2020 Global Oil Market Outlook: The Rise Of Non OPEC Forces, China'S Crude Oil Production Or Up To 1.94 Million Tons.

In 2020, the sharp decline of the situation in Iran had cast a shadow over the global oil market this year.

In January 13th, the China Petroleum Group Economic and Technological Research Institute held a press conference on the development of oil and gas industry at home and abroad in 2019 in Beijing. Vice President Jiang Xuefeng said that the supply and demand of the world oil market reached a "fragile" balance in 2019. The trade friction between the United States and China, Europe and other major economies intensified and geopolitical risks increased, which had an important impact on the trend of international oil prices.

The Institute predicts that in 2020, the global economic trend will remain weak, and international oil prices will maintain a concussion trend. The average price of Brent crude oil will be in the range of 60-65 US dollars / barrel, which is roughly the same as the average oil price in 2019.

"However, the unstable global macroeconomic and political situation, especially the trade disputes between the United States and major economies, and the greater uncertainty of the Middle East geopolitical situation, may also occur when the international oil price falls below the average annual level of 50 US dollars / barrel or up to 75 US dollars per barrel." He said.

For China, in the complex and changeable situation, efforts should be made to ensure the safety of domestic energy supply, but at the same time, we need to push forward the process of energy transformation and reduce the dependence on oil and natural gas. In 2019, China's crude oil production declined for several consecutive years, reaching 1.91 billion tons, an increase of 1.1%. The estimated output of natural gas reached 173 billion 800 million cubic meters, an increase of about 9.8%.

The balance of supply and demand is very fragile.

By the end of 2019, the birthplace of the modern petroleum industry, the United States, for the first time in more than 70 years, has changed from net importers to net exporters for the first time in the past few years.

This is also seen from the supply side, the most obvious change in the global energy market in 2019.

This effect is reflected in the transformation of supply and demand structure and market share. Since OPEC announced a reduction in production in 2017, it has accumulated a total of 2 million 440 thousand barrels / day, while taking advantage of this opportunity, the increase of over 5 million 600 thousand barrels per day has been offset by the rapid increase in output of non OPEC countries, which not only greatly offset OPEC's efforts to reduce production, but also made the market share of OPEC countries 4%.

Besides increasing production, US sanctions also played a decisive role. In 2019, the global supply and demand gap of crude oil has shrunk from 1 million barrels per day in 2018 to the general balance. But in the process, the US sanctions against Iran and Venezuela, which made the global crude oil supply plummeted by 1 million 800 thousand barrels per day, is the "biggest force" to return to balance.

This shows that the impact on the global oil and gas market has become an important starting point for the United States to implement the "American priority" strategy. Jiang Xuefeng said, "at the same time, because the above balance is mainly due to the reduction of production and sanctions, this balance is very fragile, and it is easy to cause fluctuations in geopolitical factors."

The game between the two camps of Saudi Arabia and Iran, which was supported by the United States and Russia, intensified, and the dispute in the Middle East intensified. At the end of 2019, Saudi Arabia's largest crude oil treatment plant was attacked, resulting in a sharp decline of 5 of the country's oil supply capacity. In early 2020, the dispute between the United States and Iraq continued to heat up, bringing uncertainty to the region.

In many uncertainties, attacks on oil tankers and oil facilities frequently occur. The risk of oil supply disruption in the world, especially in Asia, has been significantly improved, which has greatly affected the safety of China's energy supply. In the first half of 2019, China's crude oil imports through the Strait of Hormuz imported 3 million 300 thousand barrels per day, accounting for 33% of the total oil imports.

High risk means not only the fragility of supply, but also the increase of cost. The price of oil in 2019 dropped by 10% compared with 2018, but the price of China's crude oil dropped by only 4.6%. Apart from the increase in the price of oil in the Middle East against China's oil price, and nearly 10 times the premium of crude oil, the rising freight rate also brought additional import costs to China.

At the same time, the crude oil market in 2019 showed another characteristic: the demand side replaced the supply side, which became the main factor affecting oil prices. Observing the oil price movements of Saudi Arabia last year and the US Iraq conflict this year, we can see that geopolitical supply expectations have only kept rising for several days, and after that, oil prices quickly dropped to the level before the crisis.

The reason behind this phenomenon is that the demand for crude oil fell sharply in 2019. In the whole year, oil demand in 2019 only increased by 900 thousand barrels per day, far below that of 1 million 500 thousand barrels per day in 2018, resulting in the economic situation and sluggish demand in most of 2019.

The global economic trend will remain weak in 2020. PetroChina Research Institute predicts that oil demand will increase slightly to 1 million 150 thousand barrels per day. In the United States, Norway, Brazil and Guyana, the supply of non OPEC will increase by 2 million 100 thousand barrels per day.

However, the balance of the world oil market still depends on the reduction of production alliance, including the subsequent development of the situation in Iran and Venezuela, as well as the increase in non OPEC countries dominated by the United States.

In 2019, China's crude oil had an external dependency of 72.5%. - Gan Jun photo

China still needs to boost production

In the second years of the ten years ending in twenty-first Century, China's crude oil output finally stopped for five consecutive years, and began to pick up. The momentum of rapid dependence on foreign oil and gas has been curbed. However, the issue of energy security can not be ignored.

In 2019, China's crude oil production declined for several consecutive years, reaching 1.91 billion tons, an increase of 1.1%. The estimated output of natural gas reached 173 billion 800 million cubic meters, an increase of about 9.8%. However, influenced by the intensive operation of large-scale private refineries, the demand for crude oil increased rapidly to 6.94 billion tons, and the net import volume of crude oil exceeded 5 million tons for the first time, reaching 5.03 billion tons, up nearly 10% from the same period last year.

In 2019, China's crude oil had an external dependency of 72.5%, and its dependence on foreign oil first broke 70%, reaching 70.8%. However, the growth rate of external dependence on crude oil and oil decreased by 0.8 and 1.3 percentage points respectively from the previous year. This is the first slowdown since the rapid decline in oil prices in 2014.

With the implementation of the seven year action plan to increase domestic oil and gas exploration and development, the output will continue to rise in the future. China Petroleum Research Institute predicts that domestic oil and gas production will reach 1.94 billion tons and 190 billion cubic meters in 2020. In addition, with the implementation of policies such as clean coal development, multi energy generation and energy utilization ratio of the terminal, the external dependence of oil and gas will grow at a steady low speed.

In terms of refined oil products, the rapid growth of domestic demand and the rapid construction of refining capacity have slowed down the consumption of three major products of domestic gasoline, coal and coal for a variety of reasons. The pressure on refined oil exports has increased, and the total net export volume of the first year has broken 50 million tons, with a surge of 34%.

In 2020, the growth rate of domestic oil demand is expected to slow down, the refining capacity will not be reduced, the supply will continue to be surplus, and the net export of finished oil will probably exceed 60 million tons in one stroke, surpassing South Korea as the largest oil exporter in the Asia Pacific region.

Among them, diesel is subject to the new regulation of "IMO limit", and the export volume will be as high as 26 million tons. At the end of 2019, the government promulgated policies, and for the first time explicitly put forward "supporting eligible enterprises to participate in crude oil imports and refined oil exports", which provided policy guarantee for private enterprises to expand refined oil exports and crude oil imports.

However, the overcapacity of refining and chemical production has become a prominent problem in the domestic market. In 2019, the annual refining capacity of 28 million 500 thousand tons / year was the highest since 2014. China's refining capacity has been at least 150 million tons / year in line with the level of production increase, the reasonable yield of refined oil, the demand for domestic refined oil and the large number of exports.

"According to the consistent idea of capacity replacement, domestic production capacity is basically built, and production capacity is reduced." An industry insider told reporters, "the problem of overcapacity that has been formed for a long time will not be alleviated in a short time, which will be a great pressure for domestic enterprises."

In terms of natural gas, China's natural gas production increased by 9.6% in 2019, exceeding the import growth rate. Significant progress has been made in the key projects of interconnection and interchange of natural gas infrastructure, the receiving capacity of LNG receiving stations and the capacity building of peak shaving of gas storage.

It is worth mentioning that the natural gas market reform has been steadily advancing, and the domestic gas safety and supply capacity has been significantly improved. In 2020 and after, with the expansion of China's natural gas market and the continuous improvement of marketization, the construction of natural gas supply and storage system needs to be perfected continuously, so as to further improve the efficiency of resource allocation and the ability of supply and support.