Overseas media reports that Saudi Arabia may increase production within the year, which will catalyze significant changes in the market's outlook on OPEC+ production strategies and expectations for crude oil production. Reaffirming that increasing crude oil production will be bullish for oil transportation.
According to the Wisdom Financial App, GTJA released a research report stating that overseas media reports that Saudi Arabia may increase production within the year, which will catalyze significant changes in the market's outlook on OPEC+ production strategies and expectations for crude oil production. The oil transportation market is about to enter the traditional peak season, with shipowners actively supporting higher prices recently, leading to a continuous rise in oil shipping rates. The recent issuance of the third batch of refined oil export quotas will also help boost seasonal performance. Reaffirming that increasing crude oil production will be bullish for oil transportation, it is recommended to lower the peak season speculation and expect to position contrarian at a low level.
GTJA's main opinions include:
Overseas media reports that Saudi Arabia may increase production within the year.
According to overseas media reports on September 26, it is reported that individuals familiar with Saudi Arabia’s thinking revealed that Saudi Arabia is preparing to abandon the unofficial price target of $100 per barrel of crude oil and may gradually increase production starting on December 1, 2024, as planned, to regain market share, even if this results in lower oil prices. This shift in thinking represents a significant change for Saudi Arabia. Since October 2022, Saudi Arabia has led other OPEC+ member countries in multiple production cuts in an attempt to maintain high oil prices. The future implementation of OPEC+ production increase plans still poses uncertainties, but it will catalyze significant changes in the market's outlook on OPEC+ production strategies and expectations for crude oil production.
Reaffirming that increasing crude oil production will be bullish for oil transportation.
Recent oil price declines have heightened concerns about crude oil demand, leading to adjustments in oil shipping stock prices. Is the decline in oil prices bullish or bearish for oil transportation? The key lies in the reasons for the decline in oil prices. If the decline is due to reduced crude oil demand, the impact on crude oil end consumption and shipping volume will depend on the extent to which the decline in prices stimulates demand curve movement. If increased crude oil production leads to a decline in oil prices, it will likely stimulate growth in crude oil end consumption and shipping volume, thus being bullish for oil transportation.
Over the past two years, behind the upward trend of marine transportation, it has been affected by multiple production cuts by OPEC+ since October 2022. The high oil prices continue to restrain the demand for marine transportation. If future crude oil production increases, a decrease in oil prices will ensure that the production increase plan can be implemented as growth in crude oil exports, guaranteeing the continued growth of marine transportation demand. If oil prices fall to a significant contango in the futures market, it may further drive inventory replenishment, potentially leading to unexpected growth in marine transportation demand.
The rigidity of marine transportation supply is evident, and a super bull market in marine transportation can be expected.
Over the past two years, trade restructuring and refinery relocation have significantly driven the growth in marine transportation demand. In the first half of 2024, the capacity utilization rate in the marine transportation market has reached a threshold, and the marine transportation prosperity is on the rise. It is expected that the supply and demand of marine transportation will continue to improve in the coming years, and a super bull market in marine transportation can be expected.
The rigidity of marine transportation supply is apparent. The number of oil tanker orders in hand is limited, and aging is severe. In the coming years, there will be a shortage of shipyards, and shipowners have a limited willingness to place new orders. The demand for marine transportation will continue to grow. Over the past two years, the restructuring of the marine transportation trade has significantly increased the shipping distance, while OPEC+ production cuts and geopolitical factors have suppressed the growth rate of marine transportation volume. Recently, the impact of geopolitical events on oil prices has weakened, and oil prices are gradually returning to supply and demand logic, with oil prices falling in recent weeks, refinery operating rates rising, and freight rates increasing. Looking back over the past sixty years, crude oil, as the black blood of the global economy, has shown long-term steady growth and resilience to economic fluctuations. In the future, it is recommended to pay attention to OPEC+ production plans and U.S. petroleum policies.
Related symbols: Nanjing Tanker Corporation (601975.SH), China Merchants Energy Shipping (600026.SH), China Merchants Energy Shipping (601872.SH), CSSC Shipping (03877).
Upside risks: Economic fluctuations, geopolitical tensions, oil price risks, safety accidents, etc.
