Supply contraction, weaker demand, LPG fundamentals are not optimistic

Recently, international oil prices have experienced a certain degree of correction. How will the downstream prices of liquefied petroleum gas be interpreted?

　　 The main divergence on the current crude oil side lies in the contradiction between "strong expectations" and "weak reality." Overseas new crown pneumonia epidemics have repeated, and Europe is facing the third wave of epidemic peaks, and many cities have been closed again; AstraZeneca vaccine has been halted by many countries due to serious side effects. The latest data from EIA shows that crude oil inventories have increased for many weeks, indicating the demand side Did not meet the recovery expectations. Superimposed U.S. bond yields to record highs have led to a stronger U.S. dollar and increased market risk aversion. Whether oil prices have since returned to low fundamental valuations remains doubtful. Follow-up needs to focus on the latest trends in the OPEC+ meeting in April.

　　Return to LPG itself, showing a situation of “weak supply and demand” as a whole. In terms of domestically produced gas, in March, the national main refineries ushered in the traditional overhaul season, and both the operating rate and the output volume showed a downward trend. The quantity of imported goods exceeded the 1.9 million tons mark in the first two months of this year, a record high over the same period in history. Due to the current high inventory of ports in South China and East China and the upside-down of import profits in some regions, it is expected that the supply at the import end will decrease significantly from the end of March.

　　 The spring equinox solar term has passed, the overall temperature of the country has been warming up obviously, and the demand for combustion has been declining. The demand for chemical raw materials is relatively complex: multiple devices on the PDH route have been opened for maintenance, involving an annual production capacity of 2.25 million tons, and the overall operating rate has dropped to 69% as of last week, a decrease of nearly 15 percentage points on a week-on-week basis. Combined with the maintenance time of about 20 days, it is estimated that the demand for propane will be reduced by 165,000 tons.

　　The demand for gasoline additive route is improving. As the price of refined oil continues to rise, the prices of MTBE and alkylated oil used as oil blending are also rising. Take Shandong as an example. In March, the highest prices of the two exceeded RMB 5,700/ton and RMB 5,600/ton respectively, with monthly increases of 18.65% and 16.88% respectively. The profit repair brought by the high price has provided a guarantee for the operating rate of the device. The operating rate of the two is currently stable at about 45%, and the market outlook is expected to remain stable.

　　 On the whole, the current LPG market itself is not very contradictory, with supply shrinking, demand weakening, and fundamentals relatively weak. Under the premise that crude oil prices remain volatile, the trend of LPG will gradually return to fundamentals.