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.

According to the monitoring of nickel prices by business associations, nickel prices soared again on July 18, with spot prices rising by 4.48% in a single day, breaking through the 110,000 mark, rising by 4.77% year on year and 28.31% over the 89,508.33 yuan/ton at the beginning of the year. The main nickel market in Shanghai opened at 11830 yuan, then the price rose sharply, touching the price limit in the morning, and then unlocked, closing at 16870 yuan, up 5.24%. LME closed its March nickel submission at $14,840, up 3.23%.

Nickel is still at a historic low

The nickel commodity index on July 18 was 69.55, up 2.98 points from yesterday, down 30.45% from the peak of 100.00 points in the cycle (2011-09-01), up 78.10% from the lowest point of 39.05 on November 24, 2015. (Note: Period refers to 2011-09-01 to date)

After four months of falling nickel, the market finally won. Nickel has been soaring since July, and today it is soaring nearly five points. One of the reasons is that the supply side disturbances occur frequently, the previous edition has specifically analyzed the link: business associations: nickel supply shortage news continued to ferment stainless steel slightly followed the rise. On the other hand, the steelmakers deliberately make high nickel prices.

Let’s first look at the price rises and falls of stainless steel and nickel in the industrial chain.

According to the rising trend chart of the stainless steel industry chain of business associations, from the beginning of the year to the end of the 18th, nickel prices rose by 28.31%, stainless steel only slightly increased by 1.56%. It shows that the price elasticity of stainless steel is less than that of nickel. In the historical market, when nickel price fluctuates greatly, the price of stainless steel can still operate relatively independently. According to this logic, if the price of stainless steel remains unchanged after nickel price rises, the profit of steel mills will shrink or even suffer losses. In fact, 17 years ago, when the price of nickel soared frequently, the price of stainless steel was relatively calm. You rose little, I did not move. You rose little, I rose little, previously thought that the poor demand downstream caused. But until Tuesday (16), large stainless steel factories entered the market to purchase nickel sheets. On the 17th, stainless steel rose by 3.06% for two consecutive days, as shown in the figure below.

According to the nickel price monitoring of business associations, the market of stainless steel has been depressed this year. By June, several large steel mills began to make joint bids. The method is to increase the price of stainless steel while increasing the nickel price. This gives a plain reason for the price increase of stainless steel (the rising price of raw materials leads to higher costs), which is due to the fact that large steel mills have already made joint bids. As the cost is relatively locked up after the stock is prepared in advance, the steel mill can achieve double revenue at the futures and spot ends in the market where the prices of stainless steel and nickel rise resonantly. In addition, although nickel prices have been rising for many days to reach the highest level in the year, there are still a large number of steel mills purchasing nickel plate spot.

Future forecast: In the context of no significant change in supply and demand, the recent sustained rise in nickel prices is closely related to the positive measures taken by large stainless steel plants and frequent interference at the supply side. But in fact, the earthquake in Indonesia, restrictions on mineral exports and environmental protection factors in the Philippines have not significantly affected the spot market. However, this wave of increase has been coordinated by stainless steel factories, large stainless steel factories into the market to purchase steel factories, resulting in a sustained rise in nickel prices. However, after the purchasing boom in large stainless steel plants, prices may gradually stabilize. Recent nickel market is short-term, it is difficult to sustain the sustained rise in nickel prices, the future market is concerned about whether there are new disturbances at the supply side.

Peter, head of natural gas, coal and electricity markets at the International Energy Agency (IEA)? Peter Fraser, introducing the latest report of the International Energy Agency (IEA) on the natural gas market on June 16, said that China’s natural gas production is expected to increase by 82 billion cubic meters by 2024, about 50% more than that in 2018.

Fraser told reporters that this production forecast includes both conventional and unconventional gas production growth. China’s natural gas exploration and development activities increased significantly in 2018, and it is expected that China’s natural gas production will achieve this growth.

Fraser said that China’s recent announcement of opening up its oil and gas exploration and development business to foreign investors will undoubtedly benefit China’s domestic production.

The International Energy Agency predicts that Asia will continue to lead the growth of global natural gas consumption in the next five years. China is expected to account for 40% of the growth of global natural gas consumption and will become the world’s largest LNG importer in 2024. The United States, China and Middle East countries will dominate the growth of global natural gas production, while the growth of natural gas exports will mainly come from the United States. China and Russia, the United States will produce 1 trillion cubic meters of natural gas in 2024, and become the largest LNG exporter in the world.

Fraser also believes that despite the convergence of spot gas prices in North America, Europe and Asia this year, it is still too early to say that the integration of global gas market prices, and winter weather may soon pull gas prices in different regions apart again.

Leslie Palti-Guzman, founder and President of GasVista, a LNG market consultancy, said that due to problems such as excessive technology and market supply, construction of several LNG projects in the United States has been delayed to varying degrees. The ability of China, India and Pakistan to absorb new LNG supply is limited, and LNG exporters need to develop new small markets from South America.

Ella, head of S&P’s global natural gas and power business? Ira Joseph said that the price gap between the United States and Asia-Pacific LNG did not support exports to the Asia-Pacific market because of the sharp decline in LNG prices in the Asia-Pacific region. At present, the United States mainly exports LNG to the European market.

On July 17, 2019, the price of fluorine chemical industry rose and fell in the list of 10 commodities, fell in the list of 10 commodities, rose and fell in the list of 5 commodities. Stable products include trichloromethane, hydrofluoric acid, fluorite, aluminium fluoride and cryolite.

On July 17, the market price trend of fluorine chemical raw materials was temporarily stable. The price of fluorite raw materials was 3150 yuan/ton. Recently, some domestic fluorite plants started to work normally. Mines and flotation plants in the field started to work normally. The supply of fluorite in the field was tight. However, the recent downstream market has risen, and the price of fluorite has been affected to rise. In the southern fluorite market, the start-up of installations is general, and the price of fluorite market in the southern region has risen. As of the 17th, the domestic price of fluorite in Inner Mongolia was 2900-3100 yuan/ton, the mainstream of fluorite negotiations in Fujian was 3000-3300 yuan/ton, the price of fluorite in Henan was 3000-3300 yuan/ton, and the price of fluorite in Jiangxi was 3000-3300 yuan/ton.

Recent downstream refrigerant industry trend is general, the starting rate remains low, the demand for hydrofluoric acid is general, but due to the reduction of on-site supply, the market price trend of hydrofluoric acid is rising. As of the 17th day, the market price of hydrofluoric acid is 12080 yuan/ton. Recently, the market price of hydrofluoric acid is rising, and the domestic starting rate of hydrofluoric acid is less than 60%. More, enterprises reflect that the supply of hydrofluoric acid on the spot is adequate and regular. Recently, the market of hydrofluoric acid on the spot has improved. Some enterprises’ex-factory prices have risen slightly. Until now, the mainstream of hydrofluoric acid negotiations in the southern region is about 11500-12500 yuan/ton, while the price of hydrofluoric acid in the northern market is about 11500-12500 yuan/ton. However, people in the field reflect the near future. Hydrofluoric acid market price trend is stable, Business Analyst Chen Ling believes that the market for hydrofluoric acid may be temporarily stable.

The price trend of aluminium fluoride products is temporarily stable, the supply on the market is normal, and the trading market is general. The quotation of aluminium fluoride from Zhengzhou Tianrui Grain Technology Co., Ltd. is 11,000 yuan/ton. The quotation of aluminium fluoride from Shandong Luzeng Chemical Co., Ltd. is 10,800 yuan/ton. The quotation of aluminium fluoride from Zhengzhou Zerun Energy Chemical Co., Ltd. is 9,800 yuan/ton. The quotation of aluminium fluoride Aluminum fluoride quoted 9500 yuan/ton.

Recently, the price of trichloromethane in Shandong has been temporarily stable. The ex-factory price of trichloromethane enterprises is around 3050 yuan/ton. The start-up rate of production is low. The 440,000 tons/year plant in Jinling, Shandong Province, has started normal operation. The 120,000 tons/year plant in Jinmao, Dongying, has been overhauled. The 220,000 tons/year plant in Luxi Chemical Industry has started 60 percent. The supply of trichloromethane production enterprises in China is relatively tight. Inventory is low.

In recent years, the price trend of domestic cryolite is temporarily stable, the operation of on-site equipment is stable and the supply is normal. The domestic negotiation price is about 6500-7000 yuan/ton. The actual transaction price is mainly negotiation. Generally speaking, the recent market of fluorine chemical industry is general, and it is expected that the trend of fluorine chemical industry will remain turbulent in the later period.

On Friday, July 12, the IEA of the International Energy Agency released its monthly oil report, which attracted much attention from the market. The organization expects that non-OPEC production led by the United States will grow faster than global demand for crude oil, limiting upward space for today’s international oil prices.

According to the IEA report, in the first half of 2019, the global crude oil market has fallen into a pattern of oversupply, with crude oil supply exceeding demand by 900,000 barrels per day. The excess supply will accumulate into already large stockpiles of crude oil, which began to take shape in the second half of last year, when global crude oil production surged, but demand growth began to swing.

Neil Atkinson, head of IEA’s crude oil industry and market department, pointed out that the prospects for the second half of this year and 2020 are “considerable oversupply of crude oil”, mainly due to the substantial increase in production from the United States and other countries:

“OECD commercial crude oil stocks increased by 22.8 million barrels per day in May to a total of 2.906 billion barrels, 6.7 million barrels higher than the five-year average. If OPEC output remains unchanged at the current level of 30 million barrels per day, it will increase global crude oil inventories by 136 million barrels by the end of the first quarter of 2020. OPEC + last week extended the existing agreement to cut production by 1.2 million barrels per day to March 2020, without changing the basic outlook for oversupply. The oil market is still a long way from rebalancing. At present, the oil market is not tightening. Any rebalancing action must continue.

The IEA said that the global crude oil supply exceeded 500,000 barrels per day in the second quarter of this year, compared with the expected supply gap of 500,000 barrels per day. This is mainly due to the “extraordinarily weak” demand for crude oil in the first half of the year, with global oil demand growing at 310,000 barrels per day in the first quarter and 800,000 barrels per day in the second quarter.

The report predicts that global oil demand growth will rebound to 1.8 million barrels per day in the second half of the year, with an average annual growth rate of 1.2 million barrels per day as a result of improved economic activity and accelerated operation of petrochemical plants. Global oil demand growth will rebound further to 1.4 million barrels per day in 2020, which is on the same level as last month’s forecast, but smaller than this year’s global crude oil supply. Average growth of 2 million barrels per day and supply growth of 2.1 million barrels per day next year.

Given the slowing rebalancing process in the global oil market, the organization expects that the pattern of over-supply in the oil market will continue until 2020, with supply growth of 2.1 million barrels per day largely coming from U.S. -led capacity expansion of non-OPEC organizations. The decline in demand for OPEC crude oil in the first three months of next year is expected to force OPEC production to drop from 30 million barrels a day to 28 million barrels a day, the lowest since the third quarter of 2003.

Observations show that the conclusions of the IEA report are consistent with the monthly report issued by OPEC on Thursday. OPEC had predicted that global oil consumption would continue to grow at the rate of 1.1% this year, about 1.1 million barrels per day in 2020. Under the pressure of non-OPEC supply represented by American shale oil, global demand for OPEC crude oil was expected to decrease by 1.34 million barrels per day to 29.27 million barrels per day, the third consecutive year of sharp decline.

Analysts say the demand figure is much lower than the output of OPEC’s 14 member countries last month of 9.83 million barrels per day, which means that simply extending existing production reduction agreements or failing to prevent new oversupply in the global crude oil market. Another embarrassing situation facing OPEC is that member countries rely on production cuts to support oil price efforts, instead providing opportunities for competitors such as U.S. shale oil to nibble up global market share.

The IEA stressed that the monthly oil report reflects the recent focus of market attention on the topic of “demand growth”. Although the organization has not lowered its global GDP growth expectations for the time being, there are signs that trade and manufacturing activities are deteriorating. Global manufacturing output fell in the second quarter for the first time since late 2012; new orders fell faster. At the same time, European oil demand is weak, aviation industry is facing development difficulties, and the demand for gasoline and diesel oil in the United States also fell in the first half of the year on a year-on-year basis.

According to Reuters analysis, the IEA report shows that U.S. oil output growth will exceed the sluggish growth of global demand, leading to a global backlog of large crude oil inventories in the next nine months, which seems to be anticipating that OPEC and its allies will have to step up production cuts. According to U.S. News and World Report, strong U.S. production and exports and poor global demand will keep oil prices weak by 2020. Brent’s oil price has fallen by $10 to $15 from the same period last year. The IEA expects oil prices to fall by 8% in 2020 compared with the level in 2018.

But Steven Kopits, managing director of Princeton Energy Advisors, does not fully agree with the IEA. In his view, U.S. crude oil production growth seems to be slowing down compared with last year, and inventories of crude oil and finished oil are also decreasing. This week’s data show that American oil rigs, according to Baker Hughes, have fallen for two weeks, while EIA crude oil and gasoline stocks have fallen for four weeks.

According to financial media CNBC, WTI and Brent oil prices will increase by more than 4% this week, reversing last week’s decline. One hour before Friday’s close, WTI August futures rose 0.3% to $60.39 a barrel, hitting a daily high of $60.74, the highest since May 22, while Brent September futures rose 0.5% to $66.81 a barrel, hitting a daily high of $67.28 since May 30.

Later this week, oil prices in the United States accelerated, driven by the Fed’s expectations of interest rate cuts, as well as the impact of bad weather on crude oil production.

U.S. stocks fell more than 0.2% in midday trading on Friday, and the dollar index fell to 96.846 on the refresh day, 27 points lower than the day’s high, approaching the 200-day average of 96.774. According to Xinhua News Agency, Tropical Storm will hit the United States, Trump declared a state of emergency in Louisiana. Crude oil production in the Gulf of Mexico has fallen by more than 1 million barrels per day or by 53%.

The 16th China International Polyester Summit Forum was held in Shanghai recently. At the forum, more than 20 polyester-related enterprises and traders from home and abroad made in-depth analysis of the upstream and downstream products of the polyester industry chain.

Futures Daily reporters learned at the meeting that in the first half of the year, in anticipation of the decline in global economic growth, the domestic commodity market as a whole showed a trend of oscillation, crude oil volatility was more intense, and the PPI index continued to decline slightly. Profit distribution of polyester industry chain is shuffled again, PTA rollercoaster market again, and profits expand substantially in the case of tight liquidity. Under the influence of demand withdrawal, the profits of polyester products shrink significantly. MEG is “stagnating” in the face of huge production expectations. In addition to PTA, the other products in the industrial chain fell significantly in the first half of the year.

According to the data of China Fiber Network, PTA maintained high-load production under high profit in the first half of 2019, and its output growth rate reached 9.4%. With two rounds of large-scale production reduction of polyester in the beginning of this year and May, PTA stock accumulation degree was relatively high, and the accumulative increase of social stock nearly doubled in the first half of this year. In addition, the volume of imports increased under the high price of the inner plate, with imports growing by nearly 18% in the first half of the year.

“In the first half of the year, the import growth rate of MEG declined to 2.6% under the dramatic expansion of output growth, but the high inventory still drags down the absolute price, and the profits of MEG in all ways are very poor.” Zhao Cheng, head of polyester industry chain of medium-fibre mesh, said.

At present, the overcapacity of the polyester industry chain has been gradually alleviated, and the near future prospects are still fragile. R.D. Udeshi, president of the polyester chain of Sincerity Industries Ltd., India, said that compared with previous data, it was found that the profits of the industrial chain offset the impact of large price fluctuations and reduced the downside risk. Subversive capacity deviation will benefit the polyester industry chain in the next few years. PX, PTA and MEG will be adjusted in the future due to the increase of production capacity, and stable demand growth will support the operation of the device.

In fact, more market participants are pessimistic about the chemical industry. Jason Miner, senior analyst at Bloomberg Global Chemistry, argues that a slowdown in demand for chemicals is inevitable and that oversupply may exacerbate the decline in earnings.

Some market participants believe that China officially opened the prelude of the year of refining and chemical industry in 2019, and a number of PX units are waiting to be put into operation. PTA will enter a new round of expansion cycle after 2019, which may become the last year of PTA low inventory. In 2020, PX is still in the peak period of production, PTA production capacity may usher in a major outbreak, and the number of new polyester production capacity is expected to remain at the level of 2019.

In this regard, Zhao Cheng said that the “integration” of PX-PTA industry chain will be further deepened, and the deepening of integration will also enhance the profitability of polyester factories. The concept of PX-PTA-polyester interests bundling is becoming increasingly solid, and the three links will enjoy a growth of overall profits.

Looking ahead to the second half of the year, Zhao Cheng said that in the case of trade friction eased, demand in the second half of the year will be in a slow recovery state, but orders flowing to Southeast Asia and other places from last year to now are temporarily irreversible. The growth rate of demand for polyester is expected to be 6%-7% for the whole year, and the growth rate of production is expected to be 9%-10% in optimistic circumstances. In the second half of the year, PX’s new capacity was put into operation at a slower rate than expected, and its profit enlargement and further withdrawal were likely to be smaller. The liquidity of PTA ensures that PTA is still a better multi-product in the chemical industry sector in anticipation of the increase of social reservoirs.

On the 15th, the Ministry of Natural Resources learned that the proven reserves of oil and gas in China stopped falling and rebounded last year, adding a 100 million ton oil field, three hundred billion square gas fields and a 100 billion square shale gas field.

The Ministry of Natural Resources issued a national report on oil and gas exploration and exploitation in 2018 on the same day, showing that China’s oil reserves increased by 959 million tons last year, an increase of 9.4% over the same period last year. Among them, there are three basins with newly proved reserves of more than 100 million tons, namely, Ordos Basin, Bohai Bay Basin (onshore) and Junggar Basin, and one oilfield with newly proved reserves of more than 100 million tons is Heshui Oilfield in Ordos Basin.

The new proved geological reserves of natural gas are 83.157 billion cubic meters, an increase of 49.7% over the same period of last year. Among them, there are two basins with proven reserves greater than 100 billion cubic meters, namely, Ordos and Tarim basins. There are three new gas fields with proven reserves greater than 100 billion cubic meters, namely Sulige gas field in Ordos Basin, Mizhi gas field and Krasu gas field in Tarim Basin.

The report shows that China’s oil and gas production has steadily increased. In 2018, China’s oil production reached 189 million tons, down 1.2% year on year. Basins with output of more than 10 million tons include Bohai Bay (including sea area), Songliao, Ordos, Junggar, Tarim and Pearl River Mouth basins, totaling 176 million tons, accounting for 92.8% of the total national output.

Natural gas production in China was 14.512 billion cubic meters, an increase of 6.4% over the same period last year. Among them, the basins with output of more than 3 billion cubic meters are Ordos, Sichuan, Tarim, Qaidam, Songliao and Pearl River Mouth basins, totaling 126.346 billion cubic meters, accounting for 89.3% of the national total.