Dongxing: Oil prices are expected to remain at a mid-to-high level, driving the oil and petrochemical sector to maintain a relatively high level of prosperity.

Dongxing released a research report stating that since the beginning of the year, overseas inflation has slowed down, the domestic economy has been slightly repaired, profits in the oil and gas exploration sector have increased, while revenue in the refining and trading sector has slightly declined. Market expectations for global oil supply in the first and second quarters of 2025 are gradually increasing, causing the oil price center to fall, but still remain at a medium to high level. The bank indicated that in the context of oil prices expected to remain at a medium to high level, they will focus on companies that offer high dividends and high growth potential. With a focus on market value management assessment, dividend capacity, and willingness, high dividend yields are expected to continue. The bank recommended CNOOC Limited (600398.SH), CNOOC (00883) as potential beneficiaries, as well as Petrochina (601857.SH), PETROCHINA (00857), and Xinjiang Xintai Natural Gas (603393.SH). Key points from Dongxing: Since 2024, overseas inflation has slowed down, the domestic economy has been slightly repaired, profits in the oil and gas exploration sector have increased, while revenue in the refining and trading sector has slightly declined. Since 2024, the year-on-year increase in the US CPI has gradually decreased, remaining below 3.0%, indicating a slowdown in inflation pressure from the US as a representative of global demand. This usually means that the Federal Reserve may slow down the pace of rate hikes or maintain lower interest rates, easing the pressure of a strong dollar on commodity prices denominated in dollars, especially for oil, which is a positive signal that helps alleviate valuation pressure and stabilize market expectations, indirectly supporting commodity demand. From October to December 2024, the domestic manufacturing PMI was slightly above the boom-bust line of 50, indicating that the manufacturing industry is in a weak expansion state. As domestic measures continue to support economic recovery and slow repair, the demand for oil and gas exploration, as well as refining and trading, is gradually increasing. In the first three quarters of 2024, the oil and gas exploration sector achieved total operating income of 336.17 billion yuan, a year-on-year increase of 6.01%; the refining and trading sector achieved total operating income of 5.5223 trillion yuan, a year-on-year decrease of 2.52%. Oil and gas exploration, refining, and trading: The oil price center is expected to remain at a medium to high level, driving sector growth and maintaining high prosperity Reviewing crude oil prices: From 2024 to February 2025, oil prices have fallen slightly. From January to December 2024, prices fluctuated between 69.19-91.17 US dollars per barrel, with a monthly average price of 80.8 US dollars per barrel. In January 2025, the average price of Brent crude oil was 78.34 US dollars per barrel, and in February, it was 75.55 US dollars per barrel, a decrease of 2.79 US dollars per barrel compared to the previous month, a 3.56% decrease. In 2025, the average price of WTI crude oil was 75.20 US dollars per barrel in January and 71.73 US dollars per barrel in February, a decrease of 3.47 US dollars per barrel compared to the previous month, a 4.62% decrease. Expectations for global oil supply in the first and second quarters of 2025 are gradually increasing, causing the oil price center to fall but remain at a medium to high level Since January 2025, the United States has become the world's largest oil-producing country, with uncertainty in oil policies due to the new US president taking office, leading to significant uncertainty in global demand. Expectations for global oil supply in the first and second quarters of 2025 are gradually increasing, causing the oil price center to fall but remain at a medium to high level. The expansion of production capacity by OPEC+ oil-producing countries and the increase in US shale oil production will be sources of supply increase in the oil market. In terms of feasibility for expected outcomes, the imminent US and Russia talks have significantly reduced geopolitical expectations, leading to a prediction of a slight decrease in oil prices. The mid-term trend in oil prices still depends on efforts by Trump to suppress prices from both the supply and demand sides. Trump has proposed his own solutions for Russia-Ukraine and the Middle East, and the upcoming US-Russia summit in Saudi Arabia is a focus of market attention. OPEC+ adjusts production cuts and seeks cooperation with non-OPEC countries to address market supply-demand imbalance Since 2022, OPEC+ (Organization of the Petroleum Exporting Countries and its allies) production decisions have been aimed at reducing production to maintain oil prices. Weak global economic recovery, slowing demand growth, and the increase in crude oil production in non-OPEC countries (such as the United States) have put downward pressure on international oil prices. On December 5, 2024, a decision was made to extend the voluntary production cut agreement of 2.2 million barrels per day until the end of March 2025, and to postpone the full removal of production cuts by a year, until December 2026. Despite the continued Russia-Ukraine conflict, Russia, as an important member of OPEC+, has maintained production policies consistent with OPEC to stabilize oil prices. OPEC is attempting to cooperate with non-OPEC countries (such as Russia, Mexico, etc.) to address the market supply-demand imbalance. Global oil demand has continued to rise since the pandemic recovery, with US gasoline demand higher than last year. In the medium to long term, OPEC+ is attempting to address the market supply-demand imbalance through dynamic production cuts and cooperation with non-OPEC countries (such as Mexico, etc.), indicating a tightening of future oil supply and providing support for oil prices to remain at a medium to high level. With oil prices at a medium to high level, the oil and gas exploration and refining and trading sectors are expected to maintain high prosperity Since 2021, Brent crude oil spot prices have steadily increased, maintaining a medium to high level, leading to annual revenue growth in the oil and gas exploration sector. In the first three quarters of 2024, the average price of Brent crude oil spot was 82.72 US dollars per barrel, a year-on-year increase of 0.70%; the oil and gas exploration sector achieved total operating income of 336.17 billion yuan, a year-on-year increase of 6.01%; the refining and trading sector achieved total operating income of 5.5223 trillion yuan, a year-on-year decrease of 2.52%, mainly due to a slight decline in sales volumes of gasoline, kerosene, and diesel leading to a decrease in oil sales revenue and narrowing profit margins for the refining and trading sector. For example, CNOOC Limited and PetroChina achieved a net profit of 116.659 billion yuan and 1325.22 billion yuan respectively, indicating high prosperity; PetroChina achieved a net profit. "The annual revenue increased by 0.7%, meeting expectations. Looking at the medium to long term, OPEC+ is attempting to address market supply and demand imbalances through dynamic production cuts and cooperation with non-OPEC countries (such as Mexico). This indicates that future oil supply will be tightened, with oil prices remaining well supported at higher levels. The oil and gas extraction, refining, and trading sectors may maintain a relatively high level of activity."Risk warning: geopolitical risks; risks of large fluctuations in energy prices; risks of demand falling short of expectations.