Guotai Haitong: Geopolitical events re-ferment, crude oil rebounding temporarily.

Guotai Haitong released a research report stating that recently, US Secretary of the Treasury Benson announced a new round of sanctions against Russia's two largest oil companies, Rosneft and Lukoil, in order to urge Russia to immediately cease fire with Ukraine. This new round of sanctions by the US and Europe against Russia is more reflective of emotional disturbances. The US has not yet announced the timing of imposing sanctions on Russian crude oil, and the EU's dependence on Russian refined oil is stronger. Additionally, new geopolitical events are fermenting again. From a fundamental perspective, crude oil still faces a loose supply and demand situation. Even if there are temporary supply interruptions from Russia and Venezuela, OPEC's continued production increases are expected to help offset the gap. The main points highlighted by Guotai Haitong are as follows: Sanctions by the US and EU on Russia are the main cause of rising oil prices. According to Xinhua News Agency, on the evening of October 22, US Treasury Secretary Benson announced a new round of sanctions against Russia's two largest oil companies, Rosneft and Lukoil, to urge Russia to cease fire with Ukraine. Rosneft and Lukoil export 3.1 million barrels of oil per day, accounting for about half of Russia's crude oil exports. India, as a major buyer of Russian crude oil in Asia, will be directly affected by this sanction. In addition, the EU has issued its 19th round of sanctions against Russia, including a ban on liquefied natural gas imports starting in 2027, tightening sanctions on two major Russian oil companies, increasing the ban on shadow fleets, and implementing more stringent verification mechanisms to prevent third parties from bypassing inspections. This new round of sanctions by the US and EU against Russia is more reflective of emotional disturbances, with the US yet to announce the timing of imposing sanctions on Russian crude oil, and the EU's dependence on Russian refined oil being stronger. New geopolitical events are brewing again. According to media reports, on October 15, US President Trump stated that the US would consider launching ground operations against drug trafficking groups and confirmed authorizing the CIA to conduct operations in Venezuela. In the short term, US pressure on Venezuela is more about shifting domestic conflicts and increasing influence in South America, with limited potential for further escalation of friction. From a fundamental perspective, crude oil still faces a loose supply and demand situation. Even if there are temporary supply interruptions from Russia and Venezuela, OPEC's continued production increases are expected to help offset the gap. Even if countries like India reduce their imports of Russian crude oil, it will ultimately be a shift in trade volumes, affecting demand in the short term. Looking at the trend, crude oil faces pressure from higher-than-usual inventories, and expectations of continued production increases by OPEC lead to a lingering risk of oversupply. Investment recommendations The convening of the China International Petroleum and Chemical Industry Conference last week provided guidance for the future development of the petroleum and chemical industry in the next five years of the "14th Five-Year Plan". According to the spirit of the conference, under the backdrop of intensified competition, the industry is transitioning from a pattern of growth driven by project investments to one driven by innovation, with green low-carbon transformation and high-end structural upgrades becoming new drivers of industry growth. In this context, the two key focus areas are recommended: Anti-stagnation and new materials. In the anti-stagnation direction, it is bullish on segments like refining, long filament, and recommends companies like Rongsheng Petro Chemical (002493.SZ), Hengli Petrochemical (600346.SH), Tongkun Group (601233.SH), Xinfengming Group (603225.SH), etc. In the growth stock sector, it recommends low-cost coal-to-olefin leader Ningxia Baofeng Energy Group (600989.SH) and light hydrocarbon leader Satellite Chemical (002648.SZ). In terms of industry trends, it is optimistic about the circular economy industry chain, with potential beneficiaries such as Wankai New Materials (301216.SZ) and Levima Advanced Materials Corporation (003022.SZ). Additionally, in the medium to long term, undervalued, high dividend, and cash flow-strong companies like CNOOC Limited (600938.SH), Petrochina (601857.SH), ENN Natural Gas (600803.SH), and KUNLUN ENERGY (00135) are recommended. Risk warning Risks of overseas economic recession and lower-than-expected downstream demand.