abc3 January 2024Global Research and Evidence LabChina Oil, Gas and Chemical MonthlyOverall lukewarm ASPs of chemicals in light seasonOil and gas: MoM price declines in DecAverage Brent price was US$77.41/b in Dec, down 5% YoY/6% MoM. Disappointing OPEC+ meeting results in early Dec led to a sharp drop in Brent price, but oil prices were supported somewhat by Red Sea tensions and Fed rate cut expectations. Brent price averaged US$82.80/b in Q423, down 4% MoM/8% YoY. Global natgas prices retreated further MoM in Dec due to warm weather in the Northern Hemisphere. European natgas inventories stayed elevated, with UK NBP /Dutch TTF down 22%/21% MoM. JKM in Asia also slid 18% MoM, mainly as ample supply offset peak season demand and Panama Canal shipping restrictions. (See “Macro scorecard: Risk premiums wax and wane", Henri Patricot.)Chemicals: muted ASPs of chemicals in light seasonChina Chemical Price Index (CCPI) dipped 2% MoM in Dec, while both SHCOMP/A-share chemical sector index were 2% lower. Light soda ash prices hiked 25% MoM in Dec due to production suspension/environmental inspection, while those of butyl acrylate/acetate/glufosinate climbed 6-8% modestly MoM. Aniline/ethylene prices were dragged by subsiding oil prices in early Dec, but supported in end-Dec; glyphosphate prices continued to fall. For spread, Soda ash was among the top spread gainers in Dec, styrene/PE/PTA spread recovered on crude oil prices drifting lower MoM; PVC/urea/glyphosphate spread narrowed. January is still a traditional off-season for the chemical industry, and we project the chemicals market to remain lukewarm.2024 China oil, gas and chemical industry outlook Oil companies: UBS expects average Brent price to remain flat at US$82/b in 2024, and average Asia-Pacific LNG spot price to rise to US$15/MMBtu. We believe elevated oil & gas prices could support oil majors’ earnings. Chemicals: Currently spreads of most products stay below the 30th percentile of the past decade, and we expect restocking demand could drive a moderate recovery of fundamentals in 2024. We are upbeat on polyester filament/refrigerant/ethylene/MDI/pesticide sector. New materials: We view electronic chemicals as a potential beneficiary of domestic substitution/industry cycle upswing, and see greater upside in synthetic biology/hydrogen energy industry. (See “China Oil, Gas and Chemicals - Outlook 2024: Balance upstream/downstream; overweight chemicals”, 8 Dec 2023.)Stock picks We recommend CNOOC-A/H, as UBS forecasts the average crude oil price could surpass the current level in 2024. We recommend watching chemicals with price hike potential in 2024, Methionine (Zhejiang NHU), polyester (Tongkun Group), refrigerant (Dongyue Group). We believe Zhejiang Satellite Chemical could benefit from a mild pick-up in ethylene fundamentals. For new materials, we recommend Anhui Huaheng Biotechnoloy/Guangdon...
