Recently, calls for the extension of OPEC and its allies’existing oil production cuts to the end of this year have intensified. The Joint Ministerial Production Reduction Supervisory Committee of OPEC and allies, which oversees the performance of oil-producing countries, is scheduled to meet in late March in Azerbaijani. Meanwhile, the major oil producers, led by OPEC, will meet in Vienna from April 17 to 18 to review the current production reduction plan. At present, the market generally believes that the joint production reduction measures of OPEC and non-OPEC countries will continue until the end of 2019, but because of the deterioration of the global economic environment will lead to the reduction of oil demand and other factors, oil prices will not rise significantly in the future.

Consider extending the cut-off agreement

Saudi Arabia proposes to extend the existing oil production reduction agreement until the end of 2019, according to a source close to OPEC quoted by the Russian Tass Agency and the International Telegraph Agency. The news pushed up international oil prices on the 12th. By the end of the day, light crude oil futures for April delivery on the New York Mercantile Exchange had risen 0.14% to close at $56.87 a barrel, while London Brent crude oil futures for May delivery had risen 0.14% to close at $66.67 a barrel.

The Tass news agency reported that Saudi Arabia preferred to maintain existing provisions or “a more relaxed quota for production cuts”. The International Telegraph Agency revealed that the major oil producers, led by OPEC, will meet in Vienna from April 17 to 18 to consider whether to extend the cut-off agreement until the second half of this year, and that countries will meet again at the end of June to discuss production issues.

According to the confirmation of the Ministry of Energy of Azerbaijani, Russian Energy Minister Nowaka confirmed that he would attend the 13th Joint Ministerial Meeting of OPEC and Allied Countries in Baku, capital of Azerbaijani, from 17 to 18 March, which would discuss the current level of production reduction.

Saudi Arabia’s Minister of Energy, Industry and Mineral Resources, Khalid Falkh, said on November 11 that OPEC-led production cuts are unlikely to end by June. Another Saudi official also said the country planned to keep crude oil production well below 10 million barrels a day in April and cut exports to less than 7 million barrels a day to ease the problem of excess oil supply. Karsten Fritsch, an analyst at the German Commercial Bank, said this showed Saudi Arabia’s determination to maintain the balance of the oil market by keeping oil supplies tight.

On December 7, last year, OPEC reached an agreement with non-OPEC oil-producing countries to reduce the production of crude oil by an average of 1.2 million barrels per day from January 1, 2019, on the basis of last October’s production, with a preliminary set period of six months. Saudi Arabia’s target output is about 10.3 million barrels per day.

But according to foreign media reports, Saudi oil production in January was 10.24 million barrels per day, fell to 10.13 million barrels per day in February, and will further decline to 9.8 million barrels per day in March.

Previously published OPEC February report showed that from December last year to January this year, OPEC has achieved the largest reduction in output for two consecutive months, with Saudi Arabia leading the way. Falh promised to increase production cuts, suggesting that Saudi Arabia’s output would be nearly 500,000 barrels a day lower than the quota by March this year. According to a survey released last week by S&P Global Platz, OPEC output fell to its lowest level in nearly four years in February.

Falkh has been advocating an extension of the cut-off agreement from the beginning of this year to the end of the year. Farleh said on February 27 that before reaching a reduction agreement at the end of last year, “OPEC and its allies” experienced a significant increase in production, which directly led to the supply of crude oil did not decline, but the stock of crude oil increased sharply. “We are committed to balancing the market, and according to the market outlook, we must continue to control production in the second half of the year,” Fallich said. But at the same time, we will continue to be flexible and make decisions based on assessing market conditions.

Insufficient momentum for continued oil price rise

Since this year, the two major international oil prices have changed their declining trend in the fourth quarter of last year and both have risen by more than 20%. However, in a recent survey conducted by Reuters, respondents expected the average price of Brent crude oil futures in 2019 to be $66.44 per barrel, lower than the expected $67.32 a month ago. The U.S. Energy Information Agency (EIA), a statistical agency affiliated to the U.S. Department of Energy, released a short-term energy outlook report on December 12, predicting that the global average price of Brent crude oil in 2019 will be $63 per barrel, and will fall to $62 per barrel in 2020, much lower than the $71 per barrel in 2018. Some analysts believe that such expectations mean that oil prices will not rise much this year.

Market participants believe that the current level of international oil prices reflects the relationship between supply and demand in the market. Before the emergence of new stimulus factors, the possibility of a sharp rise in crude oil prices is minimal. Richard Gori, head of Asia operations at JBC Energy in Austria, believes that current oil prices are in a “pleasant” price range for both oil producers and consumers.

As far as the relationship between supply and demand is concerned, on the one hand, the supply of crude oil decreases and increases mutually; on the other hand, the growth rate of crude oil demand may slow down.

Over the past two months, OPEC’s output has declined sharply and the action of oil-producing countries to reduce production has been further strengthened, which is an important factor in maintaining stable oil prices. However, crude oil production in the United States and Canada is still rising.

On the demand side, the demand for international crude oil has decreased due to the expansion of new energy applications and other factors. Relevant agency data show that U.S. manufacturing data is weak, and crude oil demand in the U.S. market is now weak at the end of last year. In addition, international agencies’expectations for economic growth this year have been lowered, and global economic growth in 2019 will be slower than in 2018, which will reduce demand expectations for crude oil. OPEC forecasts that global economic growth will not exceed expectations this year and that global demand will fall to 30.59 million barrels per day in 2019. Gene McGillian, an analyst at Traditional Energy, said concerns about slowing economic growth and reduced oil demand had put pressure on international oil prices, which could offset the boost from OPEC’s crude oil supply cuts.

Overall pattern or change of international oil and gas industry

Later this year, the United States will surpass Saudi Arabia in exports of petroleum products such as oil, gas condensate and gasoline, CNN reported. Reported that, driven by the boom of shale industry, the United States will become the world’s major exporter of oil and gas condensate. Driven by the shale industry, U.S. oil production has more than doubled in the past 10 years, reaching its highest level ever.

EIA estimates that US crude oil production will average 12.3 million barrels per day throughout 2019 and increase to 13 million barrels by 2020. Meanwhile, EIA expects net imports of crude oil from the United States to fall to 1 million barrels per day in 2019 and further to fall to 100,000 barrels per day in 2020. EIA believes that in the fourth quarter of 2020, the United States is expected to become a net exporter of crude oil and petroleum products.

On November 11, Fatih Birol, Director of the International Energy Agency (IEA), said at Cambridge Energy Week: “The second wave of the shale oil revolution in the United States is coming, which will affect the overall pattern of the international oil and gas industry.” Birol pointed out that since 2018, the United States has led the growth of global oil supply. By the end of 2024, U.S. oil exports are expected to increase to 9 million barrels a day, exceeding Russia’s, approaching Saudi Arabia’s level, and diversifying the global oil supply side.

On March 12, the PX Commodity Index was 72.00, unchanged from yesterday, down 29.69% from its peak of 102.40 points in the cycle (2013-02-28), and up 58.07% from its low of 45.55 points on February 15, 2016. (Note: Period refers to 2013-02-01 to date).

Recently, the domestic market price trend of p-xylene has been temporarily stable. Pengzhou Petrochemical Plant has been running steadily. Urumqi Petrochemical Plant has started 50% of its operation. Fuhaichuang Aromatic Hydrocarbon Plant has started a line. CNOOC Huizhou Refinery and Chemical Plant has been overhauled. Other units have been running steadily for the time being. The domestic market supply of p-xylene is normal. The market price trend of p-xylene is temporarily stable. The opening rate of PX plant in Asia is about 80%. On March 12, the closing price of p-xylene market in Asia rose by $1/ton. The closing price was $1100-1102/ton FOB in Korea and $1119-1121/ton CFR in China. More than 50% of domestic imports are needed. The decline of foreign prices has a negative impact on domestic market price of p-xylene, and the price of p-xylene in the market fluctuates.

On March 12, the price of WTI crude oil in April rose to $56.87 per barrel, an increase of $0.08. Brent crude oil in May rose to $66.67 per barrel, an increase of $0.09. The price of crude oil rose slightly, which had little effect on the price of downstream petrochemical products, while the price of paraxylene was stable. Recent textile industry volatility, PTA prices declined on the 13th. The average price of East China bid was raised near 6600-6700 yuan/ton. As of the 13th day, domestic PTA start-up rate was about 84%, polyester industry start-up rate was about 80%, downstream production and sales rate increased, but PTA market prices were lower, and it is expected that the price of PX market will remain volatile in the later period.

Urea rose in March, and if it did, take a large factory in Shandong Province as an example. On February 22, the quotation was once as low as 1820 yuan/ton, and on March 10, it started to rise. The quotation lasted from 1910 to 1930 yuan/ton. Large orders and outsourcing can start to talk about 20 to 40 yuan/ton. It can be said that the price of urea is really rising, rising is skewed!

On March 7, the ex-factory quotation of a large factory in Hebei rose to 1920 yuan/ton, but the previous afternoon the factory was still signing orders at a level far below that price. When the quotation of a factory in Shaanxi Province rose to 1823 yuan/ton on March 7, the quantity of new orders was also very small, but at present, the quotation has reached 1893 yuan/ton, the contrast is obvious.

It can be seen that the urea price increase is true, but the porcelain is not so solid, that is, there is a certain gap between the quotation and the actual transaction. Let’s take a closer look at the reasons for this price increase.

First, the delayed release of agricultural demand is slightly concentrated. Our long-awaited agricultural demand, which was delayed by the snowy and rainy weather in February, was finally released. This is the biggest driving force behind the price increase. It is known that Shandong, Henan, Jiangsu and Anhui all have a part of the end-sweeping agricultural demand for agricultural distributors to replenish, so the urea ex-factory quotation in the main producing areas increased by 60-90 yuan/ton.

Secondly, the demand of industrial plywood enterprises, power enterprises, especially compound fertilizer enterprises is only slightly restrained by the environmental pressure of the two sessions, and there is no obvious shortcoming. For example, as of March 8, the average operating rate of compound mast plants in China has decreased by only one percentage point per week.

Thirdly, the expected production restriction of urea enterprises in Shandong, Shanxi and other places is not obvious, but it is over-exaggerated again, which can not be said, that is, the production restriction plus the delay of the resumption time of gas head urea enterprises, and then the delayed agricultural demand, has brought about the sharp rise in urea prices. Looking carefully, the daily output of two large urea enterprises in Shandong Province has decreased slightly. A small urea enterprise has stopped production and maintenance for half a month since March 1, and the urea enterprises in Lianghe River are basically full. However, in order to adapt to the situation of differentiated urea promoted by the landlords in Northeast China, they also appropriately open more differentiated urea. Naturally, the price of ordinary urea goes up, which is also conducive to the price of differentiated urea going up. During the period of the game, the price of natural gas may rise. The preliminary news is that the result of the game between gas suppliers and gas-head urea enterprises may rise, but the increase may not be too large. Of course, during the game, the time for gas-head urea enterprises to resume production has been delayed again and again. The gas companies in Inner Mongolia and Mongolia opened one after another from 9 to 12 March, and the gas companies in Ningxia and Xinjiang are in full swing. Head urea enterprises may not resume production until the end of March. Taking advantage of daily urea production as expected in our earlier period and not increased to a controllable level, this price increase of urea is feasible and can be sustained slightly.

Then, let’s see why the price increase is skewed when it goes up.

Previously, we also anticipated that the urea price increase is just in need. First, the low price in the early period awaits to be issued, and the difference between land sales and export price increases. But it is not a long-term solution. It is true that the urea gap is not so large. In the long run, the supply will increase significantly sooner or later, and the downstream will soon be restless, fearing that it will become the last one to take over the market. After a slightly larger increase, this kind of worry will arise. It is more obvious that the factory price of most urea enterprises is 150-200 yuan/ton higher than the cost. It can be seen that the price increase is not a skewed increase, but a probable result after the price increase.

Finally, we should continue to operate cautiously. When urea prices rise, don’t be too aggressive. When urea prices fall, don’t wait to hit the bottom price all the time. Timely entry is the best policy.

According to data released by the European Commission on 8 July, from July 25, 2018 to early March, 2019, the EU imported 7.9 billion cubic meters of liquefied natural gas from the United States, a substantial increase of 181% over the same period last year.

Since 2019, LNG from the United States has accounted for 12.6% of all imports of LNG from the European Union, making the United States the third largest source of LNG from the European Union, the European Commission said.

The European Commission said that if market conditions permit and prices are reasonable, the EU is also ready to continue to expand imports and build a number of liquefied natural gas infrastructure for this purpose. The two sides will also hold the first EU-US Energy Commission High Level Forum in Brussels on May 2.

On July 25, 2018, the European Union and the United States agreed to negotiate to reduce trade barriers, ease trade frictions and suspend new tariffs. U.S. President Trump held talks with visiting European Commission President Juncker at the White House on bilateral economic and trade issues, and held a joint press conference after the talks. The two sides expressed their intention to strengthen strategic cooperation in the field of energy. One of the specific measures is to import more liquefied natural gas from the United States by the European Union.

Russian “Bulletin” website on March 5, the United States Congress announced at the end of February “on the security of the United States from Kremlin aggression” (DASKA), the bill is a supplement to the “Punishment Against the United States Enemy Act” (CAATSA) issued in 2017.

According to the new law, the United States can impose sanctions on legal persons involved in new crude oil exploitation projects in Russia. The direct target of sanctions mentioned in the field of natural gas is the LNG projects implemented by Russia abroad.

However, the United States Industrial Safety Agency (BIS) issued an executive decree in 2014, stipulating that condensate gas is also included in the concept of “crude oil”, so related areas are also included in the sanctions.