Limited upside and downside of crude oil LPG may continue to decline after rebound

Text of research report

Inflation pressure in the United States has eased to some extent, improving the prospects for interest rate cuts, and international oil prices rose.

NYMEX crude oil Futures 06 contract rose 0.60 dollars/barrel or 0.76% at 79.23; ICE oil distribution futures 07 contract rose 0.52 dollars/barrel, or 0.63%, to 83.27. The main contract 2407 of China INE crude oil futures fell 5.5 yuan to 605.5 yuan/barrel, and rose 6.6 yuan to 612.1 yuan/barrel overnight. Last night, PG06 rose by 38 points, or 0.84%, to close at 4552 yuan/ton.

In terms of domestic spot goods, the market showed a steady decline, and it was difficult to effectively boost the demand side. The seller was still mainly shipping, and the market was still weak.

Domestic mainstream: 5020-5200 yuan/ton in South China, 4900-4950 yuan/ton in Shanghai, 5020-5150 yuan/ton in Jiangsu, 5000-5120 yuan/ton in Zhejiang, 5000-5000 yuan/ton in Fujian, 5100-5150 yuan/ton in Shandong civil mainstream, 5470-5900 yuan/ton in post ether C4 mainstream. (Data source: Longzhong Information)

LGP has been gradually affected by crude oil recently, and the fundamentals of LPG itself are even weaker. In the future, from the perspective of cost, OPEC production reduction will expire in June, and the US crude oil supply will continue to increase, making the oil price position not very high. OPEC+is unlikely to have greater efforts to reduce production, so there is a great opportunity to increase the supply side. On the demand side, the economic data of Europe and the United States will loosen, and demand may decline.

In terms of inventory, although there has been a slight destocking recently, the trend of stock accumulation is not changed. The fundamentals of LPG itself are relatively worse. On the demand side, the slack season is coming, and the overall demand is still weakening; After the rebound of the operating rate in the early stage, the industrial profit of the chemical end has significantly decreased, and the expected future operation will fall back.

On the whole, LPG supply costs and potential demand are not optimistic, and the price may continue to decline after the rebound.

Crude oil

According to Sina Finance: (1) Three officials of the Federal Reserve said that the Federal Reserve should keep interest rates high for a longer time while policymakers were waiting for more evidence of slowing inflation, which shows that officials are not eager to cut interest rates. Loretta Mester, President of the Cleveland Federal Reserve, John Williams, President of the New York Federal Reserve and Thomas Barkin, President of the Richmond Federal Reserve, said on Thursday that inflation may take longer to reach the 2% target. (2) The EIA natural gas inventory of the United States by the week of May 10 was 70 billion cubic feet, expected to be 77 billion cubic feet, with a previous value of 79 billion cubic feet. (3) Abdul Malik Hussai, the leader of Yemeni Hussai armed forces, said in a televised speech on the 16th that the organization would continue to expand the scope of attack. All ships going to Israeli ports would become targets of Hussai armed forces, and these ships would be attacked wherever Hussai armed forces can reach. (4) The number of Americans applying for unemployment benefits for the week ending May 11 was 222000, expected to be 220000, with a previous value of 231000. The number of Americans who continued to apply for unemployment benefits in the week ending May 4 was 1.794 million, with 1.785 million expected, compared with 1.785 million previously.

[Logic and Viewpoint]

The crude oil continues to oscillate at the current position, and the upper and lower space is limited. The geopolitical situation has not changed significantly. Although the conflict continues, it has little impact on the actual supply of crude oil. What needs to be focused on in the future is the impact of OPEC+oil producing country volume policy changes on the trend of crude oil, which may bring direction choices for crude oil. Empty orders can still be considered for proper holding, and it is recommended to reduce the holdings appropriately for those with heavy positions.

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