In 2018, the global crude oil market maintained an increase of 1.4 million barrels/day driven by demand from China, the United States, and India. Therefore, at the beginning of 2019, the crude oil market still maintained an increase in demand of 1.4 million barrels/day. , but towards the end of the year, the changes in crude oil demand are basically clear. According to the EIA report, the increase in the crude oil market in 2019 has been reduced to 750,000 barrels/day, which is almost a half result. So what changes have occurred in the supply and demand of the crude oil market in 2019? This article analyzes the three major markets in the world.
U.S. market
Since 2015, the growth of U.S. crude oil production has been the main force in global crude oil production growth. As of early December 2019, U.S. crude oil production had increased by 1.2 million barrels per day, which was exactly OPEC’s 2019 production reduction limit. The common view among market researchers is that OPEC’s hard work in reducing production is just a wedding dress for countries that are increasing crude oil production, led by the United States. Due to its low mining costs and efficient mining methods, it seems difficult for the U.S. market to set a cap on its crude oil production.
The picture shows the changes in U.S. crude oil production
The picture shows US oil refining Input changes
Looking at the origins of U.S. crude oil production growth, the main reason for the sharp increase in production is not the rise of U.S. inventory wells A large number of projects have been put into production, mainly due to the improvement of single well production efficiency. The EIA report shows that from November to December, the single well production efficiency of U.S. crude oil increased from 814 barrels/day to 824 barrels/day, an increase of 10 barrels/day, of which the single well production efficiency in the Bakken region increased by 20 barrels/day. In addition, as of October, there are still more than 7,000 inventory wells in the United States waiting to be put into production. Once the price is right and the opportunity is right, these inventory wells are fully capable of being put on the market in a very short period of time, and the global market will be flooded with US crude oil. And according to IEA data forecasts, U.S. crude oil production will increase again by 1.24 million barrels per day in 2020, accounting for 92% of global crude oil production growth. OPEC production cuts will no longer be able to catch up with the pace of U.S. production growth…
U.S. market demand is also relatively pessimistic this year. U.S. refining input demand has once again experienced a year-on-year decline after nine years. So far, U.S. crude oil demand has fallen by an average of 376,000 barrels per day annually, the worst performance in 10 years. There is no doubt that with Trump’s insistence and the huge downward pressure on the global economy, demand in the crude oil market has been greatly affected, and the U.S. market cannot be immune. The performance of inventories can also reflect the seriousness of oversupply in the U.S. market this year. U.S. crude oil inventory levels this year have been higher than last year. High inventories have hindered the pace of market upwards.
In terms of categories, the decline in demand is mainly concentrated in diesel, but the annual cumulative year-on-year growth of gasoline has also been in recent years. new low. As of the end of November, U.S. gasoline demand has fallen by 1.78% year-on-year, and diesel demand has fallen by 8.84% year-on-year. Both gasoline and diesel have hit their lowest values in five years. As an important raw material for economic activities, the sharp decline in demand for diesel can also reflect the economic downturn, which will also restrict the consumer demand for gasoline.
Chinese market
In 2019, China’s crude oil market demand performed well It is so bright that it can even be called the “locomotive” of global crude oil demand. According to the latest EIA monthly report data, the Chinese market contributed 75% to the increase in global crude oil demand in 2019. This is a historical peak in a normal year outside of an economic crisis. From 2010 to 2014, China’s crude oil refining input demand growth showed a slowdown. Beginning in 2015, with the gradual liberalization of the use and import rights of locally refined crude oil, a large number of local refineries were finally able to independently import crude oil. Coupled with factors such as my country’s increase in crude oil reserves, the demand for crude oil increased by leaps and bounds. After 2015, the demand for crude oil increased rapidly. out of year-by-year growth. In 2018, China’s large-scale refining and chemical projects were launched one after another, and the increase in crude oil demand began to increase. In the past few years, China’s increase in crude oil demand has been steadily maintained at around 800,000 barrels/day.
In 2019, the only large refining and chemical project that entered the production stage was Hengli Petrochemical, and Hengli Petrochemical had 20 million The annual ton/year processing capacity is approximately 400,000 barrels/day, which is all the increase in demand in 2019. In addition, according to the third quarter annual report of “Two Barrels Oil”, its processing volume increased in the first three quarters by approximately 200,000 barrels/day. In other words, excluding the Hengli refining project and the growth of “two barrels of oil”, the remaining refineries contributed nearly 200,000 barrels/day of incremental demand. Despite the sudden slowdown in crude oil demand growth in other countries around the world, China’s crude oil demand is still able to maintain substantial growth, which makes people lament the huge potential of the Chinese market. In 2020, with the commissioning of large refining and chemical projects such as Zhejiang Petrochemical, China’s crude oil demand will still become the main force in global demand growth.
Judging from China’s crude oil production, China’s crude oil production has remained at 3.8 million to 3.9 million barrels/ barrel in the past three years. Days, changes are relatively stable. Since China’s crude oil production cannot provide sufficient supply,��, then it can only be made up by the import side. In 2019, China’s crude oil imports increased by 724,000 barrels per day, a year-on-year increase of 8.25%, which is close to the increase in demand. The overall crude oil import dependence has also reached an unprecedented 73.85 %. Therefore, after Zhejiang Petrochemical goes into operation in 2020, China’s crude oil import dependence is expected to hit a new record of 75%!
The picture shows the changes in China’s crude oil production and demand
Crude oil demand increased by 800,000 barrels/day, and imports increased by 724,000 barrels/day. However, not much of this increase in crude oil entered the refined oil field. Judging from the cumulative year-on-year demand and supply of gasoline and diesel, the cumulative demand for gasoline and diesel in 2019 showed zero year-on-year growth, and the cumulative supply only increased by 1.44% year-on-year; the cumulative demand for diesel fell sharply by 9.75% year-on-year, and the cumulative supply of diesel fell by 7.93% year-on-year. Therefore, it can be seen that most of the substantial increase in crude oil demand has gone to the chemical industry. This is due to the launch of large-scale refining and chemical projects and the implementation of the “oil head to tail” policy in Shandong, where local refineries are concentrated. These measures have avoided The glut in the domestic refined oil market has intensified.
In addition to flowing to the chemical industry, the export of refined oil has also become an important way to alleviate domestic excess pressure. In 2019, domestic gasoline and diesel exports still maintained a high growth rate, of which gasoline exports were 360,000 barrels/day, a year-on-year increase of 19%; diesel exports were 438,000 barrels/day, a year-on-year increase of 14%. When the domestic market is completely saturated or even severely oversupplied, exports have become one of the important ways to maintain profits in the domestic market.
Indian market
As the third largest crude oil consumer in the world, India has high hopes from the market, and major institutions generally expect that India will take over from China in the future and become the core contributor to the increase in global crude oil demand in the next 20 years. However, India may have disappointed the market in 2019. Data shows that India’s economic development stalled significantly in 2019. Indian Oil Minister Pradhan previously expressed concern about oil price fluctuations. There are widespread concerns that the decline in Indian crude oil demand will affect the growth of global crude oil demand. In the first nine months of 2019, India’s crude oil processing volume was 5.18 million barrels/day, a decrease of 60,000 barrels/day from 5.24 million barrels/day in the same period last year. India’s crude oil imports were 4.55 million barrels per day, a decrease of 50,000 barrels per day from 4.6 million barrels per day in the same period last year. From September’s data alone, we can see that both India’s crude oil processing volume and crude oil import volume fell sharply in September, and are currently at the lowest point in the past four years. Therefore, we can’t help but wonder whether India’s claimed growth in demand will This statement has raised questions about surpassing China.
From a consumer perspective, the situation in India is similar to that of China and the United States, with gasoline consumption remaining stable and diesel consumption declining. . All signs point to the huge impact of economic downturn on global diesel consumption, which also fully demonstrates that it is difficult for crude oil demand to grow significantly under the pressure of economic downward pressure. That being the case, it is difficult for crude oil prices to strengthen significantly through the supply-side story. Therefore, our focus next year will still be on the changes in the economic environment and the variables of crude oil demand. If the economy can improve under the easing of global monetary policy, driving the stabilization of diesel demand, then crude oil demand is still expected to return, and crude oil prices will naturally The story of the supply side can be told. Otherwise, under the suppression of demand, crude oil prices will most likely continue to have a balanced market with a top at the top and a bottom at the bottom.
Outlook
In 2019, China’s crude oil demand will increase by The largest contributor to the world’s crude oil market demand, while the demand in the United States and India has stalled, there is no obvious bright spot in the demand for crude oil in other countries around the world. The Chinese market relies on the increase in refining input from Hengli Petrochemical and “Two Barrels of Oil”. It has become the only bright spot in the global market. It is China’s demand that keeps the global crude oil market in a balanced state. Otherwise, oversupply will be the main tone in the second half of 2019.
In 2020, Zhejiang Petrochemical will be fully operational. By then, the 20 million tons of refining capacity will continue to be the same as Hengli Petrochemical. Increasing China’s crude oil demand will also increase China’s dependence on crude oil imports. As China’s large-scale refining and chemical projects are launched one after another, China will continue to be the main contributor to the growth of crude oil demand next year. However, we expect that the supply side will continue to grow next year. If we rely solely on the increase in demand from China, it may be difficult to maintain a balanced state. Therefore, the demand performance of the US and Indian markets is extremely important.
In addition, in order to avoid direct competition with US shale oil, the Middle East market has begun to frequently launch refining and chemical projects , shifting from crude oil exports to refined oil exports and chemical product exports will be the main direction of change for OPEC countries in the future. In the traditional competition in the field of crude oil, OPEC countries have no advantage. They are inferior to shale oil in terms of mining costs and convenience. Naturally, their tolerance for low oil prices is at a disadvantage. At present, Saudi Arabia has made frequent moves and has significantly accelerated its deployment in the refining and chemical market. Therefore, the Middle East market is expected to become the next growth point of crude oil demand after China in the future.
Therefore, based on the performance of the supply and demand sides, we predict that the crude oil market will most likely maintain loose supply and demand next year. In the absence of significant positive trends in the macro market, difficulty in improving demand, or the impact of severe geopolitical events, crude oil prices are relatively weak. It is expected that crude oil prices will continue to oscillate with tops and bottoms.
In a relatively loose situation, when the macro market is not significantly positive, demand is difficult to pick up, or there is no impact from severe geopolitical events, crude oil prices are relatively weak. It is expected that crude oil prices will still repeat the oscillation trend with tops and bottoms. </p
