In 2019, China’s crude oil production reversed several consecutive years of decline and reached 191 million tons, an increase of 1.1%; natural gas production is estimated to reach 173.8 billion cubic meters, an increase of approximately 9.8%.
At the beginning of 2020, the situation in Iran took a turn for the worse, casting a shadow over the global oil market this year.
On January 13, the China National Petroleum Corporation Economic and Technology Research Institute held a press conference for the “2019 Domestic and Foreign Oil and Gas Industry Development Report” in Beijing. At the meeting, Vice President Jiang Xuefeng said that the world oil market supply and demand reached a “fragile” balance in 2019, and geopolitical risks in the United States, China, Europe and other major economies have increased, which has an important impact on the trend of international oil prices.
The Institute of Economic Research predicts that in 2020, the global economic trend will remain weak, and international oil prices will maintain a volatile trend, with the average price of Brent crude oil ranging from 60 to 65 US dollars per barrel. , roughly equivalent to the average oil price in 2019.
“However, the unstable global macroeconomic and political situation, the great uncertainty of the geopolitical situation in the Middle East, and the average annual international oil price falling below 50 US dollars per barrel or An upward break above $75/barrel is also possible,” he said.
For China, under the complex and changing situation, while increasing efforts to ensure the security of domestic energy supply, it still needs to promote the energy transformation process and reduce its demand for oil and natural gas. degree of dependence. In 2019, my country’s crude oil production reversed several consecutive years of decline and reached 191 million tons, an increase of 1.1%; natural gas production is estimated to reach 173.8 billion cubic meters, an increase of approximately 9.8%.
The balance of supply and demand is very fragile
At the end of 2019, the United States, the birthplace of the modern oil industry, realized the transformation from a net importer to a net exporter in monthly data for the first time in more than 70 years, whether through oil exports or wielding the “sanctions stick” ”, the United States is becoming an “oil hegemony” country.
This is also the most obvious change in the global energy market in 2019 from the supply side.
This impact is reflected in the changes in supply and demand structure and market share. Since OPEC countries announced production cuts in 2017, a total of 2.44 million barrels per day has been reduced. Taking advantage of this opportunity, non-OPEC countries, driven by the rapid increase in production in the United States, have increased production by more than 5.6 million barrels per day, which has not only greatly offset the production cuts by OPEC countries. Despite their efforts, OPEC countries lost 4% of their market share to the United States.
In addition to increasing production, US sanctions also played a decisive role. In 2019, the gap between global crude oil supply and demand has shrunk from 1 million barrels per day in 2018 to an overall balance. But in the process, the U.S. sanctions on Iran and Venezuela caused global crude oil supply to plummet by 1.8 million barrels per day, which was the “biggest force” to restore balance.
“It can be seen that exerting influence on the global oil and gas market has become an important starting point for the United States to implement the ‘America First’ strategy.” Jiang Xuefeng said, “At the same time, because of the above balance Mainly due to production cuts and sanctions, this balance is very fragile and can easily fluctuate due to geopolitical factors.”
Saudi Arabia and Iran are supported by the United States and Russia respectively. The game between the two camps has intensified, and the disputes in the Middle East have intensified. At the end of 2019, Saudi Arabia’s largest crude oil processing plant was attacked, causing the country’s oil supply capacity to drop by 50%. At the beginning of 2020, the dispute between the United States and Iran continued to heat up, bringing many uncertainties to the region. .
Amidst many uncertainties, attacks on oil tankers and oil field facilities occur frequently. The world, especially Asia, is facing a significantly higher risk of oil supply interruption, which has greatly affected China’s energy supply security. In the first half of 2019, China imported 3.3 million barrels per day of crude oil via the Strait of Hormuz, accounting for 33% of total crude oil imports.
High risks not only mean supply is fragile, but also mean rising costs. In 2019, oil prices fell by 10% compared with 2018, but the price of crude oil imported into China fell by only 4.6%. In addition to crude oil premiums rising nearly 10 times year-on-year due to higher oil price premiums for China in the Middle East, rising freight costs have also brought additional import costs to China.
At the same time, the crude oil market in 2019 showed another major feature: the demand side replaced the supply side and became the main factor affecting oil prices. Observing the oil price trend after the attack on Saudi Arabia last year and the conflict between the United States and Iran this year, we can find that supply expectations brought about by geopolitics only maintained an increase for a few days, and then oil prices quickly fell back to the pre-crisis level.
The reason behind this phenomenon is that crude oil experienced a large drop in demand in 2019. For the whole year, oil demand increased by only 900,000 barrels per day in 2019. This is well below the 1.5 million barrels per day in 2018, causing economic conditions and weak demand to have a greater impact on oil prices throughout much of 2019.
2020While the global economic trend will remain weak, the China Petroleum Economic Research Institute predicts that the increase in oil demand may rebound slightly to 1.15 million barrels per day. With the increase in production in the United States, Norway, Brazil, Guyana and other countries, non-OPEC supply will A year-on-year increase of 2.1 million barrels per day.
However, the balance of the world oil market still depends on the production reduction efforts of the “Production Reduction Alliance”, including the subsequent development of the situation in Iran and Venezuela, as well as the increase in production of non-OPEC countries led by the United States. Condition.
China still needs to make efforts to increase production
In the second half of the 21st century At the end of this decade, China’s crude oil production finally stopped declining for five consecutive years and began to rebound. The rapid increase in oil and gas dependence on foreign countries has been curbed. However, the issue of energy security still cannot be ignored.
In 2019, China’s crude oil production reversed several consecutive years of decline and reached 191 million tons, an increase of 1.1%; natural gas production is estimated to reach 173.8 billion cubic meters, an increase of approximately 9.8%. However, affected by the intensive start-up of large private refineries, crude oil demand increased rapidly to 694 million tons, and net crude oil imports exceeded 500 million tons for the first time, reaching 503 million tons, a year-on-year increase of nearly 10%.
In 2019, China’s foreign dependence on crude oil reached 72.5%; its foreign dependence on oil exceeded 70% for the first time, reaching 70.8%. However, the growth rate of crude oil and oil’s foreign dependence They slowed down by 0.8 and 1.3 percentage points respectively from the previous year, marking the first slowdown in growth since the rapid decline in oil prices in 2014.
In the future, with the implementation of the seven-year action plan to increase domestic oil and gas exploration and development, production will continue to rise. The China Petroleum Economic Research Institute predicts that domestic oil and gas production in 2020 is expected to reach 194 million tons and 190 billion cubic meters. Coupled with the implementation of national policies such as developing clean coal, replacing oil with multiple energy sources, and increasing the proportion of terminal energy consumption in electricity, the dependence on foreign oil and gas will grow steadily and at a low rate.
In terms of refined oil products, due to sluggish domestic demand and the rapid construction of refining and chemical production capacity, the growth rate of domestic consumption of the three major refined oil products, gasoline, diesel and coal, has slowed down due to various reasons. The pressure on oil exports increased, and the total net export volume for the year exceeded 50 million tons for the first time, a “surge” of 34%.
In 2020, it is expected that the growth rate of domestic demand for refined oil products will continue to slow down, the growth of refining capacity will not decrease, and the supply will continue to be excess. The net export of refined oil products may exceed 60 million tons in one fell swoop. surpassing South Korea to become the largest exporter of refined oil products in the Asia-Pacific region.
Among them, diesel has been benefited by the new IMO “sulfur limit order”, and the export volume will be as high as 26 million tons. At the end of 2019, the government issued a policy that clearly stated for the first time “supporting qualified enterprises to participate in crude oil imports and refined oil exports”, providing policy guarantees for private enterprises to expand refined oil exports and crude oil imports.
However, excess refining and chemical production capacity has become a prominent problem in the domestic market. In 2019, the newly added refining capacity was 28.5 million tons/year, the highest since 2014. According to calculations based on increased production and operation levels, reasonable refined oil yields, meeting domestic demand for refined oil products, and exporting as much as possible, my country’s refining capacity is already at least 150 million tons/year in excess.
“According to the consistent thinking of production capacity replacement, domestic production capacity is basically built first and then reduced.” An industry insider told reporters, “The problem of overcapacity that has been formed for a long time cannot be solved. It will be relieved in a short time, which will be a very big pressure for domestic enterprises.”
In terms of natural gas, in 2019, my country’s natural gas production growth rate was 9.6%. The growth rate exceeded that of imports, and the degree of external dependence was basically the same as that of the previous year. Significant progress has been made in the construction of my country’s key natural gas infrastructure interconnection projects, LNG receiving station receiving capabilities, and gas storage peaking capabilities.
It is worth mentioning that the market-oriented reform of natural gas has been steadily advancing, and the domestic ability to ensure the safe supply of natural gas has been significantly improved. In 2020 and beyond, as the scale of my country’s natural gas market expands and the degree of marketization continues to improve, the construction of the natural gas production, supply, storage and marketing system still needs to be continuously improved to further improve resource allocation efficiency and supply guarantee capabilities. </p
