John Kemp, a Reuters market analyst, wrote on Wednesday that global oil consumption has stagnated since mid-2018, causing oil prices to inevitably fall despite Saudi Arabia and its allies’best efforts to cut production.

The 18 largest oil consumers in the world consume more than 1 million barrels of oil per day, accounting for nearly two-thirds of global consumption, which can roughly effectively reflect global demand. Data from the Joint Organisation Data Initiative (JODI) show that oil consumption in these 18 countries increased by only 0.7% in the three months to March compared with the same period last year.

Oil consumption data for most of these countries are two months behind schedule, and data as of May have been released, but data for China, India and Thailand are released later.

Excluding the three countries whose data were released later, the largest 15 oil consumers accounted for 45% of global consumption, and their consumption fell by 2.2% in the three months to May, the largest decline since the 2008/09 recession.

Since 2006, consumption growth in the 15 largest oil consumers has been a reliable leading indicator of the top 18, and demand has been wider. Given the interconnectedness of the global economy, this is not surprising.

Since the second and third quarters of 2018, the slowdown in oil consumption has been closely related to the slowdown in global manufacturing activities and freight volume. Given the slowdown in oil consumption, it is inevitable that oil prices will fall sharply despite the action taken by Saudi Arabia and its OPEC + allies to limit production.

Previously, when oil consumption slowed down in 2006/07, 2008/09, 2011/12 and 2014/15, it was accompanied by a sharp fall in oil prices, which eventually brought consumption and production back to balance. Production restrictions in 2019 prevented a sharper decline in oil prices, but inevitably lower oil prices must help to recover lost consumption growth.

Kemp points out that only when the global economy avoids recession and oil consumption growth starts to accelerate again will oil prices continue to rise.

Price Trend

According to the data list of business associations, the price of TDI in East China market on July 24 was 13900 yuan/ton, a decline of 0.71%. At present, the price of domestic goods in East China market is 13700-14000 yuan/ton, and the supply of goods in Shanghai is 14500 yuan/ton.

II. Market Analysis

Products: Domestic TDI market is weak and shocky, the overall atmosphere is depressed, and there is a lack of follow-up, so the mindset of the traders is weakening along with the market, and some have low intention.

Industry chain: Upstream toluene, Shandong Geotechnical Refining Enterprises today listed price down about 50 yuan/ton. Traders today quoted a steady price, East China quoted about 5450 yuan / ton; nitric acid, market demand is still acceptable, the market is temporarily stable.

Industry: The market pays more attention to factory news, and some low prices are also heard.

III. Price Forecast

TDI business analysts believe that the recent market stabilization has weakened, focusing on factory information guidance.

The Rise of Shale Oil Supply and the Superposition of Demand Growth

A Review of the First Half of 2019

In the first half of 2019, SC crude oil futures rose from 380.8 yuan/barrel to 443.5 yuan/barrel, up 16.5%; Brent crude oil futures rose from 54.15 dollars/barrel to 64.55 dollars/barrel, up 19.2%; WTI crude oil futures rose from 45.8 dollars/barrel to 58.2 dollars/barrel, up 27.1%.

Overall, in the first half of 2019, oil prices showed a pattern of rising first and then depressing. Since the beginning of the year, Saudi Arabia has taken the initiative to cut its output excessively, Venezuela’s civil strife has intensified and its output has continued to be cut involuntarily. In addition, the exemption granted by the United States to Iran’s crude oil sanctions is about to expire. The relationship between the United States and Iran has continued to be tense, and the supply side has given strong support to oil prices. At the same time, global economic growth concerns remain, but Sino-US trade is Friction is now easing signs, so that the market’s pessimistic expectations were restored, but also created a favorable environment for oil prices to rise, oil prices once showed strong performance.

In May, the geo-conflict did not deteriorate further. On the contrary, the rising oil price raised the market’s concern about the loosening of OPEC cut-off agreement. In addition, the situation of low start-up of refineries and accumulation of crude oil stocks also appeared in the United States. At the same time, international trade relations were tense, and the increasingly pessimistic economic prospects made the market worried about crude oil demand. Gradually warming up, oil price pressure declined.

Then into June, macro-environment margin improved, geo-conflict events continued, EIA crude oil inventory increased to decrease, oil prices were repaired to a certain extent, and entered the period of oscillation adjustment.

Looking back, in the first half of 2019, the net long positions of WTI and Brent crude oil futures showed a pattern of rising first and then depressing, basically in line with the trend of oil prices. Compared with previous years, the net long positions at the beginning of the year were at the bottom of the five-year interval, close to the extremely pessimistic region, but then all the way back to the five-year interval, and with oil prices in May. The bullish sentiment retreated to the bottom of the five-year interval, and the early bullish squeeze effect further put pressure on oil prices, which also dragged down oil prices.

One of the main lines of B: OPEC + production reduction

The marginal effect of OPEC on production reduction is weakened

On December 7, 2018, OPEC and non-OPEC major oil producers reached an agreement to reduce production by 1.2 million barrels per day from January to June 2019, of which OPEC reduced production by 800,000 barrels per day and non-OPEC reduced production by 400,000 barrels per day. Since February 2019, the implementation rate of OPEC output reduction has exceeded 100%. As of May, the implementation rate of output reduction reached 151%. The implementation of output reduction is good, but it should be noted that in May, Iraq, the United Arab Emirates and Kuwait and other countries have increased production to varying degrees, and there are differences within OPEC.

After weeks of discussion, OPEC + decided to extend the cut for nine months at the just-concluded July meeting and maintain the cut quota set in December last year, with Iran, Libya and Venezuela exempting. Of course, the meeting was different. OPEC changed its previous wording of reducing global crude oil inventories to the five-year average, and said it was seeking to reduce inventories to the 2010-2014 level. Current OECD inventories have fallen below the five-year average, and to meet the new requirements, it will continue to decline by about 240 million barrels, which is also true. OPEC is required to increase its production reduction target in disguised form, but it is difficult to achieve this goal with doubtful binding force on the premise of maintaining the production reduction quota.

Generally speaking, the new agreement can be said to be a lack of novelty. Maintaining the original output reduction quota actually gives those countries with excessive output reduction space to increase production, while maintaining the output reduction itself actually causes the market to worry that OPEC has to reduce production because of poor demand prospects. Under such circumstances, the stimulating effect of production reduction on the oil market is expected to be significantly weaker than in the first half of the year.

Can Saudi Arabia’s Over-cut Continue

Since January 2019, Saudi Arabia has taken the lead in carrying out the task of reducing production beyond expectation. In May, Saudi output has dropped to 9.69 million barrels per day, and the implementation rate of the target of reducing production has further increased to 293%. At present, Saudi Arabia has actually reduced its output by 940,000 barrels per day, with a reduction limit of 320,000 barrels per day and an excess reduction of 620,000 barrels per day. That is to say, Saudi Arabia can increase its output within the reduction limit in the second half of the year, with a maximum increase of 620,000 barrels per day, which can fully compensate for the reduction in crude oil supply caused by sanctions on Iran.

Russia’s lack of momentum to reduce production

Although Russia is the representative of non-OPEC oil producers who actively support the production limitation agreement, in fact, since the beginning of 2019, Russia’s enthusiasm for production reduction has been low. In May alone, it basically achieved the OPEC+production reduction target for the first time, which is due to the pollution of transportation pipelines leading to oil refineries in Eastern and Central Europe. In the second half of the year, with the gradual solution of the oil pipeline pollution problem, this part of the reduction or disappearance, Russia’s demand for market share and the purpose of strategic deployment of the crude oil market will always be the resistance of its strict implementation of production reduction.

C Main Line Two: U.S. -led Oil Market

US crude oil production maintained growth

In the first half of this year, U.S. crude oil production maintained a steady growth momentum, but the growth slowed down. As of the week ending June 28, U.S. crude oil production was 12.2 million barrels per day, an increase of 500,000 barrels per day over the beginning of the year. The monthly report released by EIA on June 11 shows that U.S. crude oil production will increase by 1.36 million barrels per day to 12.32 million barrels per day in 2019, down 140,000 barrels per day from previous estimates, but EIA expects that U.S. crude oil production will increase by 94,000 barrels per day in 2020, up 1,000 barrels per day from previous estimates.

As of the week ending June 28, 793 active drilling rigs in the United States were at a relatively high level in history, while 55.6% in Permian region were at a high level.

Since 2018, DUC (drilled but uncompleted wells) in the United States has shown a large upward trend as a whole, only a slight decline since March 2019. By May 2019, there were more than 8,200 DUCs in the United States. However, in Permian area, DUC has soared to more than 3,900. With the large-scale pipeline production in the second half of 2019, these DUCs, especially It is hoped that DUC in Permian will be switched to completion soon, which means that the further increase of U.S. crude oil production is not far away.

Starting in June 2018, pipeline transportation in Permian region appeared obvious bottlenecks, and the MEH-Midland price gap once soared, which also stagnated the increase of U.S. crude oil output. Starting in September, the expected production of Sunrise pipeline brought the price gap back to normal, and U.S. crude oil production resumed its growth trend.

In the second half of 2019, the Permian region will usher in a peak of production, with a total increase of 2.64 million barrels per day in pipeline capacity to ports in the United States Bay region, which is expected to exceed the growth of crude oil production in the Permian region in the same period, greatly alleviate the bottleneck of transportation and increase the supply pressure of crude oil from the United States.

In line with the increase in pipeline capacity in major production areas, it is the increase in the export capacity of the United States. At present, the export capacity of American ports is about 4 million barrels per day. According to Bloomberg data, the export capacity of Corpus Christi ports is expected to double to 2.4 million barrels per day this year and increase to 3.2 million barrels per day in 2021. Under the combined effect of pipeline transport bottleneck alleviation and export capacity enhancement, the bottleneck of crude oil export in Permian region has been lifted. This means that the U.S. crude oil export routes to other countries are widened.

Canadian production may recovery

At the end of 2018, transportation bottlenecks led to a discount of nearly $50 for WCS relative to WTI crude oil futures in Canada, triggering subsequent active production cuts in Alberta. In the second half of the year, the government said it would not make a decision on the expansion of Tranmountain before the October 2019 Prime Minister’s election. The expansion plan was put on hold. However, it is gratifying that Enbridge said it planned to increase pipeline capacity by 135,000 barrels per day by the end of the year, partially alleviating the pressure of Canadian capacity and Canada’s crude oil production. Quantity or recovery.

D Main Line 3: Geopolitics

The escalating conflict between the United States and Iraq

In late April 2019, the U.S. government announced that it would no longer exempt eight countries and regions from importing Iranian crude oil. Since then, tensions in the Middle East have intensified. In June, the U.S. Treasury announced sanctions against Iran’s largest petrochemical company, the Persian Gulf Petrochemical Industry Corporation (PGPIC) and its 39 subsidiaries. Iran counteracted mainly by terminating the implementation of some provisions of the Iranian nuclear agreement. Iranian President Ruhani announced that Iran would not sell heavy water and enriched uranium to the outside world, and that Iran would again sell heavy water and enriched uranium. The second resumption of uranium enrichment activities, starting on July 7, raised uranium enrichment to the “required level”, breaking the 3.67% limit of the Iranian nuclear agreement.

As of June 2019, Iranian crude oil production was 2.28 million barrels a day, down 100,000 barrels a day from last month; Iranian crude oil exports fell to 296,000 barrels a day, although not to zero, but India stopped importing Iranian crude oil in May. At present, only China is still importing Iranian crude oil, and the situation of Iranian crude oil exports is not optimistic.

Iran’s concerns are not limited to its own production. Another core issue is the safety of global crude oil transport. About 35% of the world’s offshore crude oil transportation and 90% of the Persian Gulf’s crude oil output flow through the Strait of Hormuz, through which at least 17 million barrels of crude oil go to China, India, Japan and other places every day. Since June, two oil tankers have been attacked in the Gulf of Oman, followed by the shooting down of U.S. drones over the Strait of Hormuz by Iran. Recently, the British Navy has seized the supertanker Grace I carrying Iranian crude oil, adding up the threat of closing the Strait of Hormuz when Iran was subjected to U.S. sanctions earlier. Recently, the “war insurance premium” has risen rapidly, increasing the cost of crude oil transportation and threatening the safety of global crude oil transportation, which has become one of the main unstable factors facing oil prices in the second half of the year.

Venezuela’s supply decline is hard to reverse in the short term

Venezuela, with crude oil as its core economic pillar, is currently in the midst of a long economic and social crisis. On the one hand, its government is in high debt and its economy is on the verge of collapse; on the other hand, the political situation is turbulent. In January 2019, Guaido, a member of the opposition, named himself “interim president” and won the United States, Canada and several European and Latin American countries. Public support. Affected by this, Venezuela’s large-scale power outages occur frequently, oil tankers and crew are facing shortages. At the same time, many sanctions against Maduro government officials and Venezuela have been implemented, which has caused a significant blow to the production and export of Venezuelan crude oil.

OPEC data show that Venezuela’s output in May has dropped to 741,000 barrels per day, a record low. Since this year, its crude oil exports have also declined significantly. It is noteworthy that the volume of exports to the United States has dropped to zero since February.

Looking ahead, for Venezuela, the uncertainty in the future mainly comes from the change of regime and the lifting of sanctions imposed by the United States, but at present, the recovery of its crude oil production and export still has a long way to go.

E-risk hints and trading strategies

US: Fed Interest Rate Reduction Expectations Warm

Under the influence of trade barriers dominated by U.S. trade policy, U.S. economic data is weak, manufacturing PMI has dropped sharply, output growth has stagnated, consumer demand is insufficient, inflation continues to be weak, unemployment rate has hit the bottom, and core U.S. bond yields are upside down. All these signs suggest that U.S. economic growth will accelerate, significantly. It raised the market’s anxiety about the outlook for the U.S. economy.

On March 22, 2019, the 10-month-3-month Treasury bond yield curve of the United States first appeared inversion in nearly 10 years; on May 23, it fell into inversion again. At its June meeting, the Federal Reserve maintained its existing interest rate unchanged, but lowered its key core inflation expectations. At the same time, it abandoned its previous “patience” wording on future policy adjustments, saying that uncertainty about the future economic outlook had increased and that it was gradually showing an open attitude towards interest rate cuts. The market expected a rate of about 25B in July. P. Combined with our previous analysis of US Treasury spreads, Federal Reserve interest rate policy and US economic cycle, the deterministic increase of global economic slowdown and the weakening of short-term US dollar have boosted oil prices. However, in the medium and long term, the economic and environmental pressures on oil prices remain high, and they are also a major repression on the demand side of crude oil.

Eurozone: Sustained economic downturn

While the manufacturing sector in the euro area remains depressed, the economic boom index is weak, inflation data is at a low level, consumer confidence index is declining, and macroeconomic data in Europe continues to deteriorate, the ECB intends to accelerate the pace of quantitative easing, and the European economy may continue to deteriorate or even fall into partial recession in the future.

Against the background of accelerated global economic slowdown and tense trade situation, the expected rate cuts or implied interest rate cuts by major global central banks further exacerbate market panic, and the global economic resonance slowdown may be unavoidable.

Crude oil demand without immediate concern and foresight

On the demand side, since 2019, owing to the macro-environment turbulence, OPEC, EIA and IEA have continuously lowered their expectations of crude oil demand growth in 2019. Among them, OPEC has lowered the global crude oil demand by 360,000 barrels per day, EIA has lowered the global crude oil demand by 320,000 barrels per day and IEA has lowered by 200,000 barrels per day.

The depot period of crude oil is April-September every year, but in 2019, because the crude oil production of the United States continues to increase substantially and the start-up rate of refineries is lower than that of the same period last year, the depot of crude oil in the United States is delayed. However, in July, with the gradual recovery of the start-up rate of refineries and the seasonal improvement of downstream demand, the depot period of American crude oil stocks is gradually opened. 。 Overall, the peak consumption season in the third quarter formed a short-term support for crude oil demand.

Strategic thinking

Demand warmed seasonally in the third quarter, and global crude oil entered the depot cycle, while the U.S. hurricane season also affected crude oil production. In addition, the Federal Reserve’s short-term interest rate cuts boost the role of short-term deposits, oil prices remain strong in the short term. However, with the lifting of transport bottlenecks, shale oil production and exports in the United States will experience explosive growth. Its negative impact is expected to overwhelm the marginal boost and gradually weaken OPEC+production reduction. In addition, the slowdown of global demand, the intensification of financial market volatility and the drag of risk preference, the pressure of oil price rebound will be greater.

In summary, it is expected that oil prices will rise first and then decrease in the second half of the year. Overall, they will operate in the core areas of WTI crude oil futures of $47-62 per barrel, Brent crude oil futures of $55-70 per barrel and SC crude oil futures of $380-480 per barrel.

Price Trend

According to the monitoring data of business associations, the mainstream price of n-propanol in domestic market dropped slightly at the beginning of this week. As of July 23, the mainstream price of domestic n-propanol distributors with packaging was around 10,200-11,500 yuan/ton, 134 yuan lower than the average price on July 19, down-1.19%.

II. Market Analysis

Products: The domestic n-propanol market has been slightly adjusted, showing a downward trend. The ex-factory quotation of the manufacturers of n-propanol in Jiangsu area is around 8400 yuan/ton (including water tax), the domestic distribution quotation of n-propanol in Shandong area is around 10800 yuan/ton (including tax and packaging), and the foreign quotation of domestic n-propanol in Shanghai area is 11600 yuan/ton (including tax and tax). Near packing, the mainstream quotation of n-propanol imported from Dalian, Taiwan is between 11,000 and 11,800 yuan/ton (barreled with tax).

Industry chain: The upstream product propylene oxide market fell slightly last week and then entered a stable state. The inventory of propylene oxide factory is low, and the market supply and demand are basically balanced. On July 23, the cash delivery price of Wanhua Chemistry Shandong Mainstream Market was 9300 yuan/ton, while that of East China Mainstream Market was 9600 yuan/ton.

3. Future Market Forecast

According to the business association forecast, the trend of n-propanol market is stable in the short term.

On July 23, the hydrofluoric acid commodity index was 109.35, down 0.27 points from yesterday, down 22.13% from the peak of 140.43 points in the cycle (2018-02-21), and up 104.05% from the low of 53.59 points on November 30, 2016. (Note: Period refers to 2011-09-01 to date)

According to statistics, the domestic market price of hydrofluoric acid declined slightly on July 23. Up to now, the domestic market price of hydrofluoric acid is 12050 yuan/ton. The domestic start-up rate of hydrofluoric acid is less than 60%. Enterprises reflect that the supply of hydrofluoric acid on the spot is sufficient at present. The recent market situation is general. Due to the poor downstream demand, some hydrofluoric acid is in short supply. The factory lowered the ex-factory price, and the market price of hydrofluoric acid declined slightly. At present, the mainstream of hydrofluoric acid negotiations in the southern region is about 11500-12000 yuan/ton, while the price of hydrofluoric acid in the northern market is 11500-12500 yuan/ton. Domestic hydrofluoric acid market prices fell, spot supply is normal, but the demand situation is poor, hydrofluoric acid market prices declined.

Recent downstream refrigerant products start at a low level, the upstream fluorite and hydrofluoric acid demand is poor, the recent downstream refrigerant trading market is general, hydrofluoric acid products price shocks. Recent downstream refrigerant market transactions have improved, R22 refrigerant plant surface started at 60%, R22 market device start-up rate is temporarily stable, the main production enterprise bulk water factory offer price is between 17500-18500 yuan/ton, but the production enterprise does not have bulk water spot, mainly a small number of cylinders shipment. In addition, the actual demand side of the market has not changed much, and the delivery market has increased. The domestic market price trend of R134a is not good, the start-up rate of production enterprises remains low, the refrigerant market demand is general, and the manufacturers mainly export their products. However, the on-site transaction price does not change much. Businessmen purchase on demand. Recently, due to the normal supply of goods and poor downstream demand, the market price trend of hydrofluoric acid has slightly declined.

Refrigerant field turnover is poor, refrigerant industry equipment start-up rate remains low, for upstream hydrofluoric acid market demand is limited, hydrofluoric acid spot supply is normal, Business Analyst Chen Ling believes that the hydrofluoric acid market may be slightly lower.

Price trends:

According to the data monitoring of business associations, this week Sinopec Neighbouring Benzene executed the quotation stably. As of July 22, the executed contract price of Sinopec o-xylene was 5900.00 yuan/ton, which was stable compared with the price of o-xylene at the beginning of the week, and 11.11% lower than that of the same period last year.

II. Market analysis:

Product analysis:

As can be seen from the table above, this week’s external quotation of phenyl fell, the external quotation of phenyl in East Asia dropped by about $15 per ton, and the price of o-xylene in the United States dropped by about $22 per ton. Outside quotation fell, import cost of Phenyls fell, port inventory was low and stable, inventory consumption was slow, demand for Phenyls was general, the market for Phenyls in the future was negative. Neighbouring benzene prices in the future fall more pressure.

Factor analysis of industrial chain:

This week, mixed xylene market shocks remained stable, lack of momentum to rise. Benzene prices in the future will weaken.

Downstream phthalic anhydride market volatility fell this week, the overall market bearish obvious. This week, phthalic anhydride market shocks fell, plasticizer Market Performance weakness shocks fell, downstream market fell on the neighbouring benzol Market bearish. Downward pressure on the price of o-phenyl increased.

3. Future market forecast:

According to Bai Jiaxin, an analyst of o-xylene data from business associations, the price of o-xylene has fallen sharply this week, while the price of imported o-xylene has fallen; the price of raw materials mixed with xylene has remained stable, and the overall cost of o-xylene has temporarily stabilized; the market of downstream phthalic anhydride has fallen, the market of plasticizers has fallen, and the overall enthusiasm of downstream customers for PUR Seeking to decline, the future market neighbouring benzol Market negative, downward pressure increased. The overall downstream phthalic anhydride and plasticizer Market fell, the downward pressure of phthalic anhydride and plasticizer increased, the downward trend of phthalic anhydride did not have obvious good news, and the downward trend of phthalic anhydride risk increased. However, due to the smaller downstream decline, the downward pressure on phthalic anhydride was insufficient, and the overall downward trend of phthalic anhy

Price Trend

DOP prices have tumbled this week and the DOP market has been weak, according to business data monitoring. As of July 21, the price of DOP in East China was 7483.33 yuan/ton, down 116.67 yuan/ton from 7600.00 yuan/ton at the beginning of the week, or 1.54%, or 15.44% from the same period last year.

II. Market Analysis

Product Analysis

This week, DOP external quotation shock adjustment, overall plasticizer DOP external quotation rise, good for DOP market. DOP external offer in China is 940 US dollars/ton, up 35 US dollars/ton, price in Southeast Asia is down 5 US dollars/ton; DOP equipment start-up rate of plasticizer enterprises is maintained, manufacturer stock is limited, demand is general, overall plasticizer DOP market is negative, DOP price in the future is limited, there is a certain downward pressure.

Analysis of Industrial Chain

As for raw materials, as can be seen from the chart, the prices of octanol and phthalic anhydride, raw materials of DOP, fell this week, while the DOP market was dragged down. The decline of raw materials has affected the market of plasticizers. The overall DOP market in the future is lack of momentum to rise, and the pressure to fall is increased. It is expected that the DOP market will be mainly shocked and declined.

In terms of downstream demand, the price of PVC was stable this week, and the demand for PVC was stable. Overall, the DOP market in the future is good and limited, DOP downward pressure still exists.

3. Future Market Forecast

According to Bai Jiaxin, a DOP data analyst at business associations, raw material prices have been weak, DOP costs have fallen, and DOP prices have fallen this week. This week, DOP external price rebound, has a certain positive impact on DOP market, but raw material prices continue to fall, DOP costs decline, DOP market bearish significant impact; overall DOP market bearish, downward pressure is greater, expected future DOP prices slightly volatile decline.

According to today’s oil price report, OPEC is currently restricting oil production due to concerns about slowing demand growth, in order to prevent oil prices from falling sharply in oversupply markets. But OPEC’s state-owned oil companies (NOCs) are looking to the long term and trying to get a large share of the cake in the oil trade.

OPEC’s largest oil producers include state-owned oil companies in Saudi Arabia, Iraq and the United Arab Emirates (UAE), which plan to vigorously develop their respective oil trading businesses to find additional sources of profit from their vast commercial and marketable oil resources. National oil companies in the Middle East are already competing with the largest independent oil traders, such as Vitol, Trafigura, Glencore, Mercuria and Gunvor.

In this competition, state-owned oil companies have a huge advantage over independent oil traders, that is, state-owned oil companies have their own oil.

According to S&P’s global analysis, state-owned enterprises account for 76% of the world’s 25 largest oil companies in terms of oil production.

Today, OPEC’s oil companies will expand and open trade offices around the world, and seek to significantly increase their oil trading business and volume, thereby enhancing competition in the oil trade field.

Fatih Birol, director of the International Energy Agency, said in a speech on Thursday (July 18) that global crude oil demand growth in 2019 was expected to slow to 1.1 million barrels per day, compared with 1.2 million barrels per day, as the international trade situation dragged down global economic growth.

Last year, the IEA expected global crude oil demand to grow by 1.5 million barrels per day in 2019, but in June this year it lowered its forecast to 1.2 million barrels per day.

He believes that demand for crude oil is mainly hampered by the international trade situation, while U.S. shale oil production continues to climb. Relevant data show that U.S. crude oil production is expected to grow by 1.8 million barrels per day in 2019, down from a record 2.2 million barrels per day increase in 2018.

Birol said that the IEA is very concerned about the tension in the Middle East. Once the tension in the Strait of Hormuz leads to supply disruption, the IEA will take “quick and decisive” measures to balance the oil market.

It is reported that 20 million barrels of crude oil will pass through the Strait every day, accounting for about one third of global crude oil trading.

At present, major key crude oil producers are looking for possible alternative routes. Among them, Iraq plans to export more crude oil through Ceyhan Port in Turkey and build new pipelines in Syria, Lebanon and Saudi Arabia to help export.

“These alternatives will not have a significant impact on the market in a very short period of time,” Birol said. But it will have a far-reaching impact on the oil market in the medium and long term.

He believes that although tensions in Iran, Libya and Venezuela will support oil prices, oil prices will not rise too much “because of the rising production of shale oil in the United States”.

Four units are planned to be put into operation in the second half of the year, second only to the “large-scale production of coal chemical industry” in 2014. Static estimation shows that there is no doubt that the expansion price will fall, but whether the device can be put into operation on schedule, whether the product is a standard product or a special material are uncertain factors. In addition, the downstream polyolefin warms up after tax reduction and fee reduction and domestic demand stimulation, and the upstream unit plans to centralize overhaul after the start-up rate increases, which can offset the potential pressure on the supply side. Therefore, with the support of the traditional peak season in the third quarter, the price of polypropylene is expected to reach a new high in the year. The marginal role of supply pressure in the fourth quarter is also declining. The toughness of the demand side has become the main driver. We remain cautiously optimistic about the market in the second half of the year.

A Provision is temporarily unavoidable

Capacity expansion is still uncertain

By the end of June, the cumulative production capacity of PE in China was 18.4 million tons, of which 280,000 tons per year were added to the high-density equipment of Jiutai. The total production capacity is expected to exceed 20 million tons by the end of the year, corresponding annual capacity growth rate is 10.33%, second only to that in 2014, which ranks third in history.

At the same time, the cumulative capacity of PP is 23.21 million tons, of which two new sets of equipment, Jiutai and Hengli, with a total capacity of 770,000 tons per year, are expected to produce more than 25 million tons at the end of the year, corresponding annual capacity growth rate of 11.41%, less than in 2014 and 2016, but the increase is the second highest in history.

Foreign new capacity is mainly concentrated in the United States, which will not have a great impact on China in the second half of the year. Even if China buys a large number of American energy products, the pressure will be transmitted to China as soon as possible by 2020. The new unit with an annual capacity of 400,000 tons HDPE+350,000 tons LLDPE+900,000 tons PP is scheduled to be put into operation in the fourth quarter. At present, the ethylene glycol unit has produced qualified products and the olefin unit has little problem in putting into operation on schedule. In addition, the DPE plant with an annual capacity of 400,000 tons in Korea and the P P plant with an annual capacity of 150,000 tons in Japan are also scheduled to start production in the fourth quarter. The situation in Iran is chaotic, and the installation of 300,000 tons LDPE + 450,000 tons PP per year may be delayed. Generally speaking, the impact of new foreign production capacity on domestic production in the second half of the year is negligible.

HDPE and LDPE are mostly produced by new PE devices, while LLDPE is the corresponding target of futures, and the pressure of production capacity is not direct. PP has more new capacity than PE, and contains more futures corresponding to the target wire drawing, the market is generally expected to supply excessive PP in the fourth quarter. By analogy with the last two peak production in 2014 and 2016, the PP price performance is quite different under the combined effect of the crude oil market falling and rising, economic data bad and good. In the second half of the year, when the four sets of devices will be put into operation, whether they will produce standard products or special materials, have not been clearly determined. It is not excluded that similar conditions will occur when the planned production in 2013 will be put into operation but will be postponed to 2014.

PE output in August or hit a new low in the year

From January to June, the cumulative output of PE in China was 8.755.54 million tons, an increase of 13% over the same period last year, the highest in history. Among them, the increment mainly comes from HDPE and LLDPE. This year, LLDPE’s monthly output has remained around 560,000 tons, even in the traditional off-season from April to June. In June, 32% of the year-on-year high production put pressure on spot prices, and futures prices also rebounded to their lowest levels in the year. The maintenance loss in July is less than that in June, and the output is expected to be 1.4 million tons. In August, the number of overhaul devices increased, and production may hit a new low in the year.

From January to June, domestic PP output was 10.08 million tons, an increase of 4.74% over the same period last year. The new equipment of Jiutai Energy and Hengli Petrochemical Company was put into full operation from May to June. In July, production is expected to be 1.8 million tons, second only to March. In the second half of the year, four units with a total capacity of 2.15 million tons per year were put into operation. At present, Juzhengyuan and Sino-security have jointly started, and the whole process will be completed by the end of July, but the actual production will be realized as early as August. In August, the overhaul capacity is much larger than the new production capacity, so the monthly output will not be higher than that in July. Therefore, the production pressure of the new device will appear in the fourth quarter.

PP import volume is expected to decline in the later period

From January to May, PE imports reached an all-time high. In February and April, HDPE and LLDPE imports increased by 40% compared with the same period last year. This partly explains the phenomenon that spot prices soared repeatedly in March and fell smoothly in May. On the export side, HDPE has increased significantly, but its total volume is only 15,000 tons, so it has little impact on spot and futures. Since mid-June, PE import forecast has decreased, especially the LDPE forecast in the Middle East has declined, which has caused the domestic and foreign prices to rise in early July.

From January to May, imports of PP increased by only 50,000 tons compared with the same period last year, which explains why port stocks are always at a low level. With the expansion of domestic production capacity and research and development of high-end special materials, PP imports will further decline in the future.

Profits of oil and coal production have shrunk

In the first half of the year, both oil and coal-based production profits hit a new low in six years. When the price of polyolefin products continues to be low, raw material price becomes the most important factor affecting gross profit. Crude oil has risen, coal mines have limited production, methanol has fallen, ethane is cheap, and the profitability of each route varies greatly. Take PP as an example, the production profit is PDH > methanol extraction > Oil > coal. The long-term maintenance of this situation leads to the high start-up rate of MTO plant and the shortage of propylene supply. When the price of polyolefin rises, the willingness of the two oil and coal chemical industry to tap the price will appear.

According to the proportion of different consumption areas, PE demand side focuses on agricultural film, packaging film and plastic products, while PP demand side focuses on BOPP and injection molding.

B Demand is picking up

The peak season of greenhouse film is approaching

Usually, there is no traditional low peak season in the field of packaging film. According to the survey feedback in early July, this year’s demand for food packaging film was basically the same as last year, but export orders were reduced, raw materials and finished products stocks were at a low level, and enterprise profits were lower than in previous years. Single filament and hollow start-up rates are close to the peak in the year, indicating that terminal demand is warming up. From January to May, the cumulative export volume of pipes was 3.62 million tons, an increase of 9.70% year-on-year. Except for February, the export volume of other months increased by about 10% year-on-year. Usually, in May-July, the traditional off-season of pipe materials, the start-up rate continued to decline, until August, when the enterprise orders rebounded, the start-up rate gradually increased, in order to meet the traditional peak season of October. If the demand for pipes is not in advance, the January contract will be favorable. From January to June, the output of agricultural film was 1.138 million tons, basically equal to the same period in 2018. Although the current agricultural film is in the off-season, the market price of Shouguang double-film in Shandong has rebounded to the peak level in the first quarter after the price of PE raw material rose. In addition, since the end of June, the start-up rate of agricultural film has increased for three consecutive weeks, with a cumulative increase of 23%. According to previous year’s data, by the middle and late August, the start-up rate may exceed 50%. The centralized replenishment at the end of July is expected to boost PE prices.

Plastic products have great potential for consumption

From January to May, the output of plastic products was 28.865 million tons, down 1.2% year on year. However, after the value-added tax cut on April 1, output rose by 26.92% annually in May, the highest in the same period in history. Over the same period, the cumulative export volume was 5.48 million tons, an increase of 10.71% over the same period last year. On the one hand, it is related to the continuous introduction of tax reduction and fee reduction policies by the state, on the other hand, it is also related to the change of RMB exchange rate for export. In addition, due to the low price, good quality and stable channels of domestic goods, although the United States imposed tariffs after March, most purchasing enterprises in the United States still choose to undertake some tariffs on their own initiative. At present, the per capita consumption of plastic products in China is less than 50 kg, which is much lower than 170 kg in the United States. There is a great space for the future production of plastic products to grow. If the output of plastic products maintains its momentum in May after June, its price support for polyolefin raw materials will become stronger and stronger.

BOPP start-up rate is stable

In the first half of the year, BOPP prices followed raw material PP, falling all the way, while production profits reached their highest level in the same period in five years. Enterprises are profitable, coupled with sufficient orders, naturally will not rush to stock up, raw materials on demand, most of them only maintain 7 days of usage, finished goods inventory is also controlled within 10 days. From January to June, the BOPP start-up rate was 57.65%, and the overall stability was maintained. Only in late June, the centralized overhaul made the start-up rate fall below 50%. By the end of June, BOPP had a total capacity of 6.35 million tons in the year, including 220,000 tons of capacity for five new lines. In the second half of the year, four new routes are planned in China, and some enterprises also choose to open processing plants in Southeast Asia. The demand for raw material PP will be increased synchronously with the expansion of new capacity.

Household Appliances Export Increase

In the manufacture of household appliances, white electricity uses relatively more PP. From January to May, the output and sales of washing machines, refrigerators and air conditioners increased significantly compared with the same period last year. Although the growth rate of domestic demand is still declining, the growth rate of external demand has increased significantly, and the export growth rate of refrigerators has reached 12.81% year-on-year. It is expected that the good effect of injection moulding demand on PP will be fully fermented from August to September for three reasons: first, stimulating domestic demand. In April-May, the output and sales of four household appliances improved significantly compared with last year, especially after the reduction of VAT on April 1. In addition, in January and June, policies to promote the upgrading of household appliances were also introduced. Second, stimulate exports. In the first half of this year, most household appliances export increased much faster than domestic sales, partly because of the change of RMB exchange rate, and partly because of the expansion of overseas markets. After the G20 summit, Sino-US economic and trade frictions eased and household appliances exports improved. Thirdly, the peak season is coming. Air conditioning and refrigerators are in the hot season. Eleven long holidays and double eleven promotions further boost consumption, and the peak output of washing machines also appeared in August-September.

Passenger cars will usher in a new cycle of depot replenishment

Although the sales of new energy vehicles increased by 65.9% in the first half of the year, it can not change the dilemma of the general passenger vehicle production and sales downturn. However, the latest June generalized passenger car retail sales rose year-on-year for the first time in 13 months, which is also the largest annual growth rate in June of this century. It is no different from a shot in the arm for the market.

At the same time, the inventory clearance before the Spring Festival in January-February and the five-to-six-month national exchange in May-June have reduced the passenger car inventory to a historical low, and a new cycle of replenishment is coming.

By the end of last year, the domestic car ownership of 1,000 people was 147, far lower than 500-600 cars in Germany, Japan, France and 800 cars in the United States. With the increase of residents’income and the rise of domestic brands, the car market has great potential in the future.

The following four factors have become the main basis for the turning point of the car market in the second half of the year: first, the role of policy incentives can not be ignored. Value-added tax (VAT) was reduced to 13% on April 1, and purchasing tax base changed on July 1. Take the recently heated discussion of “13 yuan to buy a car” as an example, the purchase tax is calculated according to the actual transaction price of 13 yuan, rather than the previous minimum taxable price. Secondly, since July 1, the Sixth National Standard has been implemented in key regions, Pearl River Delta and Chengdu-Chongqing areas in advance, while the Sixth National Standard for Light Vehicles and Urban Vehicles has been implemented on July 1, 2020. The implementation of the Sixth National Standard has accelerated the elimination of the Third National Vehicle, which is bound to trigger a wave of vehicle replacement. Thirdly, Guangzhou and Shenzhen will increase the number of license plates by 100,000 and 80,000 respectively this year and next. Among the remaining five limited cities, Hangzhou and Tianjin are most likely to follow up, with about 6,000 and 10,000 incremental passenger cars per month. Fourthly, the state vigorously promotes new energy electric vehicles such as hydrogen and methanol. In 2020, all buses in key cities will be replaced by new energy vehicles. Taxis in Shenzhen have been fully electrified in the first half of the year. The replacement of this wheel will greatly increase the sales of new energy vehicles.

In the long run, lightweight is the development direction of the automotive industry, and the reduction of weight directly means the increase of the range. Fuel vehicle weight can be reduced by 10% and fuel efficiency can be increased by 6%-8%. For pure electric vehicles, the weight of the vehicle is reduced by 10 kg, and the range of the vehicle is increased by 2.5 km, while 100 kg plastics can replace 200-300 kg of other materials. With the popularization of new energy vehicles and the maturity of modified plastics technology, the use of plastics in automobile production will be greatly increased in the future. At present, PP accounts for 37% of all automotive plastics, and has an expanding trend. In the second half of the year, the demand for automotive injection moulding is optimistic.