Crude oil has performed particularly well in this round of commodity rallies. Since late December 2018, Brent crude oil futures main contracts have increased by more than 50%. In the same period, domestic energy futures followed closely, while A-share petroleum and petrochemical sector performed slightly worse. Analysts said that short-term geographic factors will reduce crude oil supply, shale oil investment will reduce this year’s growth rate of shale oil production, if OPEC production reduction can be maintained, future oil prices are expected to continue to rise, which may boost relevant stocks.

Weak and weak

Since the rebound of international crude oil futures in late December 2018, it has embarked on a unilateral upward journey. According to Wenhua financial and economic data, as of April 25, Brent crude oil futures contracts reached a maximum of $75.59 per barrel, up 50.52% from the low of $50.22 per barrel on December 26, 2018, and the largest increase in NYMEX crude oil contracts was 57.22% over the same period.

Domestic energy futures followed closely. Since the low in late December last year, the main contract ranges of domestic crude oil, fuel oil and asphalt futures have increased by 40.81%, 33.16% and 44.92% respectively.

In contrast, in the A-share market, the increase of Petrochemical Index is not ideal. Wind data show that the Petrochemical Index (CITIC) has rebounded from its low on January 3, reaching a stage high on April 8, with a maximum range of 31.57%. Since then, it has maintained a shaky adjustment, closing on April 25, with a cumulative increase of 21.83% since the low, while the Shanghai Composite Index has risen 25.26% since this year.

Yang Owen, an energy industry analyst at Chuancai Securities, said that Brent and NYMEX crude oil prices have been rising recently, driven by the decline in EIA crude oil inventories and the decline in the number of drilling rigs in the United States. In addition, Schlumberger judged in his quarterly report that investment in exploration and development in North America would decline by 10% in 2019 due to rising investment costs and slowing technological progress, which was confirmed by several declines in drilling rigs in North America this year.

Oil prices still have upward momentum

As the top of the energy industry chain, the price of crude oil affects the whole body. Usually, rising oil prices will lead to higher prices of base oil, additives, logistics and transportation costs in downstream related industries.

Wind data show that among the constituent stocks in China Petrochemical Index (CITIC), international industry has increased the most since this year, reaching 156.16%, which is the only stock in the plate that has more than doubled its growth rate; Intercontinental Oil and Gas, Satellite Petrochemical, Maohua Shihua, Tianke, Tongkun, Petrochemical Oil Suit, Xinchao Energy and Sanhongpu have maintained their growth rates in the range of 90% to 50%.

According to Yang Owen, Schlumberger judged in his quarterly report that North American exploration and development investment would fall by 10% in 2019 due to rising investment costs and slowing technological progress, which was confirmed by several declines in drilling rigs in North America this year.

“If oil prices rise in the later period, shale oil increment will also be affected by the above two reasons. The growth rate of production may lag behind that of previous years. In addition, the deadline for the US exemption from Iranian energy exports is approaching, and India has suspended its order for Iranian crude oil in May. It is expected that other exempted countries and regions may also experience this phenomenon. Short-term geographic factors will reduce crude oil supply, shale oil investment will reduce this year’s shale oil production growth rate, if OPEC production reduction can be maintained, oil prices will be affected by many factors rise. Yang Owen said.

In addition to fundamentals, Li Yanjie, chief analyst of energy and chemical industry at CITIC Construction Investment Futures, said that domestic industrial value added and fixed asset investment growth had rebounded, and the recovery of the economy was also good for commodities. Overall, the macro and oil market fundamentals are good, and short-term oil prices are expected to remain strong.