Guosheng Securities: The possibility of oil price fluctuations in 2025 is increasing, and the petrochemical sector is expected to welcome strategic allocation opportunities

According to Zhitong Finance APP, Guosheng Securities released a research report stating that under the backdrop of fluctuations, the petrochemical sector is expected to welcome strategic allocation opportunities. During periods of rising oil prices, the petrochemical sector often achieves excellent relative performance. Taking the bull market from 2014 to 2015 as an example, during the earlier stage of declining oil prices, the overall performance of the chemical sector was weaker than the market. However, during the rising oil price phase (from March 17, 2015, to June 12, 2015), WTI oil prices rose by 38%, while the petrochemical sector surged by 121%, outperforming the Shanghai Composite Index (+47%). Recently, against the backdrop of changes in geopolitics, supply, and demand, the possibility of oil price fluctuations has increased. If oil prices enter a phase of rising (after being oversold or consolidating), the petrochemical sector is likely to welcome strategic allocation opportunities.

Guosheng Securities' main viewpoints are as follows:

Macroeconomic Level: The Federal Reserve has initiated this round of interest rate cuts in an "unconventional" manner, waiting for demand to stabilize.

In September 2024, the Federal Reserve began a new round of interest rate cuts by reducing rates by 50 basis points. According to their review, in the seven interest rate cut cycles since 1980, oil prices have mostly been weak due to sluggish demand. If the economy deteriorates further into recession in the later stages of the rate cuts, there is also a possibility of a significant drop in oil prices. Therefore, before the global macroeconomic situation stabilizes in the medium term, they believe that oil prices may be suppressed by recession expectations for some time.

Demand Level: Recent growth has slowed, but there is no need for excessive concern in the long term.

They used the difference between the contribution of global GDP growth to demand and the drag caused by the penetration of new energy as the basis for measuring demand changes:

From 2000 to 2023, the average annual growth rate of global crude oil was 1.57 million barrels per day (1.8%), during which the corresponding average growth rate of global real GDP was 3.3%. Based on this, they estimate that the increase in crude oil demand supported by global GDP growth from 2024 to 2026 will be approximately 1.34, 1.41, and 1.43 million barrels per day (corresponding growth rates of 1.3%-1.4%). Additionally, they estimate that the penetration of new energy vehicles and the efficiency improvement of fuel vehicles may cause a demand drag of 330,000, 480,000, and 520,000 barrels per day, resulting in expected crude oil demand increments of 1.01, 0.93, and 0.90 million barrels per day, while the current total global crude oil demand is about 100 million barrels per day.

Supply Level (Non-OPEC): Non-OPEC crude oil supply growth in 2025 may already meet global demand increments.

According to EIA forecasts, global non-OPEC crude oil production is expected to increase by 1.62 million barrels per day in 2025, with 71% of the growth contributed by the United States, Canada, Guyana, and Brazil. When comparing the increments of supply and demand, IEA and EIA estimate that the global crude oil demand increments in 2025 will be 1.00 and 1.22 million barrels per day, while the global non-OPEC crude oil supply increments will be 1.50 and 1.62 million barrels per day. The two institutions predict that the supply increment exceeds the demand increment by +500,000 and +400,000 barrels per day, respectively, indicating that the growth in non-OPEC supply in 2025 is expected to meet the global demand increment. Therefore, changes in OPEC+ supply will become a key factor affecting the oil supply and demand pattern Supply Side (OPEC+): OPEC+ production cuts may face reversal, focus on the Israel-Palestine situation.

OPEC+ Supply Upward Factors: After review, the bank found that during the three rounds of production cuts since 2022, OPEC's actual production cut scale was less than the agreed reduction amount. At the same time, its production has gradually increased on a monthly basis. Therefore, the bank expects that after the new round of 2.2 million barrels per day production cuts is canceled in January next year, the estimated production increase for OPEC+18/OPEC-9 countries in the next 12 months will be approximately 600,000/520,000 barrels per day.

OPEC+ Supply Downward Factors: Due to the escalation of the Israel-Palestine situation, the U.S. government announced it would further expand sanctions on Iranian oil and gas. Currently, Iran is still exempt from OPEC production cuts. If sanctions intensify and lead to a real reduction in supply, Iran's potential output (which has increased by 710,000 barrels since 2023) could provide some offset to OPEC+'s expected production increase.

Investment Recommendations:

If oil prices (after a sharp decline or consolidation) enter a phase of upward movement, focus on high-growth "energy price spreads," oil and gas targets such as Satellite Chemical (002648.SZ), Baofeng Energy (600989.SH), and Zhongman Petroleum (603619.SH); favor high-dividend oil and gas assets such as China National Offshore Oil Corporation (600938.SH), China Petroleum (601857.SH), and China Petrochemical (600028.SH), and suggest paying attention to petrochemical targets that benefit from rising oil prices such as Rongsheng Petrochemical (002493.SZ), Hengli Petrochemical (600346.SH), Tongkun Co., Ltd. (601233.SH), Xin Fengming (603225.SH), and Hengyi Petrochemical (000703.SZ).

Risk Warning: OPEC+ production changes, geopolitical risks, macroeconomic uncertainties, calculation error risks