Minsheng Securities: Upward trend in oil prices during the peak season remains unchanged, focusing on the weak expectations reversal point

According to the Wise Finance APP, Minsheng Securities published a research report stating that the current crude oil fundamentals show a strong reality and weak expectations pattern. On one hand, in Q2 24, global crude oil demand has shown good growth momentum, with EIA/IEA statistics increasing by 830,000/710,000 barrels per day year-on-year respectively, and US commercial crude oil and gasoline inventories continued to decrease by 3.44 million and 2.01 million barrels this week, performing well in destocking during the peak season. However, on the other hand, the main driver of global demand growth, China's crude oil demand in May and June has declined for two consecutive months, with Shandong's refinery operating rate lower than previous years and showing a downward trend recently. The weaker demand data has raised concerns in the market about demand prospects. The current strong reality of destocking during the peak season and OPEC production cuts continue to drive oil prices higher, but the weak expectations partly hinder the upside space. It is recommended to pay attention to the marginal improvement space of Chinese demand and the turning point brought by the overseas interest rate reduction pace.

The upward trend in oil prices during the peak season remains unchanged, focusing on the turning point of weak expectations. Currently, the crude oil fundamentals show a strong reality and weak expectations pattern. On one hand, in Q2 24, global crude oil demand has shown good growth momentum, with EIA/IEA statistics increasing by 830,000/710,000 barrels per day year-on-year respectively, and US commercial crude oil and gasoline inventories continued to decrease by 3.44 million and 2.01 million barrels this week, performing well in destocking during the peak season. However, on the other hand, the main driver of global demand growth, China's crude oil demand in May and June has declined for two consecutive months, with year-on-year decreases in crude oil imports of -8.7% and -10.8% respectively, where May demand (production + imports) decreased by 6.3% year-on-year. In addition, Shandong's refinery operating rate in China is lower than previous years and still showing a downward trend recently, the weaker demand data has raised concerns in the market about demand prospects. The current strong reality of destocking during the peak season and OPEC production cuts continue to drive oil prices higher, but the weak expectations partly hinder the upside space. It is recommended to pay attention to the marginal improvement space of Chinese demand and the turning point brought by the overseas interest rate reduction pace.

US Dollar Index Decline; Oil Price Decline; Northeast Asia LNG Spot Price Decline. As of July 12, the US Dollar Index closed at 104.11, a weekly decrease of 0.77 percentage points. 1) Crude Oil: As of July 12, Brent crude oil futures settlement price was $85.03 per barrel, a weekly decrease of 1.74%; WTI futures settlement price was $82.21 per barrel, a weekly decrease of 1.14%. 2) Natural Gas: As of July 12, NYMEX natural gas futures closing price was $2.31 per million British thermal units, a weekly decrease of 0.73%; Northeast Asia LNG spot price was $11.93 per million British thermal units, a weekly decrease of 1.21%.

US Crude Oil Production Increase; Refinery Daily Processing Volume Increase. As of July 5, US crude oil production was 13.30 million barrels per day, a weekly increase of 100,000 barrels per day. As of July 5, US refinery daily processing volume was 17.11 million barrels per day, a weekly increase of 320,000 barrels per day US Crude Oil Inventory Declines, Gasoline Inventory Decreases. 1) Crude Oil: As of July 5th, the US strategic crude oil reserves were 373.07 million barrels, an increase of 480,000 barrels compared to the previous week; commercial crude oil inventories were 445.10 million barrels, a decrease of 3.44 million barrels compared to the previous week. 2) Refined Oil Products: Motor gasoline inventories were 229.67 million barrels, a decrease of 2.01 million barrels compared to the previous week; aviation kerosene inventories were 44.46 million barrels, an increase of 1.16 million barrels compared to the previous week; distillate fuel oil inventories were 124.61 million barrels, an increase of 4.88 million barrels compared to the previous week.

Investment Advice: Regarding investment targets, Minsheng Securities recommends the following investment themes: 1) With the increase in oil price center, state-owned enterprise reforms driving the optimization of state-owned assets, combined with high dividend characteristics, the valuation of oil central enterprises is expected to improve. It is recommended to pay attention to PetroChina, CNOOC, Sinopec; 2) With rising oil prices, it is recommended to focus on China National Petroleum Corporation (CNPC) with high growth and significant performance elasticity; 3) Acceleration of natural gas market reform, it is recommended to focus on New Natural Gas and Blue Flame Holdings which are in the growth stage of production; 4) With the acceleration of oil and gas production, it is recommended to focus on the scarce target in the gas well service sector, Jiufeng Energy.

Risk Warning: Geopolitical risks; Supply and demand imbalance risks that may arise from the possible conclusion of the Iran nuclear agreement; Risks of global demand falling short of expectations