Author: Wang Yilu, East China Sea Futures
Prophase oil priceEzc4slotThe upward trend does not represent a rise in the price hub, but is still a reflection of geopolitical premiums. However, we have to say that the structural change is partially ineffective in the process of this round of price changes, and when the highest price is close to 92, the crude oil structure still maintains a strong trend, on the one hand, it also shows that from the basic level of supply and demand, the current supply and demand is not too weak drive, this round of price changes are more with the macro. In addition, it can also be seen that supply and demand are still weakening panic in the near future. Due to the partial distortion of the current structure, later prices will continue to follow macro changes, which are more likely to be driven by several factors: first, the sharp deviation from expectations of refined oil consumption in the peak season; second, the rapid growth of North American supply; and third, and most importantly, the plate resonance brought about by macro expectations, including copper prices, may be affected.
Although OPEC+ has some countries to reduce production to make up for the previous commitment to excess production, but from the production point of view, there is basically no significant change, OPEC basically maintained at 26.8 million barrels per day. Iraq and Kazakhstan say they will make up for their excess production of 600000 b / d and 400000 b / d in the first quarter, but the time limit will be for the whole of this year, so even if it can be done, the reduction in production will only be within 300000 b / d, which is relatively limited.
As for Russia, the United States has begun to impose sanctions on Russian oil tanker companies in the early days, and it has achieved initial results, but with the recent stickiness of overseas inflation, the United States has once again relaxed sanctions on Russian banks. as a result, Russian supply has also risen slightly. However, in April, Russia's diesel exports were only 36.Ezc4slot0.2 million barrels per day, a decrease of 50,000 barrels per day compared with the previous month. In addition, PJSC, a Russian state-owned refinery in Ryazan, was again attacked by Ukrainian drones, with a capacity level of 340000 b / d and an affected device of 60, 000 b / d, but so far the operation of its device has not been significantly affected, and whether it will affect the loading plan remains to be seen.
In North America, the Trans Mountain Expansion section mentioned earlier has been put into commercial operation, and the original 300000 b / d will be expanded from 590000 b / d to 890000 b / d. The first shipment will take place in mid-May, and the long contract scheduled shipment has not yet been fully received. At that time, North American heavy oil trade flow will be reshaped, Canadian oil sands will increase exports to Asian refineries, Asia-Pacific heavy raw material choice will no longer be limited to South America, while traditional Mei Wan customers will be more difficult to get Canadian raw materials, and then can only choose South American or domestic oil products, the recent Mei Wan heavy oil Mars price spread has increased significantly. Although Canadian oil sands have a discount of more than $10 relative to Brent, its exploitation costs have dropped sharply in recent years, from nearly $70 / barrel in the past to an average of $45 / barrel at present, and some assets have dropped to less than $30. Although the overall production cost is still on the high side, and the exploration cost is still more than 55 US dollars per barrel, the short-term oil price remains high and the superimposed transportation is opened up, there is still room to expand output. Therefore, in terms of total supply and demand of crude oil, Canadian exports will partially replace South American and US oil exports in the short term, but in the medium term, Canada's own production capacity will be stimulated to grow, and this will not take a long time, so in the 2nd-3rd quarter, this will still be a suppression of oil prices.
In addition, the supply in the oil market has not changed much. Although there are voices that OPEC+ will reduce its production reduction share, there is a good chance that OPEC+ will maintain its original production reduction quota in June. In addition to the possible supply impact caused by geopolitics, more focus in the second quarter will be on demand verification during the peak season, as well as changes in macro demand expectations, or including the resonance impact of commodities.
Therefore, from the supply level, the current basic match demand, the gap between supply and demand is not large, the continuous strength of the previous structure illustrates this point. However, it should be noted that after the recent price decline, the spot discount has also declined, the overall supply and demand is in the process of transformation, and there is an increased risk in the later stage of supply. Whether demand can absorb the supply increment and the expected changes in macro demand will be the theme of the next stage. from this point of view, the second quarter, especially May-June, will become the key point for the change of oil prices over a period of time. Demand verification and Fed decisions will be market guidelines at a later stage.
The decline in prices at the end of April was also mainly due to the slight weakening of overall supply and demand, excluding the premium brought back by Israel and Kazakhstan as they gradually approached a ceasefire agreement. Judging from the recent inventory situation, there has been a continuous accumulation of stocks, of course, in the early stage, as Europe is still in the peak of maintenance, and the overall start-up of Asia-Pacific refineries is not high, so it is affected to a certain extent. During this period, the accumulation of inventory is also at the normal level in the same period, but it will be more difficult for prices to have a real upward drive before the inventory is removed again.
And the recent profit level has reflected this trend. Light fractions have not shown an obvious upward trend so far, and the early strength has been basically exhausted by now. Judging from the flow direction of aromatic hydrocarbons, the oil hype that appeared in the past two years has basically ceased this year, and the price difference does not show the economy of cross-regional arbitrage. It also shows that the recent demand for overseas oil products is expected to be weak. The recent accumulation of light fractions also confirms the current decline in demand.
From the perspective of refining and chemical profits, the overseas downturn is also the most important factor in this round of price decline. And the previous discount confirmed that in the case of low demand for finished products, this round of upward crude oil prices did not lead to an increase in refinery profits, so spot buying is relatively general, and our long-term bearish support for oil prices is supported here. If profits remain low in the future, prices are likely to continue to be suppressed during the peak season.
From a financial point of view, short positions in Brent and WTI have risen to their highest level since January, and net long positions have declined significantly since April. Compared to itsEzc4slotHe has a wide range of assets such as gold and copper, and crude oil performed relatively poorly in April, with limited value, which is also the reason for recent capital inflows.
In the Asia-Pacific demand, although there are still more imports from Russia, the recovery rate of Chinese demand is still slow, the start-up of both state-owned and georefining operations remains low, domestic refining and chemical profits are low, the production and marketing of by-products such as asphalt is poor, and the demand for chemicals is also bad, which brings negative feedback to the upstream refining and chemical demand. Recently, however, the number of oil tankers exported to China has increased again, and overall construction has rebounded to a certain extent. After coming out of the overhaul in May, it is expected that Asia-Pacific demand will rebound to some extent, but the space may still be limited.
From May to June, the most important thing will be the change in demand expectations brought about by the macro economy. Judging from the recent data, wage growth is basically in line with inflation, but the employment data has shown a decline, and the commodity consumption data also showed a slight month-on-month decline, split with service consumption, which was still high. By the way. Wage growth has also slowed significantly in recent months. Therefore, the later demand for overseas commodities, especially the bulk demand for oil products, may not be optimistic.
At present, the Fed still sets the tone for this year that it will not raise interest rates again, but the expectations of interest rate cuts are getting lower and lower. Judging from the actual data, the possible weakness derived from the consumption data will lead to a strong logical change in commodity prices under inflation caused by overseas easing that began in 2020. The main tone of matching strong overseas varieties, which has lasted for two to three years, is likely to change in the near future.
We mentioned in our previous monthly strategy that oil prices will still be under pressure as we enter the second or third quarter. This oil price correction fulfilled our expectations earlier. After the second quarter, the oil market will enter the peak season demand verification stage, and we are still not too optimistic about the current demand, but relatively, although the current supply and demand is gradually loosening, but there is no sharp contradiction, whether it is supply increment or the embodiment of depressed demand, it still takes some time to cash in, so the oil price has recouped the geopolitical premium. There may be periodic shocks in May, but we still have a bearish forecast for oil prices during the quarter.