Recently, overseas crude oil prices have reached a high in the past two years, and domestic SC is also close to previous highs. However, the rise of domestic chemical products has stagnated, and the overall price is in a range oscillation. The chemical industry is downstream of crude oil. Why do the trends of chemical industry and crude oil diverge? We believe it is caused by the divergence between supply and demand.
The demand structure and rhythm are different
First, the demand accounts for a relatively large proportion The regions are different, and the second is that the demand terminals are different.
The United States accounts for 20% of crude oil demand and Europe accounts for 15%. The two major economies have a great influence on the crude oil market. Recently, the pace of vaccination in Europe and the United States has accelerated. As of June 4, the vaccination rate in the United Kingdom was 59.1%, the vaccination rate in the United States was 50.9%, and the vaccination rate in Germany was 45.1%. New cases in Europe and the United States have begun to increase, and oil product consumption has begun to grow rapidly. As of the week of May 28, U.S. gasoline demand reached a new high since the epidemic, with an absolute value of 9.534 million barrels per day. The number of passengers flying during Memorial Day on May 31 exceeded 1.9 million, which was also the first year in 2020. The highest level since March this year. China’s crude oil demand accounts for 15% of the world’s total, and the period of rapid growth in China’s oil consumption is from April to August 2020. At this stage, China’s domestic air flight numbers and domestic urban traffic congestion index are already in a stable operating period, and the growth rate remains stable. Looking at chemical consumption, China mostly ranks first, and demand growth is stable and has not jumped.
The demand terminal reflects the different characteristics of crude oil and chemicals. Crude oil is a consumer commodity, and chemicals are industrial manufacturing commodities. 80% to 90% of crude oil downstream is refined oil. The consumption of refined oil is very dependent on people’s travel and social interaction. Such demand will rise sharply after vaccination. Due to the high level of automation in industrial production and the fact that China, an industrial powerhouse, was the first to emerge from the epidemic, chemical demand has gradually normalized in 2020.
The supply status and trends are different
First, crude oil has a stronger monopoly; second, crude oil has a stronger monopoly; It is a long-term resource product. Compared with chemical industry, it requires longer time and larger capital investment. The new supply of crude oil is limited, while most chemical industry is in the period of concentrated production.
In 2019, OPEC+ crude oil production accounted for up to 50% of global supply. If the circulation of the global crude oil market is taken into account, this proportion may increase to 70%. OPEC+ implements controlled production and determines the supply growth rate based on demand growth. Looking at domestic chemicals, even polyolefins, which account for a large proportion of the “two barrels of oil”, or PTA, which is more concentrated in production, the monopoly on their respective products is far lower than OPEC+’s control over crude oil, not to mention some products with dispersed output. Varieties, such as MEG, MA, etc.
Since crude oil prices peaked in 2007, they have been in a bear market cycle for more than ten years. Without the stimulus of high prices, traditional oil and gas production companies have no incentive to explore and develop, like Angola. Crude oil production has dropped by one-third in the past four years, Mexico’s production has also gradually declined in the past decade, and China’s production has remained stable, with a growth rate of only about 1%. Even if oil prices rise and oil companies increase investment, crude oil output will not be released until 2-3 years later, or even longer. The chemical industry construction cycle is 1-2 years. Thanks to the centralized commissioning of large-scale private refining and chemicals in my country, my country’s chemical industry production capacity will be in a concentrated release period from 2020 to 2022, with production capacity growth rates ranging from 10% to 40%.
Looking forward to the market outlook, travel volume in Europe and the United States will continue to rise, and the vaccination rate in Europe and the United States will reach 70% in July; 4. The global vaccination rate will reach 70% in the quarter, and the demand for gasoline and jet fuel will also reach a higher level. Therefore, the strength in oil prices will continue. In the second half of the year, the chemical industry will face the dilemma of rising costs and the gradual release of production capacity. The overall price continues to oscillate. It will still be good to buy crude oil and sell chemicals, especially those such as EB, MEG, and MA that have a large growth rate of production capacity and have no bright spots in demand. Strategy. At the same time, we must also see that oil prices are easily affected by emergencies. Some domestic chemical inventories have low absolute values and high elasticity. Hedging between crude oil and chemicals requires finding a suitable time point. </p