Oil Prices May Welcome Six Consecutive Rises

In the past two weeks, international oil prices have staged a "roller coaster" market. Industry insiders believe that the market's worries about geopolitical risks and supply expectations will continue to dominate the high volatility of oil prices in the future. For my country, the largest oil and gas importer, it is a mixed blessing. A new round of domestic refined oil price adjustment window will be opened on March 17, when the "six consecutive rises" will be a high probability event, the cost of transportation and other industries will further increase, and some oil refining companies will also suffer serious losses. However, from the perspective of the stamina and space of economic growth, the rise in oil prices has also brought market opportunities to the transformation of the energy industry.

International oil prices on a "roller coaster"

Since the beginning of this year, international oil prices have continued to rise. The prices of West Texas Intermediate (WTI) futures and Brent crude oil futures have both risen from less than $70/barrel in early December last year to over $90/barrel in early February. On the 1st, WTI and Brent crude oil futures prices both broke through the $100/barrel mark, and on March 8th, the two closed at $123.70/barrel and $127.98/barrel respectively, hitting new highs since July 2008. Only 6 It rose more than 27% in the trading day. However, the situation deteriorated sharply from March 9, and as of March 15, WTI and Brent crude oil futures prices fell below the $100/barrel mark, closing at $96.44/barrel and $99.91/barrel, respectively, compared with March 8 They are down 22.04% and 21.93% from their daily highs.

"The current market fundamentals are the expected increase in oil demand brought about by the slowdown of the international epidemic and the gradual unblocking, and the slow adjustment of the supply side represented by OPEC+, which has led to a significant decline in inventories. At the same time, oil and gas investment in response to climate change and energy transition Be cautious, there are hidden worries about the supply prospects." Bai Jun, deputy director of the Beijing Gas Research Institute, analyzed in an interview with a reporter from the "Economic Information Daily" that the "roller coaster" market is mainly due to the conflict between Russia and Ukraine, economic and financial sanctions and counter-sanctions, and geopolitics. Factors such as gaming, inflation and interest rate hike expectations have resulted in a fragile market mentality, unstable investor sentiment, and large fluctuations in market risk premiums.

Liu Manping, an expert on Chinese energy issues, believes that the previous surge in oil prices was mainly due to the irrational rise in the market caused by the conflict between Russia and Ukraine. “But the impact is short-term, and once the market adjusts to this factor, or the conflict eases, oil prices will definitely fall.”

Regarding the follow-up oil price trend, although there are differences in the judgment of industry insiders, they agree that high volatility will remain in the short term. "It is expected that oil prices will continue to fluctuate in a while." Bai Jun believes that at present, there is no expectation that oil prices will continue to fall sharply.

In the view of Sun Chuanwang, a professor at the China Energy Economics Research Center of Xiamen University, the future oil price changes will still depend on the progress of the situation in Russia and Ukraine in the short term. If the impact on the supply side cannot be compensated, oil prices may still fluctuate or even rise. Analysts judged that the tight balance between supply and demand is still a strong support for the oil market in the near future, and the market's anxiety about geopolitical risks and supply expectations will continue to dominate the high volatility of oil prices. Monetary tightening policies such as the Fed rate hike in the later period will also have a non-negligible impact on the oil market.

Domestic mixed

"Although rising prices are good for domestic oil and gas production and overseas upstream business, my country is the world's largest oil and gas importer. High oil and gas prices have increased the cost of related industries and the living burden of residents, which is not conducive to achieving this year's economic development goals." Bai Jun say.

Liu Manping also pointed out that the rise in international oil prices directly increases the import cost of my country's crude oil, which in turn affects the refined oil and chemical raw materials downstream of the industrial chain, and will also raise the cost of raw materials in many industries, which will be transmitted to the consumer side through the production chain, leading to inflation. rise.

At 24:00 on March 17, a new round of domestic refined oil price adjustment window will open. According to estimates, gasoline and diesel prices are expected to increase by 820 CNY/ton, the largest increase since the new pricing mechanism on March 26, 2013. Before that, domestic refined oil prices had been raised five times in a row, with gasoline and diesel prices increasing by 1,265 yuan and 1,220 yuan per ton respectively.

Analysts said that with the rise of international oil prices, the cost of domestic refineries has also increased significantly. Although the wholesale prices of gasoline and diesel have risen significantly recently, it is still difficult to guarantee the profits of the refining process as a whole. As of March 9, the average comprehensive refining profit of Shandong local refinery was -213 CNY/ton for the week. Factors such as profit loss and lack of raw materials have caused some local refineries in Shandong to reduce the operating load recently. As of March 9, the average operating load of the primary atmospheric and vacuum unit in Shandong local refinery that week was 56.33%, a month-on-month decrease of 4.6 percentage points, which also led to finished products. Oil production has declined somewhat.

"Rising oil prices also have a positive side, for example, restraining oil consumption; promoting the development of the new energy industry, forcing a clean and low-carbon transformation of energy; accelerating the elimination of outdated production capacity and promoting the upgrading and adjustment of the refining industry." Liu Manping said.

Sun Chuanwang said that from the perspective of the stamina and space of economic growth, the rise in oil prices has brought market opportunities to the industry transformation. For traditional energy companies, they are forced to vigorously implement energy conservation, emission reduction and clean substitution, and increase the supply of green and zero-carbon energy. And new energy companies have obtained external conditions for further development, not only to enhance domestic competitiveness, but also to usher in greater opportunities for international investment and cooperation.

Take multiple measures to ensure stable supply and prices

In the face of sharp fluctuations in international oil prices, how should we respond to ensure a secure and stable supply of energy?

The first measure is to significantly increase the investment in oil and gas exploration and development, and promote the increase of oil and gas reserves and production. In fact, in 2019, my country put forward the "Seven-Year Action" plan for the first time in the oil and gas exploration and development industry. Since then, crude oil production has increased for three consecutive years, providing confidence for the first decline in China's crude oil imports and foreign dependence in 20 years in 2021. ". At present, "three barrels of oil" are further increasing reserves and production, and China's oil and gas production is expected to further increase in the future.

"We should also do a good job in the reserve of important primary products, expand the scale of the reserve, and enhance the ability to resist risks." Sun Chuanwang pointed out. According to reports, my country will add more than 5 billion cubic meters of gas storage facilities in 2022.

While striving to increase oil and gas reserves and production, my country should vigorously promote the clean and efficient utilization of coal based on the national conditions of coal-based energy. In addition, vigorously promote the high-quality development of renewable energy, accelerate the implementation of renewable energy replacement, and the rapid increase in clean energy will also effectively hedge and mitigate external impacts.

According to the plan, my country will build 450 million kilowatts of large-scale wind power photovoltaic bases in deserts, Gobi, and deserts. "Economic Information Daily" reporter learned that the first batch of desert, Gobi and desert wind power photovoltaic bases with an installed capacity of about 100 million kilowatts have started construction in an orderly manner, and the second batch of base projects has been accelerated. At the same time, new energy vehicles are also developing rapidly, and are expected to reach 5.5 million in 2022.

Relevant enterprises are also accelerating their upgrading and transformation. Sinopec proposed to strive to build China's first hydrogen energy company by 2025. The "14th Five-Year Plan" plan's cumulative green hydrogen production exceeds one million tons. A person from a petrochemical enterprise in Zhejiang told the "Economic Information Daily" reporter that while reducing losses as much as possible by speeding up turnover and locking in the long-term in advance, the company is also seeking to develop into high-end industries and conduct field research on new businesses such as photovoltaics and energy storage. .

Ensuring the safe and stable supply of energy also depends on the power of the market. Bai Jun believes that from a domestic perspective, high costs should be reasonably shared between suppliers and users in the short term, and price adjustment should also be played to use high prices to curb some demand. Domestic production and supply capacity and improve production and supply efficiency.