In June, the prosperity index of the petroleum and chemical industry continued to fall, still in the cold range, but the overall recovery signal of the industry was strong. The prosperity index on the downstream near-demand side achieved positive growth month-on-month, and the production heat and inventory turnover rate improved significantly. It indicates that the recovery of demand is being transmitted to the middle and upper reaches of the industrial chain, and the destocking cycle is coming to an end. According to the analysis of the China Petroleum and Chemical Industry Prosperity Index Compilation Group (hereinafter referred to as the Compilation Group), the recovery of demand is supporting the bottoming and recovery of the industry-wide prosperity index, and the recovery trend has been further confirmed.
Looking forward to the third quarter, the compilation team predicts that the international energy will be exhausted, and the bullishness will gradually increase. Energy prices may rebound. The prosperity index of the petroleum and chemical industries will usher in an overall rebound.
The recovery of demand is transmitted to the upper and middle reaches of the industrial chain
The prosperity index of the petroleum and chemical industry in June dropped to 94.75, down 0.2 percentage points from May 2023, slightly lower than the normal range, and temporarily in the colder range; down 2.06 percentage points from June 2023. Specifically, there have been some positive changes in industry data, such as: the prosperity index of rubber, plastic and other polymer manufacturing industries on the downstream near-demand side has achieved positive growth month-on-month, and the production heat and inventory turnover rate have improved significantly; the fuel processing industry, chemical industry Inventory indicators for raw materials and chemicals manufacturing also improved significantly. This indicates that the demand recovery is being transmitted to the middle and upper reaches of the industrial chain, and the destocking cycle is coming to an end.
In June, China's economy continued to recover, and the momentum of recovery was still weak. According to data from the National Bureau of Statistics, in June 2023, the manufacturing PMI rebounded slightly by 0.2 percentage points to 49%, still in the contraction range. The supply and demand of real estate markets in key cities continued to weaken, and first-tier cities were more resilient than second- and third-tier cities. In May, the new social financing was 1.56 trillion yuan, a year-on-year decrease of 1.3 trillion yuan; the new credit in May was 1.36 trillion yuan, a year-on-year decrease of 541.8 billion yuan, which was lower than market expectations. On the international front, except for the Federal Reserve, major central banks raised interest rates more than expected. Under the environment of continuous tightening of liquidity, commodity prices are still facing downward pressure.
International energy supply presents high vulnerability
Looking from the energy market, the international crude oil is bullish. On the supply side, on June 5, the OPEC+ meeting decided that Saudi Arabia would voluntarily cut production by an additional 1 million barrels per day in July. The previous production reduction plan was extended for one year. On the same day, Saudi Aramco raised the OSP (Official Agreement Price) across the board, exceeding market expectations. On July 3, Saudi Arabia announced that it would extend its plan to cut production by 1 million barrels per day until August. Russia also announced that it would maintain its plan to cut production by 500,000 barrels per day, and reduce exports by the same amount in August to reduce supply. The decision by Saudi Arabia and Russia reflects the consensus of OPEC+ on crude oil price protection. The OPEC+ production reduction measures are mainly in response to the expected oversupply due to the economic recession, and the supply and demand of crude oil are still in a tight state. In terms of inventory, as of the end of June, the U.S. SPR (National Strategic Petroleum Reserve) inventory fell to 347.2 million barrels, and the outbound data shows that the U.S. Department of Energy has completed the release plan of 26.2 million barrels formulated in February 2023. Unless oil prices rise sharply, the U.S. Department of Energy will most likely stop SPR outbound and carry out SPR replenishment sequentially. Since October 2021, international oil prices have been fluctuating downwards. The direct reason is that a large amount of low-priced strategic reserve crude oil released by the United States has hit the market. As of July 1, 2023, the supply of this "cheap crude" has been terminated.
Natural gas prices bottomed out. Affected by the warm winter, European natural gas prices will drop sharply in the first half of 2023. On June 1, the price of the main contract of TTF (Dutch natural gas futures) fell to a minimum of about 23 euros/MW. With the record high temperature in many parts of the northern hemisphere, the pressure on power supply has increased, and the TTF price has also begun to bottom out.
The compilation team believes that, overall, the international energy supply still presents a relatively high vulnerability. Factors such as policy changes in supplying countries and climate anomalies may cause an imbalance between energy supply and demand, and low inventory pressure may trigger a rebound in energy prices.
The prosperity index will welcome the overall rebound
From the perspective of the natural environment, there is a high probability that there will be an El Niño phenomenon in the second half of this year. The compilation team reminds us to be alert to the supply shortage caused by abnormal weather.
El Niño occurs on average every two to seven years and generally lasts 9 to 12 months. It usually causes increased rainfall in southern South America, the southern United States, the Horn of Africa, and parts of Central Asia, and significantly increases Pacific hurricanes. Quantities; also cause severe drought in Australia, Indonesia, parts of South Asia, Central and northern South America. The International Meteorological Organization, the US National Atmospheric Administration and other meteorological agencies have issued El Niño forecast reports, and the occurrence of El Niño in the second half of 2023 is already a high probability event. The abnormal weather associated with the El Niño phenomenon may affect the supply of some varieties of agricultural products and energy in some regions, resulting in a supply gap.
Although the prosperity index of the petroleum and chemical industry in June weakened month-on-month and the year-on-year decline has expanded, from the perspective of the structure of prosperity indicators, the marginal improvement is obvious. The inventory turnover rate of the entire industry has risen month-on-month, and the downstream rubber, plastic and other polymer manufacturing industries have achieved positive growth month-on-month, indicating that demand recovery is supporting the industry-wide prosperity index to complete the bottoming and recovery, and the recovery trend has been further confirmed. Looking forward to the third quarter, the international energy sector is exhausted, and the bulls are gradually increasing. Energy prices may usher in a rebound. In the first half of the year, the cost-side factors that continued to hinder the growth of the prosperity index of the petroleum and chemical industries may turn from negative to positive. To sum up, the compilation team expects that the prosperity index of the petroleum and chemical industries will usher in an overall rebound. (Reporter Zhang Nan)
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