Crude Oil Price Outlook

Transcription

1 Crude Oil Price Outlook Positivity from risk appetite, supply-demand structure and Middle East tensions Minggao Shen SFC CE No. ATQ GF Securities (Hong Kong) Brokerage Limited 29-30/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong Contribution from the GF A-share research team: Zhang Jingjing * zhangjingjing@gf.com.cn * Please note that Zhang Jingjing is not a registered licensee with the Securities and Futures Commission of Hong Kong and is not allowed to conduct regulated activities in Hong Kong. Factors driving crude oil prices As one of the most important commodities in the world, crude oil is also a financial instrument. Crude oil prices are affected by several factors including the supply-demand structure, the movement of the US dollar index, market liquidity, and investors risk appetite. Among them, the supply-demand structure is the key determinant of crude oil prices, followed by liquidity, and shorter-term factors such as the market risk appetite and structure of investors positions. In general, when both long-term and shorter-term positive factors come into play, crude oil prices tend to show strong growth momentum. Supply-demand structure to support crude oil prices from 2Q18 onwards Since 2012, a pattern has been observed where the first quarter is the weakest season for global crude oil consumption while oil demand enters the peak season starting from 2Q. Given production cuts by OPEC and non-opec countries (not to mention OPEC's limited spare capacity) and the rising level of cost for the US shale oil industry to break even, the risk of crude oil supply increasing substantially is relatively low. Assuming that global economic growth will exceed 3% in 2018, the probability of a 2% increase in crude oil demand in 2018 is very high. In addition, once the peak season begins, crude oil prices will likely be supported by supply-demand conditions. Short-term factor 1: Under pressure from the US midterm election, President Trump may change his policy focus; oil prices will likely be boosted by market sentiment After taking office last year, the Trump administration has appeared highly goal-oriented with a clear timetable for carrying out fiscal and foreign policies. For 2018, the midterm election may be a key factor for consideration in the Trump administration s policy making. In general, domestic policies tend to benefit the economy and boost the market risk appetite, while foreign policies might not necessarily have the same effect. The US Section 301 Investigation into China in Aug 2017 and the implementation of trade protection measures against China in March 2018 have led to a decrease in risk appetite in the US market and triggered corrections in US stocks. If President Trump s goal is for the Republicans to win the midterm election, his policy implementation is increasingly likely to accommodate the market risk appetite as a factor for consideration as the election approaches. If the market risk appetite continues to recover, crude oil as a risk asset will also be boosted by improved market sentiment. Short-term factor 2: Middle East geopolitical tensions likely to accelerate crude oil price growth Recently geopolitical friction resurfaced in the Middle East. As the Middle East is an important supplier of crude oil, there is the risk of some oil supplies being disrupted when geopolitical issues escalate. Since 2011, geopolitical incidents in the Middle East have often pushed up short-term oil prices. In short, both supply-demand conditions and the market risk appetite are likely to boost oil prices in the medium term; in particular, geopolitical tensions in the Middle East are most likely to drive faster oil price growth in the short term. That said, once geopolitical risks subside, oil prices will also face the risk of short-term corrections. Long-term outlook: Risk of a supply shortage in 2019, oil prices likely to pick up further In , crude oil industry capex dropped significantly, which has created downside risk to conventional crude oil supply in the US during Increased shale oil supply may partially offset the supply shortage from conventional oil fields in the US, but the overall supply will not increase. In addition, OPEC has a very limited amount This is a summary of a report originally written in Chinese. Please contact us for more information of the original report. The Chinese version shall prevail in the event of any discrepancy between the two versions. (Continued on next page )

2 of spare crude oil production capacity. Even without production cuts, it is unlikely to supply more crude oil. In general, as long as the global economy maintains a growth rate of around 3%, this would correspond to crude oil demand growth of 2%. With no new additions of supply, we expect to see a global crude oil supply shortage during Unless there are significant downside risks in the global economy, crude oil prices are very likely to continue to rise. Risks: Global economic growth falling short of expectations, acceleration of shale oil supply, market risk appetite falling short of expectations, support from geopolitical factors to crude oil prices coming in smaller than expected. Figure 1: quarterly global crude oil consumption volume (m barrels/day) 100 4Q 3Q 2Q 1Q

3 Macro Research Figure 2: Crude oil consumption by OECD, non-oecd and major economies as % of global total consumption 8 美国 US India 印度中国 China 非经合组织 Non-OECD 经合组织 OECD Figure 3: China s quarterly crude oil consumption volume during (m barrels/day) Q 3Q 2Q 1Q

4 Figure 4: OPEC s spare crude oil capacity (m barrels/day) E Sources: EIA, GF Securities Development & Research Center Figure 5: Total production volume in seven major shale oil production areas in the US (barrels/day) 美国 Total 7 大页岩油产区总产量 production vol in 7 major shale oil production areas in the US 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000, /1/1 2009/1/1 2011/1/1 2013/1/1 2015/1/1 2017/1/1 Sources: EIA, GF Securities Development & Research Center 4

5 Figure 6: Global petroleum inventory 石油库存 Global petroleum : 世界百万桶 inventory (m barrels) 4, , , , , , , , /1/1 2004/1/1 2007/1/1 2010/1/1 2013/1/1 2016/1/1 Figure 7: Total crude oil and petroleum products inventory in the US (k barrels) 2,100, 库存量 Inventory: : 原油和石油产品 total crude ( 包括战略石油储备 oil and petroleum ) 千桶 products (Incl. SPR) 2,000, ,900, ,800, ,700, ,600, ,500, /1/5 2004/1/5 2007/1/5 2010/1/5 2013/1/5 2016/1/5 5

6 Figure 8: Per drill production volume in seven major shale oil production areas in the US (barrels/day) 800 美国 Per 7 drill 大页岩油产区单个钻机出油量 oil output in 7 major shale ( 桶 / 天 oil ) production areas in the US (barrels/day) /1/1 2009/1/1 2011/1/1 2013/1/1 2015/1/1 2017/1/1 Sources: Company data, GF Securities Development & Research Center Figure 9: Shale oil as % of US crude oil production volume % 48.68% 47.98% % % % 14.61% 21.97% Sources: EIA, GF Securities Development & Research Center 6

7 全球原油消费增速 Macro Research Figure 10: US crude oil production as % of global total production 17.00% 美国原油产量占全球比重 Proportion of US crude oil production volume as % of global total 15.00% 13.00% 11.00% 9.00% 7.00% 2001/1/1 2004/1/1 2007/1/1 2010/1/1 2013/1/1 2016/1/1 Figure 11: Global economic growth and crude oil consumption growth 5.00% 4.00% Global crude oil consumption growth 3.00% 2.00% 1.00% % % -3.00% -4.00% -5.00% 全球实际 Global real GDP GDP 增速 growth (%) (%) 7

8 Figure 12: WTI crude oil prices YoY vs. growth in capex of S&P 500 listed energy companies S&P 500 listed energy WTI crude oil annual S&P500 能源上市公司资本支出同比 WTI 原油年均价同比 ( 右轴 ) companies CAPEX YoY avg price YoY (RHS) Sources: Bloomberg, Wind, GF Securities Development & Research Center 8

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