Guojin Securities Research Institute
Resources and Environmental Research Center
Petrochemical Team
Core Conclusion
Organization of Petroleum Exporting Countries OPEC The global marginal supply dominant position in the world for decades has been rapidly declining after the rise of the United States Shale oil . OPEC+ has replaced OPEC as the core organization that supports oil prices, but in the context of the continuous production of shale oil, OPEC+ has become increasingly weak to support oil prices through traditional production cuts, and geopolitical events may occur frequently, so as to give crude oil a certain degree of risk premium .
OPEC reduced production by 12 times, and the execution rate of production reduction was about 60%!
From 2001 to the present, OPEC has carried out 12 production cuts. Overall, the execution rate of OPEC production cuts is around 60%. Since 2016, with the soaring shale oil production in the United States, OPEC and NON-OPEC countries such as Russia have formed an OPEC+ alliance. Since January 2017, OPEC+ has carried out two production cuts. Although it has joined Russia, a major crude oil production country, the results of both production cuts are not as expected. OPEC+ is gradually losing its dominance in crude oil!
OPEC+First production cut: US sanctions collapse under Iran .
OPEC+The production cuts that began in January 2017, before May 2018, the execution rate of OPEC production cuts became an important factor affecting oil prices, that is, OPEC+ production cuts are effective. However, as the United States began to impose sanctions on Iran, geopolitics became the dominant factor in international oil prices, especially under the pressure from the United States, OPEC+ gave up production cuts in June 2018 and Iranian sanctions in October were lower than expected, resulting in a round of plummeting crude oil prices in October 2018.
OPEC+Second production cut: Shale oil will play the leading role!
The second production cut started in January 2019. Although OPEC's overall production cut rate is relatively high under the excessive production cut of Saudi Arabia , it has a small impact on oil prices! The main factors of fluctuations in international oil prices have become factors such as lower than expected shale oil production in the United States, US sanctions on Iran and Venezuela, and concerns on the demand side caused by trade frictions between the United States and other countries. Especially after the bottleneck of the US pipeline in the second half of 2019 was lifted, the huge potential for increasing production of US shale oil further made OPEC+ lose its voice. OPEC+'s second round of production cuts has completely lost the dominance of crude oil.
OPEC can no longer support oil prices by relying on traditional production cuts: geopolitical events may occur frequently!
As of June 2019, the production of the United States + Russia + Saudi Arabia has exceeded OPEC, and the three countries have become the main force in the international crude oil market game! Saudi Arabia and Russia have poor cooperation, which has given the United States huge room for shale oil production! According to OPEC's forecast, in 2020, non-OPEC countries will increase crude oil production by 2.44 million barrels per day in 2020, of which the main increase comes from US shale oil, which also means that the demand for OPEC in the world crude oil market will drop by 1.3 million barrels per day in 2020, and OPEC's market share will drop to 33%, a decrease of 5 percentage points from 2016!
Risk warning
(1) The substitution of new resource types has led to a decline in crude oil demand beyond expectations; (2) The global economic downturn has exceeded expectations, resulting in a rapid decline in crude oil demand; (3) The signing of a new crude oil agreement has led to a change in the international supply pattern; (5) The early easing of relations between the United States and Iran has led to a change in the supply pattern; (6) The sharp changes in the internal situation in the United States have caused crude oil supply to be lower than expected or exceed expectations; (7) Uncontrollable factors such as wars and natural disasters have led to a change in the crude oil supply pattern.
and above are excerpted from the securities research report that has been released by Guojin Securities . For details, please refer to the full version of the report for details of the analysis content (including risk warnings, etc.). If there is ambiguity due to the excerpt of the report, the content of the full version of the report shall prevail.
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