The continuous rise of crude oil and the upgrading of domestic chemical safety inspection will play a supporting role in the chemical products sector. At the same time, with the arrival of spring inspection and downstream consumption peak season, methanol fundamentals have gradually improved, which will also provide support for methanol prices.

The international crude oil continues to rise, the explosion of sound water continues to ferment, and the peripheral factors support the price of methanol. At the same time, with the improvement of demand, methanol is also supported, and the methanol rebound is expected to continue.

Peripheral factors continuous fermentation

Since last year, domestic chemical futures have risen in varying degrees under the continuous upward trend of crude oil prices.

Recently, OPEC’s crude oil production has been declining continuously, and the global crude oil supply and demand have basically balanced. At the same time, Russia declared its support for OPEC’s production restriction policy. According to the current situation, Russia’s crude oil production is still far from the previous agreed reduction. Therefore, the global international crude oil supply still has the possibility of further tightening, oil prices or sustained upward, which will have a beneficial effect on the chemical sector.

On March 21, an explosion occurred in a chemical enterprise in Xiangshui County Industrial Park, Yancheng City, Jiangsu Province, causing heavy casualties. On April 4, the government of Yancheng, Jiangsu Province, decided to close the industrial park. Although this industrial park does not involve the methanol industry, the market generally believes that the security inspection of chemical enterprises will be greatly strengthened by the government in the later period, and the supply of chemical products will be affected to a certain extent, which will play a supporting role in the short term.

The continuous rise of crude oil and the upgrading of domestic chemical safety inspection will play a supporting role in the chemical products sector. Fermentation of external factors will help methanol prices continue to rise.

Fundamental conditions are gradually improving

Although crude oil prices continue to rise, the trend of methanol futures is weaker than other chemical products. From the current situation, the supply and demand pattern of methanol is slowly improving.

Firstly, on the supply side, in April, the domestic methanol plant centralized into the spring inspection, and the market supply was tightening. At the same time, the United States, Southeast Asia and other places have also been overhauled, the global supply of methanol will decline. Secondly, the production profit of downstream methanol enterprises has been repaired in the near future, coupled with the arrival of the peak consumption season, enterprise procurement has shown a more obvious warming up. Due to the warming up of downstream consumption in formaldehyde production enterprises, the start-up load is likely to rise further, and the consumption of methanol will increase. Although the profit of DME production enterprises has declined sharply, the purchasing volume of methanol will remain stable under the effect of purchasing just in need because of the low stock of DME production enterprises. Acetic acid is affected by the maintenance of international acetic acid plant, the problem of oversupply has been alleviated. In this case, the price of acetic acid has risen slightly recently, and the purchasing of methanol by acetic acid enterprises is expected to increase. Finally, methanol port stocks began to fall at a high level. As of April 4, methanol stocks in domestic ports were around 959.3 million tons, down 25.1 million tons from March 28, down 2.55%.

Forecast for future market

In conclusion, the sustained rise in international crude oil prices has supported methanol prices. At the same time, with the arrival of spring inspection and downstream consumption peak season, methanol fundamentals have gradually improved, which will also provide support for methanol prices. Under the above two factors, methanol is expected to continue to rebound, and the operation of methanol is mainly to buy at bargain.

Thanks to the initiative of OPEC oil producers led by Saudi Arabia to reduce production more than expected, coupled with the slowdown of production growth in the United States, the crude oil market has been strong in recent years. Since April, the focus of crude oil futures prices at home and abroad has obviously moved up. Among them, WTI crude oil rose from $60 to $63.49 a barrel, the highest since November 2018, Brent crude oil also stood on the platform of $70 a barrel from below $68 a barrel. Domestic crude oil contract 1905 also showed strong performance, rising from 455 yuan per barrel to 480 yuan per barrel.

Improvement of liquidity expectations

In order to boost the economy, US President Trump has urged the Federal Reserve to cut interest rates again and publicly recommended the re-adoption of quantitative easing in the financial crisis. There are signs that Trump will intervene in the future direction of the Fed’s monetary policy by nominating two candidates who agree with him as Fed governors. At the same time, the Federal Reserve and its own economic slowdown, the world’s major central banks will further consolidate the tone of easing. Liquidity expectations were loose, confidence in global commodity markets increased, and risk appetite in crude oil markets rebounded significantly.

OPEC’s implementation of output reduction exceeded expectations

Since the beginning of the year, the biggest driver of the rebound in crude oil prices is the reduction of production in oil-producing countries. Until now, this favorable factor is still fermenting and will not be exhausted in the short term. From the implementation of the quarterly reduction, the overall level is higher than expected. According to a survey released by Prussian Energy Information, output in OPEC member countries fell by 570,000 barrels per day in March from a year earlier to 30.23 million barrels per day. The implementation rate of output reduction reached 124% in 11 member countries, up from 79% in February. Among them, Saudi Arabia’s excess production reduction. Data show that Saudi Arabia’s output fell by 280,000 barrels a day to 9.87 million barrels a day, the lowest since February 2017.

Although Venezuela, Iran and Libya have been exempted from the implementation of the reduction agreements, for their own reasons, the three countries are in a passive state of production reduction. Venezuela is in the dilemma of massive blackouts in the face of U.S. sanctions, forcing the shutdown of heavy oil production facilities in Venezuela. Data show that Venezuela’s output fell to 740,000 barrels a day in March. At present, Iran’s output is relatively stable, with crude oil production of 2.69 million barrels per day in March, and by the end of the U.S. sanctions exemption period, crude oil production may decline substantially.

US output growth slowed down

For a long time, the sharp growth of shale oil production in the United States has not only occupied the market share of OPEC oil-producing countries, but also weakened the profit atmosphere created by OPEC member countries’efforts to reduce production, and become the biggest negative factor in the oil market. Recently, however, the number of active drilling rigs in the United States has declined. In the week ending April 5, 831 seats were the lowest since May 2018.

In view of the decrease in the number of active drilling rigs, the leading indicator of U.S. crude oil production, the U.S. government has reduced its forecast for crude oil production growth from 1.45 million barrels per day to 1.35 million barrels per day, while its output is expected to be 12.3 million barrels per day. The slowdown in U.S. crude oil production growth is conducive to boosting market enthusiasm. Fund position data show that as of April 2, WTI crude oil non-commercial net multi-position volume was 481361, the eighth consecutive week of increase, and is the largest since mid-October 2018.

Overall, the global market is still in a tight supply situation in the second quarter. With the improvement of the macro atmosphere, the focus of crude oil prices will rise further.

According to Dow Jones, S&P Global Platts data showed that OPEC crude oil production fell to its lowest level in more than four years in March. Total OPEC crude oil production, comprising 14 member countries, fell to 3.23 million barrels per day in March, down 570,000 barrels per day from February levels. One of the OPEC member countries, a market hotspot in the Americas, produced 740,000 barrels a day in March, falling to the lowest level in the past 16 years. Saudi Arabia, OPEC’s largest oil producer, has dropped to 9.87 million barrels a day, the lowest level since February 2017.

With several major breakthroughs in exploration and development, shale gas has recently become hot again. As a large reserve country, China has 21.8 trillion cubic meters of recoverable shale gas resources, but the current proven rate is only 4.79%, which has huge resource potential. At a time when China’s dependence on natural gas is increasing, the value of unconventional natural gas shale gas exploitation is self-evident. The breakthroughs in exploration and mining technology are encouraging, but more attention should be paid to the reform of prospecting right mechanism and the follow-up of related supporting policies.

Shale gas has recently caught fire again. With the release of several major discoveries in exploration and development in recent years, shale gas has gradually become the core growth point of China’s natural gas industry. At a time when China’s dependence on natural gas has climbed to 45.3%, the news is very interesting.

Industrial Development

At the end of March, Sinopec announced that significant breakthroughs had been made in the exploration and development of shale gas in Sinopec: Weiyuan (far) Rong (county) Shale Gas Field submitted its proven reserves of 124.7 billion cubic meters, and 1 billion cubic meters of production capacity would be built this year; Dongsha Shen-1, the first high-yielding shale gas well in Dingshan-Dongxi Block, with a depth of more than 4200 meters, produced 310,000 cubic meters of high-yielding gas per day, breaking through the buried depth of over 4,000 cubic meters. Fracturing technology for shale gas wells of 1000 meters.

Two months ago, the China Geological Survey announced a major breakthrough in shale gas survey in Western Hubei, China. The amount of shale gas geological resources is 11.68 trillion cubic meters, which has a resource base of 10 billion cubic meters per year. Therefore, the western Hubei region is expected to become a new base for shale gas exploration and development and natural gas production in China, forming a “tripod” resource pattern with Fuling and Changning-Weiyuan in Chongqing, breaking the situation that China’s shale gas development is concentrated in the upper reaches of the Yangtze River.

Natural gas is the cleanest energy in traditional fossil energy. With the development of green and low carbon, China’s demand for natural gas is increasing.

In January this year, China’s oil and gas industry development report at home and abroad, published by the China Petroleum Economic and Technological Research Institute, showed that in 2018, China’s natural gas imports reached 125.4 billion cubic meters, an increase of 31.7%. For the first time, China’s imports surpassed Japan and became the world’s largest natural gas importer, with its external dependence rising to 45.3%. This means that nearly half of China’s natural gas needs to be imported from abroad.

Ju Jianhua, director of the Mineral Resources Protection and Supervision Department of the Ministry of Natural Resources, said that China’s recoverable shale gas resources amount to 21.8 trillion cubic meters, ranking first in the world. At present, the proven rate of shale gas in China is only 4.79%, and the potential of resources is huge.

Shale gas, a kind of unconventional natural gas, is stored in organic-rich shale and its interbeds, mainly composed of methane, which was previously considered difficult to develop economically and effectively. However, with the successful application of large-scale fracturing technology in horizontal wells, the development and utilization of shale gas has developed rapidly.

As a large reserve country, China has every reason to make great achievements in shale gas industry. Ju Jianhua said that from September 2014 to April 2018, in less than four years, China has discovered Fuling, Weiyuan, Changning and Weirong shale gas fields in Sichuan Basin. The cumulative proven geological reserves of shale gas have exceeded trillion cubic meters, with a production capacity of 13.5 billion cubic meters and a cumulative gas production of 225.80 billion cubic meters. China has become another country to realize large-scale commercial development of shale gas fields after North America.

At present, Fuling shale gas field is the largest shale gas field in China. Last March, Sinopec announced that Fuling Shale Gas Field has an annual production capacity of 10 billion cubic meters, equivalent to the construction of a 10 million tons of large oil field. In 2018, Fuling shale gas field produced 6.02 billion cubic meters of shale gas and sold 5.78 billion cubic meters.

Why can we develop rapidly?

There is no doubt that the world’s largest reserves and huge market gap have promoted the rapid development of shale gas in China in just a few years. Among them, policy plays an important role in promoting. At the end of 2011, with the approval of the State Council, shale gas became the 172nd independent mineral in China.

In October 2013, the State Energy Administration promulgated the Shale Gas Industry Policy, which made it clear that the state would directly subsidize the shale gas production enterprises according to the amount of shale gas development and utilization. From 2012 to 2015, the central financial subsidy standard was 0.4 yuan per cubic metre, which was twice as high as that of CBM subsidy standard. During the 13th Five-Year Plan period, the subsidy standard for shale gas was adjusted to 0.3 yuan/cubic meter in the first three years and 0.2 yuan/cubic meter in the second two years.

At the same time, shale gas mining enterprises also enjoy policies such as reducing or exempting compensation fees for mineral resources and royalties for the use of mineral rights. From April 1, 2018 to March 31, 2021, the Ministry of Finance and the General Administration of Taxation reduced the tax on shale gas resources by 30%.

Meanwhile, great breakthroughs have been made in shale gas exploration and exploitation technology in China. “China has innovated and formed a series of practical cleaner production technologies suitable for the characteristics of shale gas development, realized cleaner production in the whole process of gas field exploration and development, and formed the theory of shale gas reservoir formation with Chinese characteristics, core exploration and development technologies, which laid an important foundation for the rapid development of shale gas industry in China.” Ju Jianhua said.

According to media reports, the cost of a single well in Fuling shale gas field, the largest shale gas field in China, has been reduced by more than 30% compared with the early development stage in 2014.

In the new breakthrough of Sinopec shale gas exploration and development, technological breakthrough is also one of the important highlights. In Dingshan-Dongxi block, Sinopec’s deep shale gas key test well, Dongshashen 1 well, produced 310,000 cubic meters of high-yield gas per day in high-quality shale gas reservoirs with a depth of 4270 meters, breaking through the fracturing technology of shale gas wells with a depth of over 4000 meters, laying a technical foundation for large-scale commercial development of deep shale gas.

Kang Yuzhu, academician of the Chinese Academy of Engineering, pointed to the shale gas breakthrough of the Bureau of Geological Survey in Western Hubei, and said that the results of the shale gas investigation in Western Hubei were strategic breakthroughs and had a landmark leading role. The results generally reached the international advanced level, and some of them reached the international leading level.

Greater growth prospects are promising

At present, there are still some constraints in shale gas exploration and development.

Firstly, the investment scale of shale gas construction is large, the implementation cycle is long, and there are many uncertainties. The investment enthusiasm of some small and medium-sized enterprises has declined.

In 2011, shale gas was listed as the 172nd independent mine in China. Its original intention was to introduce multiple investors into the shale gas industry and implement a highly centralized system different from the natural gas industry. In 2011 and 2012, the former Ministry of Land and Resources held two tenders for the transfer of prospecting rights, of which 20 tender blocks attracted 83 enterprises. However, as the international oil price declined, the heat of shale gas in small and medium-sized enterprises declined greatly. The third shale gas tender was delayed until 2017. Previously, many enterprises that have obtained shale gas exploration rights have fallen into the strange circle of “circle without exploration” because of the excessive demand for funds and uncertain prospects.

Secondly, because shale gas reserves in China are generally deep buried and mostly in mountainous areas, large-scale operations are difficult to carry out, and exploration and development are difficult.

In addition, the experts said that although there is a lot of policy support for shale gas at the policy level, there is still a lack of management policies for shale gas exploration and development in China. Most of them still refer to the traditional oil and gas operation rules, so it is necessary to formulate more targeted regulatory policies.

The State Energy Administration (SEA) has proposed in the Circular on the Issuance of Shale Gas Development Planning (2016-2020) that efforts should be made to achieve 30 billion cubic meters of shale gas production in 2020 and 80 billion cubic meters to 100 billion cubic meters of shale gas production in 2030.

At present, it is still difficult to achieve this goal. However, under the pressure of resources and environment, shale gas will have more room for growth in the future.

As the supply and demand situation remained unchanged, international oil prices continued to rise that week, continuing the trend of the first quarter’s sharp rise.

On the demand side, U.S. employment data eased concerns about weak global demand for crude oil.

London Brent crude oil futures for June delivery rose for the second consecutive week, while light crude oil futures for May delivery on the New York Mercantile Exchange rose for the fifth consecutive week.

The media revealed that the United States is considering more sanctions against Iran, which have cut Iran’s crude oil exports to the bottom. In addition, an important Venezuelan crude oil port was again suspended due to U.S. sanctions.

Nobel Rucker, head of economics at Ulius Bell Bank, said supply prospects remained the primary consideration in the oil market. Saudi Arabia’s sustained production restrictions set a bullish tone, supporting crude oil prices, so that Brent crude oil futures prices are expected to reach $70 a barrel.

In addition, the U.S. Department of Labor reported that employment growth rebounded rapidly from a 17-month low in March.

“Market analysts say these figures will be enough to keep prices above $60 for at least a few weeks.

In the first quarter of the past decade, the international oil price has renewed its biggest single-quarter rise in nearly 10 years. The data show that among the benchmark oil prices in New York and London, oil prices in New York rose for three consecutive months, leading to a cumulative increase of more than 31% in the first quarter, refreshing the biggest single-quarter increase since the second quarter of 2009, while Brent oil prices in the North Sea rose 25% in the same period, also the biggest single-quarter increase in nearly 10 years.

Propylene industry has experienced the peak of capacity expansion from 2014 to 2016 and a short period of backwardness in 2017. In 2019, new production capacity of propylene has reached an all-time high in recent years, and is expected to increase by 5.86 million tons per year. However, propylene demand growth is slower than capacity growth, self-sufficiency rate will rise again, domestic propylene capacity to catch up with equivalent consumption, or face the situation of excess capacity.

Propylene production capacity in China has expanded rapidly in recent years. Propylene production has increased in all routes. Propylene dehydrogenation (PDH) and coal-based olefins (CTO) have increased significantly by virtue of cost advantages. In addition to the new production capacity of PDH route, the coal-to-olefin (CTO) route has also warmed up, and its new production capacity in 2019 is at a high level over the years. Due to the rising international crude oil prices and other factors, China’s CTO has developed vigorously, especially the rich coal resources in the western region. Now it has formed four CTO industrial bases, namely, Ordos in Inner Mongolia, Yulin in Shaanxi, Ningdong in Ningxia and Zhundong in Xinjiang. By the end of 2018, CTO units had a capacity of about 4.8 million tons per year. In 2019, with the commissioning of Jiutai Energy, Zhongan Coal Chemical Industry and Ningxia Baofeng three projects, propylene production capacity increased by 900,000 tons per year.

At the same time, the new propylene production capacity of new refineries can not be ignored. Under the stimulation of a series of reform dividends such as the liberalization of crude oil import and the decentralization of examination and approval authority, new refineries have opened up the capital channel by obtaining capital operation such as bond financing and equity financing through banks. In 2019, China welcomed large-scale integrated refining and chemical projects such as Zhejiang Petrochemical Corporation and Baolai Group, which are expected to release 1.9 million tons of propylene per year.

It should be noted that although the propylene equivalent consumption increased steadily in 2019, the growth rate continued to slow down. Polypropylene, propylene oxide and acrylonitrile were the three downstream products with fast growth, and their structure proportion increased slightly; the propylene and acrylic acid proportion was the same as in 2017; butanol and octanol proportion decreased slightly.

According to the disclosure, in 2018, China’s propylene production capacity was 34.83 million tons per year, reaching 31.4 million tons, an increase of 5.5% and 9.2% respectively over 2017, and its equivalent consumption was 40.1 million tons, an increase of 7% over the previous year. Propylene production is expected to reach 41.73 million tons per year in 2019, with output of 34 million tons, up 19% and 8.3% respectively from the previous year, while equivalent consumption of 42.1 million tons will continue to slow down to 5%. Data show that China’s propylene supply may face a pattern of overcapacity.

On the first day of April, the price of Multi-Fertilizer increased by 30-50 yuan/ton, especially in Jiangsu, Northeast and Henan.

The biggest support for this round is urea. As we all know, urea has entered the upstream channel since the end of February. Up to now, it has risen by more than 200 yuan/ton in many places. Small particles in Shandong and Henan have been on the front line of 2000 yuan/ton as early as possible, which is also the highest price of urea since November 2018. The adjustment lasted for a long time and increased a lot, which exceeded market expectations. Especially for compound fertilizer enterprises, urea purchasing mostly adopts on-demand purchasing mode. Generally, the purchasing frequency is 7-10 days, and the large-dose stockpiling is only a few, which leads to the enterprises with less pre-stockpiling, and the new cost will increase more. Taking conventional urea 40% cl28-6-6 as an example, the cost of nitrogen fertilizer is 140 yuan/ton higher than that at the beginning of March. Although ammonium phosphate and potassium fertilizers have been declining in recent years, their declines have a narrowing trend, which makes it difficult to hedge the cost caused by urea rise. Statistics show that the cost of raw materials for urea 40% cl28-6-6 has increased 125 yuan/ton as of April 1 compared with the beginning of March.

Prices of enterprises are rising along with the trend, which promotes the rise of market prices. At the end of the month and at the beginning of the month, the adjustment of enterprises is relatively obvious. Part of the adjustment is to give preferential policies in the earlier period, with the impact range of 20-50 yuan/ton. Part of the adjustment is to increase the price directly, with the range of 30-50 yuan/ton, and some high nitrogen fertilizers are about 60 yuan/ton. With the reduction of preferential policies or the increase of prices, it will help to reduce the supply of low-end goods in the market, and the focus of new orders will move upwards. However, at present, it should be noted that before the adjustment of enterprises, the amount of advance receipts is large (especially at the end of the month these days, some distributors pay money actively for fear of rising prices). That is to say, at present, there are many orders in advance, especially spring tillage fertilizer. The increase of spring tillage fertilizer lies more in purchasing goods and boosting the market atmosphere. As for summer fertilizer, from the perspective of pre-harvest, the estimated impact is 30-40%.

From the downstream demand point of view, boosted by higher soybean subsidies, maize planting area will continue to be reduced in some parts of Northeast China, while summer maize planting area in Mainland China will be relatively better than other agricultural products, and the planting area may be relatively stable. However, with the increase of agricultural prices, the level or reduction of fertilizer application may be reduced in some areas. This is also the biggest restriction on the compound fertilizer market.

At present, the compound fertilizer market is still in a good mood. Among them, 45% CL3 * 15 of Jiangsu is more than 2000 yuan/ton, 40% cl30-5-5 of Henan Gaota is more than 2030 yuan/ton, and some new orders in Northeast China are delivered to 45% s12-18-15 at about 2480 yuan/ton. Although most of the prices are tentative increases and new orders follow up is not much, but supported by costs, enterprises intend to bid strongly. It is expected that before the Qingming Dynasty, some enterprises will adjust, and the supply of low-end goods in the market will continue to decrease, especially for high-nitrogen products. The turnover focus is expected to shift upward.

Recently, crude oil futures in both internal and external markets continue to rise in tandem. Domestic crude oil futures, NYMEX crude oil futures and Brent crude oil main contracts have reached new highs since November 2018. Analysts said that macro-level and basic-oriented support short-term crude oil prices to maintain a strong trend. In the second quarter, although the game between Saudi Arabia, Russia and the United States on oil market will intensify, OPEC + production reduction action is not expected to change significantly. The supply and demand pattern of the crude oil market will continue to improve, which is expected to support the further upward movement of the oil price center.

Internal and external discs have reached a new high

On April 3, the main 1905 contract of domestic crude oil futures reached a maximum of 475.5 yuan/barrel, a new high since late November 2018, closing at 472.4 yuan/barrel, up 1.26%. As of that day, the main contract of NYMEX crude oil futures reached a maximum of 62.99 dollars/barrel, a new high since November 8, 2018; the main contract of Brent crude oil reached a maximum of 69.96 dollars/barrel at one time, which was the highest since November 13, 2008. New high.

On the one hand, the ISM manufacturing index of the United States was higher than expected in March, while the PMI of China’s Caixin manufacturing industry hit an eight-month high in March, according to Li Yanjie, an analyst at CITIC Construction Investment Futures. The expansion of China’s and the United States’manufacturing industry has cooled global crude oil demand worries. On the other hand, the Reuters survey shows that OPEC’s implementation rate of output reduction is expected to be 135% this year and 101% in February, and OPEC’s oil production is expected to decrease by 280,000 barrels per day to 30.4 million barrels per day in March, the lowest level since 2015. In addition, the Jose oil terminal in Venezuela was suspended due to insufficient electricity supply. Macroscopic and basic orientation support short-term crude oil prices to maintain a strong trend.

Zang Gali and Xu Lin, energy and chemical researchers at Sinda Futures, said that despite differences between Saudi Arabia and Russia in reducing production, US President Trump again used Twitter to pressure OPEC, but it is not expected that significant changes will occur before the Vienna Conference in late June.

De-stocking of crude oil will accelerate

Looking ahead to the fundamentals of the oil market in the second quarter, Zang Jiali and Xu Lin believe that because Saudi Arabia has exceeded the cut-off quota and has limited space for further reduction, the action of reducing oil production in the second quarter will continue to advance steadily, but the boost to oil prices will be weakened. In addition, as a leading indicator of crude oil production, the number of active oil drilling rigs in the United States has fallen to the lowest level in a year, and the growth rate of crude oil production in the United States will continue to slow down in the second quarter, and even there may be a slight negative growth.

Regarding the geo-situation, the above-mentioned analysts said that Venezuela’s domestic situation is still unclear and the geo-situation risks remain. Venezuela’s crude oil production in the second quarter may continue to decline after a brief recovery, subject to U.S. sanctions. On the Iranian side, the strategic goal of reducing Iranian oil exports to zero is not in the immediate interests of the United States. The Iranian sanctions issue will probably make a smooth transition, that is, to extend the exemption period while maintaining or slightly reducing the existing exemption.

Overall, the oil market game between Saudi Arabia, Russia and the United States will intensify in the second quarter, but OPEC + production cuts are not expected to change significantly. The focus of the crude oil market is still on the supply side. The consumption of refined oil, especially gasoline, is better than expected, and the de-stocking process of global crude oil is expected to accelerate. The supply and demand pattern of the crude oil market in the second quarter is expected to continue to improve, which will further support the upward movement of the oil price center. The target price of NYMEX crude oil will be raised to $67 per barrel, Brent crude oil to $75 per barrel and domestic crude oil to $500 per barrel.

Active production cuts by oil producing countries, passive production cuts by Iran and Venezuela, slowdown of upstream investment in shale oil in the United States and increase of seasonal demand have pushed oil prices upward continuously. However, with the tightening of supply in the first quarter and the gradual realization of hedging and release of pipeline capacity, the upward resistance of oil prices will increase in the latter part of the second quarter.

OPEC output continued to decline

In February, OPEC crude oil production fell to 30.549 million barrels per day, a new low in the past four years. The implementation of production reduction in major oil producing countries has led to a significant decline in OPEC crude oil production. From the implementation of production reduction in oil-producing countries, the implementation rate of production reduction in January and February this year reached 86% and 106%, respectively. Saudi Arabia and Kuwait, the major oil-producing countries, maintained a high implementation rate of production reduction. Under the framework of active output reduction, Venezuela and Iran’s output also declined passively due to the sanctions imposed by the United States. Venezuela’s crude oil production has fallen by more than 1 million barrels per day in the past two years, falling to 500,000 barrels per day in March due to the paralysis of its domestic power system, and its crude oil exports to the United States dropped to 0 in mid-March. In addition, Iran’s output and exports have continued to decline since the United States resumed sanctions against Iran in November last year. Iran’s crude oil production fell to 2743,000 barrels per day in February this year, the lowest level in the past five years. Since November last year, Iran’s exports to Europe, South Korea and other places have all dropped to 0. At present, only a few countries such as China and India are exporting, and the export volume is also gradually declining.

Upstream investment in shale oil in the United States slowed down

Recently, the growth of crude oil production in the United States has slowed down. The number of active drilling rigs in the United States has declined in the past year or so. Especially since the end of last year, the total number of active drilling rigs in the United States has declined due to the drop in oil prices. It dropped to 824 in the week of March 22, down 64 from the high at the end of last year. According to the time when the oil price of drilling rigs lags for about 4 months, the data of drilling rigs will continue to weaken in the next 1-2 months. 。 Meanwhile, in the data of seven major shale oil producing areas in the United States, the number of drilling wells has fallen in recent months, which is directly related to the decline in the number of drilling rigs. Permian Basin, the largest shale oil producing area in the United States, has been declining in single well production for nearly a year, which means that the efficiency of shale oil wells in the region is declining, and with the decline of the growth rate of production in the region, more drilling investment may be needed to maintain production in the future. At the same time, higher requirements are put forward for the cost of shale oil production, and shale oil enterprises may have to lead to the future. Efforts should be made to reduce mining costs.

US demand will increase seasonally

Since mid-February, refinery activity in the United States has been gradually active, refinery start-up rate and crude oil processing volume have been rising, and the import of refineries in the United States has increased seasonally, which will lead to the de-stocking of crude oil. In the past month, U.S. crude oil stocks have fallen by about 15 million barrels a day, and the speed of de-stocking has accelerated. Inventory reports for the week of March 22 were affected by a chemical tank fire in the Houston Channel of the United States. Refinery start-up declined by 2.3% and crude oil stocks increased by 2.8 million barrels. However, we believe that this is only a short-term disturbance and that refinery activity in the United States will continue to rise in the second quarter.

U.S. crude oil capacity is expected to be released in the second half of the year

In 2018, inadequate pipeline capacity in North America led to the accumulation of regional stockpiles of crude oil, and led to a sharp rise in WTI-Midland and WTI-WCS price spreads, but since then, with the increase of pipeline capacity, the current price spreads have returned to a reasonable level. However, this does not mean that crude oil pipeline capacity can meet the demand. According to OPEC statistics, the Permian crude oil production in the main shale oil producing areas of the United States has exceeded 3.7 million barrels per day, and exceeded the pipeline capacity of the area, which to some extent limits the growth of production in the region. According to the new pipeline plan of the United States, the new pipeline plan of the United States from 2019 to 2020 is expected to be 5.960 million barrels per day, and the new pipeline capacity from Permian to the Bay Area in 2019 will reach 1.925 million barrels per day, most of which will be put into operation in the second half of this year, which means that the inventory pressure of the Permian Basin will be eased in the second half of this year.

Brand Finance, an international brand value authority, released its top 50 list of global oil and gas companies in 2019, including three Chinese companies. Compared with last year, PetroChina and Sinopec still rank second and third, but both brand value and brand rating have increased considerably.

BrandFinance, based in London, ranks companies in different industries globally in terms of brand value every year. The brand value judgment indicators in the field of petroleum and natural gas mainly include the following aspects: brand strength, brand usage fee, brand usage Commission rate, brand annual revenue and estimated revenue.

According to these indicators, this year’s top ranking is still Dutch Shell Oil Company, whose brand value is as high as $42.3 billion, an increase of 7% over the previous year; the fourth to tenth rankings are French Daudal Oil Company, British BP, American Chevron, Malaysian Oil Company, American Exxon Mobil, Italian Eni and Norwegian National Oil Company. PetroChina and Sinopec’s brand value increased by 18% and 23.3% respectively compared with 2018, and their ratings changed from AA + and AA to AAA-, respectively.

This year’s ranking data show that American oil companies account for 23.6% of global brand value, followed by China (17.2%), the Netherlands (10.8%), France (6.6%), Russia (5.4%) and the United Kingdom (5.0%). In addition, this year’s ranking has several characteristics: first, the brand value of national oil companies is growing faster than that of international oil companies; second, oil and natural gas brands are generally respected by users and the market in this industry; third, new faces appear in the ranking, that is, Abu Dhabi National Oil Company, which was unknown in the past ranking, is ranked 12th.

Omar Zaafreni, senior vice president of Abu Dhabi National Petroleum Corporation, believes that technological progress is extremely important for the development of the oil and gas industry. “Our ambitious goal is not only to make the company a modern national oil company, but also to become a modern energy company when the fourth industrial revolution comes.”

BrandFinance CEO David Hague said: “With the application of new digital technologies such as artificial intelligence and cloud technology in the field of oil drilling, oil and gas giants need to be prepared to make digitalization a top priority in reducing costs and improving efficiency. Only those enterprises that can explore and use these latest technology tools can maintain a leading position and enhance their brand value in the future.