Saudi Arabia’s attack boosted global refinery profits and increased inflationary pressures in China

News: 1. Moody’s: The average Saudi crude oil output in 2019 is expected to be 9.7 million barrels per day. According to foreign media, many senior executives and board members in Saudi Arabia and Amy expressed doubts about the company’s goal of resuming production within three weeks. According to people familiar with the situation, they expect it will take twice as long to resume production as the current target. In a report last Friday, Commerzbank wrote that the actual impact of the attack on Saudi Arabia’s oil infrastructure is still difficult to judge, as the country may dilute any potential problems given the importance of customer relationships and the imminent listing of Saudi Aramco. However, there are also reports that Saudi Arabia may resume production early next week. A source familiar with the latest developments said that Saudi Arabia has recovered more than 75% of its lost crude oil production and will resume full production early next week.

2. After the attack on Saudi oil facilities, tensions in the Middle East escalated. The Pentagon of the United States has ordered an increase in the deployment of troops in the Gulf to strengthen Saudi air defense and missile defense. U.S. Secretary of State Pompeo said Sunday (September 22) that to avoid war with Iran, the U.S. military surge in the Persian Gulf is for “containment and defense”.

3. From September 1 to 19, Saudi Arabian crude oil exports averaged 6.8 million barrels per day and 7 million barrels per day in August. Overall, the decline was not significant. Although Saudi Arabia guaranteed that its export volume was not greatly affected, its crude oil supply to some customers shifted from Saudi light to Saudi medium and heavy crude oil (the current tight market for medium and heavy crude oil). Buyer acceptance is higher, so after Saudi Arabia’s own buffer, the impact of the spot market is limited, more reflected in the impact on the price difference of different oil types.

Summary: Yesterday, although it was reported that Saudi Arabia will resume all oil production capacity next week, we saw that crude oil showed some resilience. Brent shock consolidation did not fall below $62 a barrel. It is expected that crude oil will still perform stronger before Saudi oil production actually recovers. EFS 3.5, B/W price gap 6.13, the United States, Asia refinery profits recently rebounded rapidly. Rising oil prices have exacerbated China’s inflationary pressures and reduced policy adjustment space. China’s imports of crude oil from Iran did not decrease in July, with imports of about 925,000 barrels per day, an increase of 4.7% over the previous month. As a major buyer of crude oil in the Middle East, China faces challenges in energy security (Iran accounted for 6.3% of China’s crude oil imports in 2018, and Saudi Arabia accounted for 12.3%. If Saudi Arabia’s supply is not fully restored by the end of September and the supply reduction lasts for two months, and the United States has recently increased its oversight of Iranian crude oil exports, China’s crude oil imports will face a shortfall, and China may open strategic crude oil stocks.

In August 2019, China’s stock supply days were 174 days based on crude oil imports and 132 days based on crude oil processing. Since October 2018, China’s crude oil imports to the United States have been intermittent due to trade frictions between China and the United States. By August 2019, China is determined to impose a 5% tariff on U.S. crude oil imports. If China imports U.S. crude oil to supplement the Middle East crude oil import gap, it will restrict China’s bargaining power with the United States. Saudi Arabia’s conversion of crude oil gap into product oil gap is conducive to boosting global refinery profits.

Since Saudi refineries have reduced their output by 1 million barrels per day (possibly partially passive and partially active), in the absence of short-term changes in demand, this is equivalent to the gap of converting crude oil into refined oil. It is expected that Saudi refined oil imports will increase considerably in the future. According to IHS statistics, the capacity of five refineries, totalling 1.5 million barrels per day, may be directly or indirectly affected by the damage of Abu Ghaig processing plant installations. These five refineries account for 52% of Saudi Arabia’s total processing capacity, of which gasoline accounts for 45%, diesel accounts for 40% and fuel oil accounts for 80%. Before the impact, Saudi Arabia exported 500,000 barrels of diesel oil per day, imported 30,000 barrels of gasoline and exported 100,000 barrels of fuel oil per day. Assuming that the affected refinery was offline completely, this would lead to a decrease in diesel oil exports to 100,000 barrels per day and an increase in gasoline and fuel oil imports to 300,000 barrels per day, respectively. This would have a marginal impact on the supply and demand of refined oil in Asia-Pacific region. Larger.

Judging from the current data of Saudi refined oil tanker life, it is not significantly affected at present. The main reason is that there are still some product stocks in the previous refineries. However, it is reported that the trading subsidiary of Saudi Arabia and Amy has begun to make inquiries on diesel oil and aviation coal in the market. It is expected that it will meet the demand of European and other customers in the future, but due to the fact that since then, the refinery still has some product stocks. The shortage of refineries has led to the impact of the Saudi Arabian incident on downstream refined oils, which may continue to ferment this month, thus boosting the cracking price gap of refined oils and spot discounts.