corresponding to the domestic retail price limit of gasoline and diesel will be increased by 320 yuan/ton.
This round of refined oil price adjustment window will open at 24:00 on June 14. There are currently only three working days left before the price adjustment window. International oil prices continue to run at high levels, and this round of retail price limit increases is already a certainty.
Since the beginning of this year, domestic refined oil prices have experienced a total of ten price adjustments, nine of which have been raised, showing a trend of "nine increases, one decrease, and zero stranded". all rose and fell, with gasoline and diesel prices rising by 2,330 yuan and 2,245 yuan per ton respectively during the year.
Jin Lianchuang monitoring data shows that as of June 9, the retail price limit of No. 92 gasoline in major domestic cities has remained at around 8.8-9.1 yuan/liter, and the retail price limit of No. 0 diesel has remained at around 8.6-8.8 yuan/liter. , the retail price limit of No. 95 gasoline remains within the range of 9.5-9.8 yuan/liter.
According to the current calculation of the price adjustment range of refined oil products, the corresponding price increase of No. 92 and No. 95 gasoline will exceed 0.25 yuan. predicts that the retail price limit of No. 95 gasoline in many places in China will be close to or enter the "10 yuan" era.
Domestic gasoline and diesel prices continued to rise this week, but the improvement in the overall buying and selling atmosphere was limited. Jinlianchuang analysis pointed out that the beginning of this week coincided with the Dragon Boat Festival holiday, the trend of crude oil continued to rise, and the local refining market continued to rise after a brief downturn. Returning from the holiday, fueled by the rise in crude oil, the retail price increase is expected to continue to widen, and the Ministry of Commerce issued temporary export quotas. The news supported the strong performance, and the quotations of the main units continued to rise.
Among them, the cumulative increase of gasoline is 250-350 yuan/ton, and the cumulative increase of diesel is mostly 50-100 yuan/ton due to demand constraints. As the price pushed to a high level during the week, the downstream market entered the market with a more cautious attitude. Most of the market transactions were small orders of urgent demand, and the overall buying and selling atmosphere was average.
Jin Lianchuang's analysis pointed out that next week, some refineries have recently resumed work, the main refinery production enthusiasm has increased, the operating load has generally increased, and the market resource supply has increased. On the demand side, with the onset of hot weather in summer, the utilization rate of vehicle air conditioners continues to increase. Domestic residents take more short-distance trips, and gasoline consumption steadily improves. In terms of the diesel market, affected by hot and rainy weather, the development of industrial and mining infrastructure projects is hindered. With the increase in the northern The summer harvest is gradually completed, and the support for diesel demand has weakened.
Crude oil themed funds dominate the top ten list of gainers during the year
Crude oil, known as the "King of Commodities", has shown its kingly style this year.
On June 9, both New York crude oil and Brent crude oil in the United States stood firm at the US$120 mark. New York crude oil increased by more than 60% during the year, and Brent oil increased by more than 50% during the year. ranked first among the major asset classes. According to
Wind data, the top ten fund performance lists during the year were all oil and gas-themed QDII funds, with gains of more than 60% during the year. Among them, Huabao S&P Oil & Gas A RMB dominated the list with a return rate of 79.38% during the year.
Although these 10 funds are all oil and gas themed QDII funds, they have different specific investment targets.
The first quarter report of Huabao S&P Oil & Gas A RMB at the top of the list shows that its investment targets are U.S. upstream oil and gas exploration companies, a small number of midstream refineries, and comprehensive oil and gas companies throughout the industry chain, and are less disturbed by short-term crude oil futures. Especially when oil prices are at high levels, the profitability of these companies is very good. Not only can they enjoy the flexibility of high oil prices, but their abundant cash flow, high dividends, and high buybacks also help in the macro environment where inflation remains high. The following provides investors with defensive attributes to hedge against mainstream stock market volatility.
According to a reporter from 21st Century Business Herald, 7 of these 10 oil and gas themed funds have investment targets in US oil and gas companies, and the other 3 Harvest Crude Oil, E Fund Crude Oil A RMB, and E Fund Crude Oil C RMB are listed on US stocks. Crude oil theme fund. After comparison, it was found that the US crude oil theme funds that these three funds have heavy positions at the same time are United States Oil Fund LP (USO) and United States Brent Oil Fund LP (BNO). USO and BNO track New York crude oil futures and Brent crude oil respectively. Futures price trends.
Regardless of the specific investment direction, oil and gas themed QDII funds have benefited from rising oil prices and have achieved outstanding performance since the beginning of the year. However, if oil prices can remain high, can the prosperity of the oil and gas industry continue?
How far can the crazy crude oil go? An article by the team of Zhang Jingjing, chief of
Investment Macro, titled "How to Treat the Crude Oil Supply and Demand Game?" 》The research report explains its views on the trend of crude oil from three time stages: short, medium and long term.
In the long term, after Biden takes office, the United States will usher in an era of new energy development and also impose policy constraints on traditional energy. Replacing traditional energy with new energy will not happen overnight, and crude oil demand may peak in 2025. Taking the epidemic as a watershed, international crude oil has ushered in a bull market with rising demand margins and shrinking supply margins, and this bull market logic will roughly last until around 2025.
Zhang Jingjing believes that in the medium term, the risk of crude oil adjustment will intensify in the next 3-12 months. uses inventory levels as a yardstick to measure crude oil prices. Currently, commercial crude oil inventories in the United States are still slightly higher than the low level in 2018, but oil prices are significantly higher than the price level of 70-80 US dollars per barrel at that time. Crude oil prices are significantly higher than comparable historical periods, indicating that the "valuation" is too high, or includes expectations of current supply shortages and rebounding travel demand. After experiencing impulse boosts such as overseas travel and the resumption of work, production and markets in Shanghai, China, the conflict on the demand side of crude oil may switch to weaker demand at some point in the third quarter. By then, if there is no expectation or actual boost from supply shocks, international crude oil prices will most likely rise and fall. In addition, if Iran's nuclear negotiations are reached or the international situation improves, oil prices may face greater adjustment pressure. Sui Xiaoying, chief petrochemical researcher at
Founder Mid-Term Research Institute, also agrees with Zhang Jingjing’s mid-term view on oil prices.
Oil prices exceeding US$100 cannot be sustained for a long time. Comparing historical data, it is found that when oil prices exceed US$100, it will inhibit the growth of oil consumption and dampen the demand of real enterprises and economic growth. The condition for the weakening of oil prices lies in the weakening of oil demand caused by economic downturn. This year, due to high global inflation and tightening of financial environment, the market has a general consensus on the slowdown of economic growth. If the economic slowdown is expected to be realized, global oil consumption will marginally improve. Weak, thus causing the center of gravity of oil prices to decline.
Zhang Jingjing believes that in the short term, when emotions are high and transactions are not crowded, the possibility of another upward pulse in international oil prices driven by unexpected factors or short-term changes in fundamentals cannot be ruled out. Once does this, global market risk appetite may also tighten rapidly in stages. After that, oil prices will plummet from highs until demand picks up again.
Chen Li, chief economist of Sichuan Finance Securities, is also optimistic about the short-term trend of oil prices. Chen Li said that a number of factors support the sharp rise in oil prices in the short term. First of all, summer is the peak travel period in the United States, and the demand for oil is heating up. Secondly, the epidemic in Shanghai has been effectively controlled and the resumption of work and production has been steadily promoted, driving a sharp rebound in crude oil demand. In addition, overseas manufacturing and service industries are continuing to recover, residents' demand is strong, and crude oil demand is increasing. Considering that crude oil supply is still tight, the gap between supply and demand may further expand. Overall, the pressure of crude oil supply and demand imbalance is difficult to alleviate in the short term, and international oil prices are expected to remain volatile and upward.
Nanhua Futures Energy Chemical Analyst Liu Shunchang pointed out that at the beginning of this month, OPEC decided to increase production by 648,000 barrels per day in July and August. However, considering that most OPEC countries except Saudi Arabia and the United Arab Emirates currently have insufficient remaining production capacity, it is expected that OPEC’s actual increase in production will be limited, which will not alleviate the problem. The current high prices in the crude oil market have limited effect. At the same time, the EU's sixth round of sanctions against Russia and strong demand in the U.S. finished product market have supported the continued strength of oil prices. However, two subsequent scenarios may cause oil prices to weaken: first, Saudi Arabia may increase crude oil production more than expected at the follow-up OPEC meeting. U.S. President Biden will visit Saudi Arabia in July, and we need to pay attention to Saudi Arabia’s attitude towards increasing production; second, The cracking of refined oil products in Europe and the United States continues to fall sharply, and the negative feedback of high prices on the demand for refined oil products begins to occur.
There is a high probability that oil prices will rise and peak in the second half of the year.
Reporters noticed that many institutions have recently raised their expectations for international oil prices. Although the predicted price peaks are different, it is unanimously expected to rise and fall during the year.
Jeremy Weir, CEO of Trafigura Group, the world's third largest independent oil trading company, said that oil prices will continue to surge in the coming months and may reach US$150 per barrel or even higher before the end of the year. The market may not see a drop in demand until the end of the year, as rising commodity prices could weigh on economic activity and ultimately cool demand.
Goldman Sachs predicts that Brent crude oil prices will rise to the peak level of this bull market this summer, with a forecast target of $140/barrel in the third quarter of 2022. Goldman Sachs also predicts that Brent crude oil prices will be at US$130 in the fourth quarter of this year and US$130 in the first and second quarters of next year.
Citibank has also recently raised its forecast for Brent oil prices. It currently predicts that the price of Brent crude oil will be US$113 per barrel in the second quarter of this year, which is higher than the previous forecast of US$99 per barrel. The price forecasts for the third quarter and fourth quarter have also been raised respectively. to US$99 and US$85 per barrel. Cheng Xiaoyong, director of
Baocheng Futures Financial Research Institute, said that in the short term, due to geopolitical factors, Russian crude oil supply has gradually been compressed in the global crude oil market, and the remaining production capacity of OPEC crude oil is not high, resulting in OPEC increasing production not being enough to make up for Russian crude oil. The supply gap caused by the decline in exports. However, the demand outlook is also not optimistic. High inflation and monetary tightening are leading to a slowdown in world economic growth or even recession.
The Organization for Economic Cooperation and Development (OECD) on Wednesday lowered its forecast for economic growth and raised its inflation forecast, saying that although the global economy should be able to avoid stagflation like the 1970s, the geopolitical situation has made the growth prospects far bleak. OECD expects the global economy to grow by 3% this year, well below the 4.5% growth forecast when it updated its forecasts in December.
Cheng Xiaoyong believes that in the short term, investors can consider buying CME Group’s newly launched micro WTI crude oil monthly call options to hedge the risk of high oil prices. In the medium term, short positions in far-month crude oil futures and the purchase of forward micro WTI crude oil monthly put options can be appropriately placed to hedge against losses caused by the peak and decline of high oil prices in the second half of the year.
Editor of this issue Liu Xueying Intern Lin Xiying
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