Zhitong Finance and Economics APP learned that Guolian Securities released a research report stating that OPEC member countries reached a new production agreement at the 37th ministerial meeting and will extend the voluntary production reduction policy until the end of 2025, gradually canceling voluntary additional production reductions from September 2024. According to calculations, after the implementation of this production agreement, the oil market may show a tighter supply-demand balance in the second half of 2024, and under the baseline scenario, the oil market may face a supply gap of nearly 0.5 million barrels/day by the end of 2024. Expected oil prices will still remain at high levels due to fundamental support.

Petroleum extraction: Profit remains strong driven by high oil prices.

Companies with large oil and gas upstream businesses benefit from the sustained strong performance due to high oil prices: as of the first quarter of 2024, the petroleum extraction sector achieved a total operating income of 937 billion yuan, up 9.83% year-on-year; and a net profit attributable to the parent of 87.1 billion yuan, up 9.4%. Guolian Securities believes that due to the impact of the oil and gas upstream investment cycle, oil prices may remain at high levels in the next few years, coupled with the continuous strengthening of the risk resistance capabilities of leading central enterprises such as the "Big Three", future profits are expected to continue to remain strong.

Oil service projects: Capital expenditures may have a positive impact on performance.

Global upstream oil and gas total investment is expected to resume high growth in 2022. According to the IEA World Energy Investment Outlook report, global upstream oil and gas apparent investment is expected to increase by 7% to 570 billion US dollars in 2024, further increasing from 2023. Taking into account upstream inflation, effective capital expenditures are likely to be less than 7%. If effective capital expenditures continue to increase positively after deducting inflation, the oil service project sector is still worth paying attention to.

The operating rates of other petrochemical companies that have completed their expansions may determine the supply-demand direction.

Guolian Securities believes that the expansion periods of polyester filament and some refining industry leaders may end, and their operating status may undergo significant changes and are worth watching. On the one hand, through analysis, it was found that after the high tide of polyester filament production capacity releases until 2023, there are no large-scale production capacity release plans for the time being, and manufacturers are gradually affected by various production factor indicators. If leading enterprises can properly control their operating rates, they can avoid the oversupply impact brought by high operating rates in the first half of 2024, and the polyester filament sector is worth continued attention.

Investment recommendations: It is suggested to focus on China Oil (600938.SH) and the leading oil service enterprise China Oilfield Services (601808.SH), as well as the industry representative companies Tongkun Group (601233.SH) and Xinfengming (603225.SH) with core assets and advanced capacity, and whose business focus is on polyester filament.

Risk warnings: The risk of global macroeconomic downturn; the risk of mismatch caused by global industrial chain rebalancing; the risk of large fluctuations in commodity prices; the risk of project progress and technology breakthroughs falling short of expectations; the risk of international trade policy; the risk of climate change exceeding expectations.