In July, the prosperity index of the petroleum and chemical industry returned to the normal range driven by the three factors of cost support, continuous recovery of demand, and favorable policies, and turned positive for the first time year-on-year, ending 18 months of negative growth.
Under the strong support of demand recovery, the downstream rubber, plastic and other polymer product manufacturing prosperity index increased by more than 4 percentage points year-on-year and month-on-month. The prosperity index of chemical raw materials and chemical products manufacturing industry increased by 3 percentage points month-on-month, and the year-on-year decline was narrowing sharply. Affected by high temperature and precipitation, the demand for travel has declined, and the prosperity index of the fuel processing industry has dropped, which has led to a simultaneous decline in the prosperity index of the oil and natural gas extraction industry.
The China Petroleum and Chemical Industry Prosperity Index Compilation Group (hereinafter referred to as the Compilation Group) predicts that in the short term, the petrochemical industry is expected to continue to recover. However, as the global central bank's interest rate hike is gradually coming to an end, the petrochemical industry may maintain fluctuations within the normal range.
End 18 months of negative growth
In July, the prosperity index of the petroleum and chemical industry rose significantly to 96.38, an increase of 1.63 percentage points from June 2023, and returned to the normal range; 18 months of negative growth.
In terms of different industries, the prosperity index of rubber, plastic and other polymer products manufacturing industry in July increased by 4.96 percentage points month-on-month, rising from the cold range to the normal range. Affected by the positive recovery of the demand side, the prosperity index of the chemical raw material and chemical product manufacturing industry rose by 3 percentage points month-on-month, showing a marginal recovery, but still in the overcooled range. High temperatures and precipitation continue to affect travel demand, and the fuel processing industry prosperity index fell by 1.57 percentage points from the previous month, an expansion of the decline. Affected by the decline in the prosperity index of the fuel processing industry, although the prosperity index of the oil and natural gas extraction industry fell by 0.21 percentage points from the previous month, it was still in the warm range.
In July, China's economy continued its weak recovery. According to data from the National Bureau of Statistics, in July 2023, the manufacturing PMI rose slightly by 0.3 percentage points month-on-month to 49.3%, still in the contraction range. The supply and demand of the real estate market in key cities is still not optimistic. The area of newly added supply and the area of new housing transactions have fallen sharply year-on-year and month-on-month, and the heat of second-hand housing transactions has also declined. In June, the newly added social financing was 4.22 trillion yuan, a year-on-year decrease of 985.9 billion yuan, and a month-on-month increase of 2.67 trillion yuan. The growth rate gap between money M2 and M1 widened, and both residents and corporate loans showed signs of recovery.
Internationally, market expectations have digested the Fed's interest rate hike in advance. With the global inflation data falling, the major central banks have reached a consensus that interest rate hikes are coming to an end, and commodity prices are expected to rise rapidly in the second half of the year.
The support of the cost side continues to strengthen
In July, the cost-side support of the petrochemical industry continued to strengthen. With the decline in inventory, energy prices rebounded significantly.
In early July, the United States stopped the release of SPR (Strategic Petroleum Reserve), and the inventory level remained unchanged after falling to 346.8 million barrels. In terms of OPEC+, Saudi Arabia officially implemented the decision to reduce production by an additional 1 million barrels per day, and Russia's crude oil exports fell significantly, fulfilling its commitment to reduce exports. Overall OPEC+ production fell to 27.79 million barrels per day, a drop of about 900,000 barrels per day. In addition, the number of active drilling rigs in North America reported by oilfield services companies has also declined, which indicates that the decline in U.S. shale oil production in the third quarter is more likely. Affected by the termination of the release of SPR in the United States, the reduction in OPEC+ supply, and the decline in U.S. shale oil production, U.S. crude oil commercial inventories continued to decline in July. According to the weekly inventory data from the U.S. Energy Administration (EIA), the cumulative decline in U.S. commercial crude oil inventories in July reached 12.47 million barrels (comparison of data on July 28 and data on June 30). In addition to crude oil, U.S. refined oil inventories also declined significantly.
Driven by the low inventory, the US crude oil WTI, US gasoline RB, and US fuel HO futures contracts all rose continuously. WTI rose from 70.45 US dollars / barrel (June 30) to 81.76 US dollars / barrel (July 31), an increase of 16.1%; RB rose from 2.53 US dollars / gallon (June 30) to 2.90 US dollars / gallon (7 31), an increase of 14.6%; HO rose from 703.75 US dollars / ton (June 30) to 869.25 US dollars / ton (July 31), an increase of 23.5%.
According to the analysis of the compiling team, on the whole, the international energy supply is still tightening. As the inventory level continues to decline, the trend of international crude oil and refined oil prices becoming more and more volatile, and the return to fundamentals of pricing has been confirmed, which will give The price of petrochemical products brings continuous cost support.
Market confidence has been greatly boosted
In July, market confidence has been greatly improved, and policies involving various fields have been released one after another. 13 departments including the Ministry of Commerce issued the "Three-Year Action Plan for Comprehensively Promoting the Construction of a Quarter-of-a-Day City Convenience Living Circle (2023-2025)"; the Ministry of Commerce issued the "Notice on Several Measures to Promote Household Consumption"; Opinions on Economic Development and Growth, etc.
The petrochemical industry has a wide range of downstream applications, involving many aspects such as clothing, food, housing and transportation. The release of a number of major policies in the fields of macroeconomics, people's livelihood, real estate, consumption, and investment has not only boosted market confidence, but also brought prosperity to the petrochemical industry. strong support.
Looking forward to the future, the compilation team judges that from the perspective of the economic index structure, the inventory turnover rate has declined while the cost-profit margin and production enthusiasm have increased, indicating that the industry's willingness to replenish inventory is increasing. Affected by the hurricane season in the Gulf of Mexico and El Nino and other climate anomalies in the third quarter, the tense energy supply may continue. The overall international oil price will fluctuate upwards, and the volatility is expected to increase. This will continue to have a negative impact on the cost side of the petrochemical industry. Influence.
The compilation team predicts that in the short term, the cost-side drive will still dominate, and the recovery of demand will provide support, and the petrochemical industry is expected to continue to recover. However, as the global central bank's interest rate hikes are gradually coming to an end, periodic liquidity shocks are inevitable. Considering that the recovery momentum on the demand side is weak, the petrochemical industry may maintain fluctuations within the normal range. (Reporter Zhang Nan)
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