Tianfeng: What phase is the energy sector in the cycle?

Tianfeng released a research report stating that crude oil has experienced three major cycles in history, and by 2025, the oil market will still be overshadowed by the shale oil era. In terms of short cycles, the current short cycle is coming to an end from 2020 to 2025, with only one breaking and clearing process left; in terms of coal, the inventory cycle is nearing completion of a cycle, but marginal supply constraints limit the rebound space; natural gas still awaits a decline after the capacity cycle lands. The core views are as follows: Crude Oil - The big cycle is still in the era of shale oil, and the small cycle still needs to wait for a break. Crude oil has experienced three major cycles in history - the rise of oil-producing countries in the 1970s, privatization and relaxation of oil in the 1980s-90s; and the demand from China and "Arab Spring" in the 2000s. After the 2010s entered the era of shale oil revolution. Although the 2020s experienced events such as the epidemic and Russia-Ukraine, overall, by 2025, the oil market will still be overshadowed by the shale oil era. In terms of short cycles, it seems that there is a five-year cycle after the United States resumed oil exports, which is the expansion-contract cycle of shale oil. Currently, the current short cycle is coming to an end from 2020 to 2025, with only one breaking and clearing process left. Coal - Completing an inventory cycle, the bottom may have appeared, but marginal supply constraints limit the rebound space. The capacity cycle of coal has policy attributes, and the inventory cycle has market attributes. The current inventory cycle is nearing the completion of a cycle. From passive destocking in 2021, to active inventory building in 2022, to passive inventory building in 2023/24, to active destocking by 2025. The supply-demand pressure of thermal coal in 2025 is self-evident. Negative feedback from the supply side has appeared, and prices have bottomed out. High-cost suppliers (mainly those far from consumption areas), including imported coal, are expected to accelerate destocking in May. The coal production in Xinjiang is expected to enter a zero-growth or negative growth state. However, it is difficult to have high expectations for the elasticity of coal prices after hitting bottom. Because marginal suppliers such as Xinjiang and Indonesia have good production elasticity. It is easy to destock when prices fall, helping to quickly bottom out; conversely, when prices rebound, it is also easy to resume production, limiting the space for a rebound. Natural Gas - Still awaiting a decline after the capacity cycle lands. By 2025, oil prices (inflation-adjusted) have dropped back to the low levels before 2015-2017 at $63 per barrel. However, the current natural gas price in Europe, TTF, is still around $12 per mmBtu, significantly higher than the average of $7.6 per mmbtu from 2015-17. We believe the reason is that the supply of natural gas relies more on infrastructure (pipelines, LNG export terminals, receiving stations, etc.), and it takes longer for supply to rebalance. With new capacity coming online, by 2025, global natural gas supply, especially the LNG market, is expected to gradually enter a loose state, and LNG spot prices are expected to return to below long-term contract prices. Risk warnings: 1) Lower-than-expected oil demand leads to the risk of accelerated breaking of prices; 2) Escalation of geopolitical conflicts in Iran or Russia-Ukraine leading to unexpected rebound in oil prices; 3) Risks of lower-than-expected coal demand due to factors such as China's climate; 4) Risks of coal supply exceeding expectations in major coal-producing provinces such as Shanxi and Xinjiang; 5) Risks of international natural gas LNG export terminals coming online slower than expected, leading to TTF prices remaining high longer than expected; 6) Risks of power demand from data centers in the United States exceeding expectations leading to a higher than expected increase in HH prices; 7) Risks of lower-than-expected natural gas demand in China.