According to today’s oil price report on July 3, energy data provider KPLER reported that OPEC crude oil exports increased 761,000 barrels/day last month from May to 23.7 million barrels/day. In May, OPEC’s oil production fell below 22 million barrels a day.

The increase was attributed to strong exports from Saudi Arabia, the United Arab Emirates and Iraq, which increased exports by about 135,000 barrels a day in June. Iraqi exports increased by 100,000 barrels a day last month, but the United Arab Emirates saw the largest increase in crude oil exports, exceeding 400,000 barrels a day.

In June, Iranian exports fell sharply again, from 469,000 barrels a day to only 515,000 barrels a day.

Although Venezuela and Libya increased shipments in June. Venezuela’s exports increased from 883,000 barrels a day in May to 968,000 barrels a day in June, and Libya’s exports in June were 1.1 million barrels a day, up from 974,000 barrels a day in May.

Cartel exports were 3.577 million barrels a day lower than in June last year due to the double effects of OPEC+cut-off agreement and voluntary cuts by Venezuela and Iran due to sanctions.

Earlier this week, OPEC and its external partners agreed to extend the cuts to the end of March 2020. The total reduction is 1.2 million barrels per day, of which 800,000 barrels per day will be cut by OPEC member countries, while the rest will be cut by Russia, Kazakhstan and several smaller non-OPEC producers. OPEC’s compliance targets exceeded 100% and reached 168% in the first half, mainly due to the inevitable decline in production in Venezuela and Iran.

Usually, this will push up prices. However, as concerns about global economic growth and oil demand deepened and markets ignored OPEC’s news, Brent crude oil and WTI crude oil prices both fell immediately after OPEC announced a delay in production cuts.

According to the latest statistics from the Vietnamese Customs Administration, Southeast Asia is the main market for Vietnamese fertilizer exports, accounting for 64% of the total. Vietnamese fertilizer exports show a decreasing trend on the whole, but exports to Japan have increased sharply.

In February 2019, Vietnam’s domestic chemical fertilizer exports totaled 36.25 million tons, with an export volume of 9.73 million US dollars, which was 15.9% and 30.6% lower than that in January, respectively. The average export volume in February was US$280 per ton, down 13.9% from January and 14.1% from the same period last year. The average export volume in the first two months of the year was US$309 per ton.

Fertilizer exports to Cambodia are the largest, accounting for 26.49 million tons and 9.61 million US dollars, with an average export volume of US$362.92 per ton, an increase of 4.5% over the same period last year. Nevertheless, compared with the same period last year, export volume and export volume decreased by 50.71% and 48.5% respectively.

Fertilizer exports to Malaysia ranked second, with 14.3 million tons and US$2.6 million exported during the same period. The average export volume was 185.31 US dollars per ton, a decrease of 6.93% compared with the same period last year.

It is noteworthy that in the first two months of the year, Vietnam’s export of chemical fertilizers to Japan increased sharply, reaching 4,040 tons, with an export value of $1.84 million, up 5.5 times and 13.5 times respectively from the same period last year. On the other hand, Vietnam’s fertilizer exports to the Philippines decreased significantly, with 369 tons (96.24% year-on-year decrease) and exports of $107.8 million (96.48% year-on-year decrease).

Saudi Arabia, OPEC’s main oil producer, will continue to shoulder heavy responsibilities as the organization and its allies are almost forced to extend their efforts to curb the U.S. shale boom to a fourth year, Bloomberg reported in London on July 2.

Saudi oil minister Khalid Falkh said at a news conference Monday night that Saudi Arabia was willing to continue to reduce the amount exceeding its quota requirements.

Amrita Sen, chief oil analyst for energy, said: “This is a commitment to reduce inventories, no matter what they pay for it.” Saudi Arabia is likely to keep production at around 10 million barrels a day, below their target and “if needed in nine months, they will continue to trade.”

Alpha Lich hinted as early as 2016 that Saudi Arabia, Russia and other OPEC + coalition oil producers would only need six months to cut supplies, but he seems increasingly caught up in the struggle to seize control of the global oil market from the American shale industry.

“I have no doubt that American shale will peak, peak and then decline like any other basin in history.” Al-Fallich told reporters at OPEC headquarters in Vienna. “Before that, I think that for those of us at stake, as well as for those who want to protect the global economy and provide visibility for the future, we need to be cautious about continuing to adapt to this situation.”

I. The price trend of epichlorohydrin:

According to the data from the business associations’list, the market price of epichlorohydrin rose by 4.62% as of July 3, compared with last Wednesday (June 26). Today, the mainstream price of epichlorohydrin in China is 15500-16000 yuan/ton.

II. Market analysis:

Products: Epichlorohydrin market is rising. At present, the spot supply is still tight, the low price supply is difficult to find, and the high offer of the holder. However, the lower reaches of the high-priced deposits conflict with reason, just need to replenish the main, the actual single narrow-range negotiations. At present, the mainstream quotation in the East China market is around 15 500 yuan/ton, and the acceptance is delivered to the surrounding areas. Mainstream quotation in Shandong market is around 15 300 yuan/ton, self-raised. Mainstream market quotation in Huangshan area is around 15 500 yuan/ton, acceptance delivered.

Industry chain: The market price of upstream propylene in Shandong has risen significantly. Recently, the price of propylene enterprises in Shandong began to rise on July 2. Today, the price of propylene enterprises has risen by 100 yuan/ton again. At present, the main market turnover is around 7800-7900 yuan/ton. Downstream epoxy resin, supported by high raw material costs, some manufacturers have a rising atmosphere.

3. Future market forecast:

According to business associations, the domestic epichlorohydrin market will be dominated by high-level finishing in the short term.

Price Trend

According to the price monitoring of business associations, as of July 3, the average price of domestic aggregated MDI market was 12 425 yuan/ton, and the overall market was not hot.

II. Market Analysis

Products: Domestic aggregate MDI market climate is not warm, continue to range fluctuations. Supplier manufacturers’supply is tightening, agent’s supply is not much, quotation is more stable, follow the market, but downstream picking mood is not positive, just need small orders. Influenced by recent environmental inspections, 141b began to rise, which would inhibit the demand for aggregated MDI. The market continues to be weak and deadlocked, and the prices of the holders dare not rise or fall, which is more painful, and the middlemen in the northern market are relatively calm in the near future.

On the market side, South China has consolidated the weak market segments of MDI. The market in North China and Shandong is in a downward trend. The markets in East and South China are weak and stable. The shipment of goods is mainly accompanied by the shipment of goods by the holders, and the negotiation of the actual orders is weak. East China aggregates weak shocks in the MDI market. The downstream demand follow-up is weak, the main shipment is accompanied by the holder, the inquiries are scarce, and the confidence of the operators in the future market is insufficient. The aggregated MDI market in North China continued to decline narrowly. Despite the tightening of the overall supply side of the supplier, the market demand follow-up has been weak, coupled with environmental inspection to curb the northern hard bubble market, it is expected that the short-term market is mainly weak.

Industry chain: raw materials, pure benzene: driven by the strong East China pure benzene, and the rising prices of some downstream products in Shandong Province, the refined pure benzene is running steadily, and the low-price supply in the market is difficult to find. Shandong mainstream in 4750-4950 yuan/ton, individual refinery due to parking overhaul, no inventory. Local hydrobenzene rose to 4850-4950 yuan/ton. Aniline: Although the raw material pure benzene rises sharply and the cost of aniline is under pressure, due to the high pressure of shipment, aniline enterprises operate cautiously and the price is stable. Shandong mainstream negotiation price reference at 5850-6070 yuan/ton. East China market mainstream reference 6000-6100 yuan/ton acceptance.

3. Future Market Forecast

Business Cooperative Perspective: Business Cooperative Aggregate MDI analysts predict that short-term domestic aggregate MDI market prices continue to be weak and deadlocked, and it is not easy to rise or fall.

Price Trend

In June 2019, the domestic methanol market was mainly volatile. According to the price monitoring of business associations, the average domestic methanol price was 2334 yuan/ton at the beginning of the month, and 2180 yuan/ton at the end of the month. The price dropped by 6.60% in the month, 19.93% compared with the same period last year.

II. Market Analysis

Products: The domestic methanol market trend in June is mainly shocky. With the end of spring maintenance, local methanol supply increased, while import arrivals maintained a high level. Traditionally, demand was weak, and the second half of the methanol spot market was deadlocked, mostly weakened. The new 600,000-ton methanol-to-olefin plant in Jiutai, Inner Mongolia, was put into operation this month. At present, the methanol purchasing volume is stable with full-load production. The olefin plants expected to be put into operation from July to August are Shandong Luxi, Nanjing Chengzhi and Zhongan United.

Industry chain: formaldehyde: formaldehyde Market as a whole fell this month. The upstream methanol market is lower as a whole, and the cost is difficult to support. However, the downstream market is affected by the busy farming in the north, the flood season in the South and the environmental protection policies in some areas. The overall start of the market is not high, and the demand is difficult to support the formaldehyde market. As a result, the formaldehyde market is running lower this month, the profits of enterprises are reduced, and the market as a whole. Volume declined. Dimethyl ether: Dimethyl ether market overall shocks slightly fell this month, price fluctuations in the range of 20-100 yuan/ton. During the month, the main enterprises in Henan such as Yima and Xinlianxin all maintained half-load operation. The total daily output in this area decreased by 40% to about 3300 tons (with a full output of 5500 tons). Later in the month, the Tangshan Xuyang and Shanxi orchid dimethyl ether plants were shut down again for overhaul. The supply in the northern market was further narrowed, and the manufacturers supported by low supply were obviously weak. In order to maintain the daily balance of production and marketing, only a small price adjustment was made under the current situation, while the mainstream transactions in the northern market fluctuated between 3000-3200 yuan/ton. Acetic acid: This month, the domestic acetic acid market rose and fell, with frequent market shocks. At the beginning of this month, the main acetic acid plant in East China stopped unexpectedly and for a long time, which led to the shortage of supply in East China, passively transferring supplies from North China, and gave the enterprises the initiative to report an increase, with the market rising by 400 yuan/ton. In the mid-month period, the mainstream production enterprises in East China resumed normal operation, and downstream demand continued to weaken. The conflict with high-price acetic acid was obvious, the market supply was not digested smoothly and the domestic supply gradually accumulated. After that, the enterprises in Central China and Shandong pulled back their offers one after another, driving down the market transaction price by about 250 yuan/ton. Towards the end of the month, the short-term failure of the main production enterprises in East China has given the market part a bullish mentality, but the device has been restored in time, breaking the market bullish enthusiasm, and returning to stability after the acetic acid market rose slightly.

Industry: According to the price monitoring of business associations, in June 2019, there were four kinds of commodities rising annually in the energy sector, one of which rose more than 5%, accounting for 6.3% of the monitored commodities in the sector; the top three commodities were WTI crude oil (5.02%), MTBE (2.46%) and coking coal (0.82%). There are 12 kinds of commodities with a decline of more than 5%, accounting for 31.3% of the monitored commodities in the plate. The products with the first three declines are petroleum coke (-8.44%), liquefied natural gas (-7.64%) and naphtha (-7.09%). This month’s average rise and fall was -3.07%.

3. Future Market Forecast

Business Society Viewpoint: On the positive side, due to the impact of the Iranian collision, the cost of shipping from Iran to China has increased, and it is expected that Iranian cargo will remain tense in July; there are still some scheduled overhauls of methanol plants in July, including Shenmu, Yankuangyulin, Xianyang Chemicals and other enterprises; and the MTO plant in Jiutai, Inner Mongolia, has been upgraded to 90% by the end of September. The second MTO of Shandong Luxi and Nanjing Chengzhi is expected to start production from July to August. On the negative side, in traditional downstream products, the market of dimethyl ether and acetic acid continued to decline, and the profit of enterprises was not good; the import volume in June was estimated to be more than 800,000 tons; however, the import volume in July will decline due to the increase of international equipment maintenance and the restriction of Iranian transportation; the safety and environmental protection inspection will continue to be rigorous, and local market terminal enterprises. Production reduction or shutdown are affected, which is not conducive to methanol consumption. Methanol analysts in business associations predict that the main logic of the recent spot market is that the supply of methanol exceeds demand, and the short-term market of methanol is mainly declining; if Nanjing Chengzhi goes into operation smoothly, methanol is expected to stop falling in late July.

Major oil producers said they were optimistic that the cut-off agreement would be extended, with crude oil futures closing higher in June.

West Texas Light Crude Oil (WTI) futures for August delivery on the New York Mercantile Exchange rose $0.62 to close at $59.09 a barrel, up 1.1%, hitting a high of $60.28 a barrel. According to data from the Dow Jones Market Data Group, WTI futures prices rose 9.3% in June trading on spot contracts.

Meanwhile, Brent crude oil futures for August delivery on the London ICE European Futures Exchange rose $0.32 to close at $65.06 a barrel, up 0.5%, hitting a high of $66.75 a barrel. Brent’s oil price rose 3.2% in June trading on spot contracts.

According to foreign media reports, Saudi Arabia’s energy minister Khalid al-Falih said that most OPEC member countries would like to extend the cut agreement for nine months. Earlier in the day, Bijan Zanganeh, Iran’s oil minister, said in an interview that he would support a nine-month extension of the cut.

Earlier, Russian President Vladimir Putin announced last weekend that Russia had reached an agreement with Saudi Arabia to extend the cut for six to nine months. Putin met with Saudi Crown Prince Mohammed Bin Salman at the G20 summit in Japan and said: “We will support an extension of the cut-off agreement, as will Russia and Saudi Arabia.” He added: “As far as the extension is concerned, we have not yet decided whether to extend it for six months or nine months, maybe nine months. “

Suhail al-Mazrouei, the Minister of energy and industry of the United Arab Emirates, also said in an interview that it might be necessary to extend an agreement reached in December last year to reduce production by 1.2 million barrels a day, which expired last Sunday.

Marshall Steeves, an energy market analyst at Informa Economics, told MarketWatch, the US financial media, that after Putin’s meeting with Saudi Crown Prince Mohammed Ben Salman, the extension of the cut-off agreement for six to nine months seems to be in place. “Of course, this requires the overall approval of the organization, but with Iran and other countries agreeing to cut production, this decision seems likely to be adopted. However, the OPEC + decision still needs to be considered, because the only question now is whether Russia will agree. He said.

OPEC Member States and non-OPEC oil-producing countries such as Russia are gathering in Vienna to renegotiate production reduction agreements, which will hold ministerial meetings on Tuesday.

Earlier this month, Iran shot down an American surveillance drone over the Strait of Hormuz. Some analysts believe that this situation may lead to the disruption of crude oil flow and transportation in the region and increase tensions between the United States and Iran. Since 2017, OPEC and its allies have been cutting crude oil production to prevent oil prices from falling amid soaring U.S. production. This year, the United States has surpassed Russia and Saudi Arabia as the world’s largest crude oil producer.

Oilfield service provider Baker Hughes reported earlier on Friday that the number of active crude oil drilling platforms in the United States increased by four this week to 793, up from one last week. The data from Beckhughes can provide clues to future U.S. crude oil production. The increase in the number of drilling platforms means that production may rise, which is usually a negative factor for oil prices.

In other energy trades on the New York Mercantile Exchange, the price of RBOB gasoline futures for July delivery rose 1.8% to $1.931 a gallon, up 7.8% in June, heating oil futures for July delivery rose 0.7% to $1.954 a gallon and 5.6% in June. Gas futures prices fell 4.1 cents to $2.267 per million UK heat units, a 1.8% drop, and fell by about 6% in June.

OPEC and its allies will continue to cut oil supplies at the same level in the first quarter of 2020, according to Prussian Energy Information. The actual leaders of the producer alliance, Khalid al-falih, Saudi energy minister, and Alexander Novak, Russia, have agreed to extend the oil cuts for longer than previously announced.

OPEC and non-OPEC cuts of 1.2 million barrels per day expire on Sunday. Oil demand growth forecasts and U.S. production surge, and many ministers support an extension to prevent further price falls. The alliance will meet in Vienna on Monday and Tuesday to decide how to proceed.

Arriving in Austria’s capital, Falkh said that the oil cuts are most likely to be extended by nine months, but the specific time will be for talks with other ministers. In addition, he said that the number of cuts should remain unchanged and there was no need for further cuts, as some countries, such as Algeria and Iraq, had suggested. Despite the slowdown in demand growth, demand for more than 1 million barrels a day is healthy and the market will remain balanced in six to nine months.

Nowak said it was difficult to increase production because of bad weather conditions in Russia. The most likely and beneficial way for the season to affect demand is to extend trading for nine months. In addition, the removal of contaminated Russian crude oil from the Druzhiba pipeline may also enter autumn, affecting production.

Much of the discussion around the agreement revolves around the extension before the end of the year. Russian President Vladimir Putin met with Saudi Crown Prince Mohammed Bin Salman at the G20 summit in Japan on Saturday, and announced that the two countries had agreed on expanding cuts. After that, he proposed for the first time the possibility of a nine-month agreement.

On June 22, the World Energy Blue Book: World Energy Development Report (2019), published by the International Energy Security Research Center of Graduate School of Chinese Academy of Social Sciences and Social Science Literature Publishing House, was released in Beijing.

I. Blue Paper’s social influence is becoming more and more prominent.

Blue Paper is divided into four parts: general report, market article, hot topic article and frontier discussion. The general report and the market report comprehensively reviewed the operation of the global energy market (oil, natural gas, coal, electricity and so on) in 2018, and prospected in 2019. The hot topics included the introduction and operation of China’s crude oil futures, geopolitical risks and China’s energy security, “one belt and one road” energy cooperation and policy recommendations, and The current situation and problems of the production, supply and marketing system of natural gas market, the policy of “coal to gas” and other hot issues are analyzed, while the frontier discussion section conducts in-depth research on the frontier topics of energy industry, such as research and development of energy storage technology and application, hydrogen fuel development, etc. We believe that the Blue Paper focuses on the global energy market and conducts in-depth analysis and Research on hot issues and cutting-edge topics. It has a high vision and a deep content. It has been published for seven consecutive years since 2013, and has had a wide and profound impact on the energy industry and academia.

2. China has become the third largest crude oil futures market in the world

The Blue Book points out that since the birth of the Shanghai Futures Exchange’s “Renminbi Crude Oil Futures” in March 2018, trading volume has risen rapidly. At present, China has become the largest crude oil futures trading market in Asia and the third largest in the world, second only to the WTI crude oil market in the United States and the Brent crude oil market in the United Kingdom, and its international influence has gradually emerged.

We believe that with the expansion of China’s crude oil supply and demand gap in recent years and the high degree of external dependence year by year, the trend of crude oil prices has brought greater challenges to the smooth operation of China’s petroleum and chemical industries; the launch and smooth operation of China’s crude oil futures market not only provides a multi-level for China’s relevant enterprises. It also promotes the internationalization of RMB and provides a guarantee for the healthy and stable operation of China’s petroleum and chemical industries.

3. China’s Natural Gas Demand Continues to Grow Highly

The Blue Book points out that China’s natural gas consumption continues to grow rapidly, driven by policies such as “coal to gas” and “winning the battle to defend the blue sky”. The proportion of natural gas in primary energy in China has also increased steadily from 5% in the early period of the 12th Five-Year Plan to 7.5% in 2018. In the next 10 years, the proportion of natural gas in primary energy in China will increase from 7.5% in 2018. 5% rose to about 15%.

We believe that natural gas, as a clean energy, will continue to maintain a rapid growth momentum under the background of the transformation and upgrading of China’s energy consumption structure. Driven by the gradual increase of urbanization rate, the gradual improvement of natural gas pipeline network layout and environmental governance, China’s natural gas demand will still be in the golden period of development, with huge potential for future development and incremental space. According to the forecast data of PetroChina Institute of Economics and Research, China’s natural gas demand will reach 620 billion square meters in 2035, of which 300 billion square meters are produced by itself, about 52% need to rely on imports.

III. Investment Suggestions

Sinopec, the leading domestic petroleum processing enterprise, will continue to be optimistic, as well as the wide range of energy sources focusing on natural gas business.

Risk cues. Oil price volatility risk, main product price decline risk, revenue less than expected risk, etc.

After a sharp decline in May, the domestic PVC market gradually stabilized and rebounded in June. Seasonal trend shows that there will be seasonal upward trend from the end of June to the middle of August in recent years. Under the background of increased peripheral pressure in 2019, can we get out of the seasonal upward trend again?

1. Supply keeps a low growth rate and supply pressure is relatively limited.

Since 2019, production capacity has been put into operation, including Shaanxi Beiyuan, Shanxi Ruiheng, Ningxia Jinyuyuan, Taizhou, a total of 700,000 tons, and there are still 740,000 tons of plant planned to be put into operation in the later period.

In terms of output data, the cumulative output in January-May 2019 was 790.307 million tons, an increase of 1.28% over the same period last year. Due to the high amount of spring overhaul in the year, the loss of spring overhaul (April-July) increased by about 200,000 tons compared with 2018. For the whole year, if the level of monthly maintenance in the later period is roughly the same as that in 2018, the growth rate of supply in the whole year will be about 3%.

From the point of view of overall supply and demand, although the demand performance is not good, the expected demand still maintains a year-on-year growth trend. The probability of tight balance between supply and demand throughout the year is higher. Serious imbalance between supply and demand is not expected. The price fluctuation range is expected to be the same as in 2018. The seasonal peak seasonal rise in 2018 started at the end of June and reached around 7500 in early August. The expected seasonal rise still exists in the year, but the rising space is expected to be lower than that in the third quarter of 2018.

2. Stop the Spot Drop and Stay Steady, Transaction Volume

From the perspective of PVC basis difference, the base difference has changed from strong to weak since mid-June, and futures are almost flat. After the end of the overhaul in July, construction starts to pick up, the pressure on the spot supply will increase, and futures may weaken in the latter period due to the expectation of the peak season.

3. The peripheral situation eased and market confidence resumed.

Influenced by the good news from Sino-US trade, the trend of commodities stopped falling and rebounded, the market was expected to restore, and the impact of PVC also rebounded. At the same time, considering the seasonal trend, the current time node has the expectation of gradually building the bottom. If the macro-level is stable in the later period, then in chemical products, because of the balance of supply and demand, it can be used as a multi-head configuration in chemical products.

4. Housing start-up data performed well and expectations remained in peak season.

From January to April, the new housing construction area was 58.552 million square meters, up 13.1%, and the growth rate increased by 1.2 percentage points. Among them, new residential construction area of 433.35 million square meters, an increase of 13.8%.

From the perspective of real estate data, the demand for PVC in September is still supported by the start of real estate construction from January to April, but the support for the 2001 contract is relatively limited.

5. Summary

From the perspective of the supply and demand pattern of PVC, the supply side in the first half of the year hedged the supply increment brought about by the putting into operation of some production capacity because of the much higher spring overhaul volume than the same period in previous years. It is estimated that the supply growth rate will be 1.58% in January-June and 3.3% in the whole year. On the demand side, the growth rate of demand is expected to be weaker than that of the past two years, but the growth trend is maintained. Supply and demand are expected to maintain a tight balance throughout the year. Prices are expected to rebound in the peak season of the third quarter, but it is difficult to break through the 2018 high in the year. The 09 contract can try to do more at the low. Long-term fundamentals, demand-side as a result of the downward trend of real estate is difficult to change, in the late sales end to start, will play a restraining role in the long-term demand, the 2001 contract can be empty run.