Recently, the international energy market has experienced ups and downs. At the end of September, the Russian natural gas Beixi 1 and Beixi 2 transmission pipelines leaked, and the natural gas price soared accordingly; At the beginning of October, OPEC+decided to reduce the crude oil production by 2 million barrels per day in November, and the international oil price also rose accordingly. The light crude oil in New York rose 16.48% in the first week of October alone. The drastic fluctuations in energy prices have forced the shutdown of petrochemical plants in some regions abroad, and the price of products has risen sharply. Domestic petrochemical enterprises have ushered in the “wind” of wealth creation.
Limited natural gas supply European petrochemical enterprises cut production
On September 26, two North Stream pipelines that Russia exported natural gas to Europe simultaneously leaked. The limited supply of natural gas has led to a sharp rise in the price of natural gas in Europe.
Beixi No. 1 is an important pipeline for Russia to transport gas to Germany and Western European countries. Since it was put into operation in 2011, it has provided 55 billion cubic meters of natural gas to Germany and Western European countries every year. In 2021, the gas transmission volume will reach 59.2 billion cubic meters, becoming an important part of the international energy pattern. Since June 2022, Russia has continuously reduced the load of Beixi 1. Affected by this, the international natural gas price showed a sharp rise, and the European natural gas price once reached a record 321 euros/megawatt hour.
Natural gas is not only an important energy source, but also an important chemical raw material. It is understood that more than 40% of the raw materials of European chemical industry come from natural gas, and the production process also relies heavily on natural gas. At the same time, there are major chemical enterprises in Europe, such as BASF, Costron, Solvay, DSM, Langsheng, Evonik, and Henkel. BASF, a European MDI and TDI producer, once said that in Europe, 60% of the natural gas it purchased was used to produce the energy needed – steam and electricity, and the remaining 40% was used to produce basic chemicals. The Beixi pipeline accident will affect the supply of energy and raw materials in Europe, and then the supply of chemicals in Europe.
According to the research report of the German Federation of Industry and Commerce (DIHK), after investigating 3500 German industrial enterprises, about 16% of them think it is necessary to reduce production or give up part of their business, of which nearly 1/4 have reduced production, the other 1/4 are in the process of reducing production, and the remaining 1/2 are planning to take measures.
OPEC+implements the reduction of crude oil production and the price continues to rise
Not only natural gas, but also oil prices continue to rise. On October 5 local time, the 33rd OPEC+Ministerial Conference decided to reduce the crude oil production by 2 million barrels per day in November. Affected by this news, international oil prices rose accordingly.
The international oil price has continued to recover since the low point in April 2020. After entering 2022, the Russian-Uzbekistan conflict triggered a global oil supply panic. On March 8, the price once exceeded $137/barrel, setting the highest oil price record since 2010. In the first half of 2022, Brent’s average oil price was $105/barrel, up 66% year on year. In the third quarter of this year, the US dollar index continued to strengthen, the market was not optimistic about the US and even the global economy, the demand side was restrained, and the international oil price fell significantly. As of September 30, Brent crude oil futures closed at $87.96 per barrel, down $26.85 per barrel or 23.39% from June 30.
On the issue of crude oil production, Europe and the United States and OPEC+are engaged in a continuous and fierce game. Most countries in the Middle East oil-producing countries rely on crude oil for their income, and the decline in oil prices will lead to the deterioration of fiscal revenues and expenditures. According to the calculation of the International Monetary Fund (IMF), Saudi Arabia, which ranks the first in the world in terms of oil production, achieved a fiscal balance at a crude oil price of 79.2 US dollars per barrel. If the oil price is lower than this level, it means that Saudi Arabia will have a fiscal deficit. Iraq and other countries with the second largest oil production are mainly concentrated at US $75-79/barrel. US $80/barrel can be said to be the common “bottom line” of major oil producers. Therefore, it is unlikely that the price of crude oil will fall sharply in the later period.