Guotai Haitong: The widening supply gap throughout the year is expected to keep high oil prices sticky.

Guotai Haitong released a research report stating that in April 2026, international oil prices first fell and then rose, mainly affected by the fluctuating progress of negotiations. The average price of Brent crude oil was $102.5 per barrel, a year-on-year increase of 54.2% and a month-on-month increase of 2.9%. Looking ahead, with the continuation of the closure of the strait, the EIA and IEA predict that the global supply gap will expand for the entire year. Even if negotiations progress smoothly, oil prices will still face a tight reality due to the slow recovery of supply, with high oil prices expected to be sticky. Guotai Haitong's main points are as follows: Supply side: Lowering the annual supply forecast, OPEC+ deviates from target production According to the forecasts of IEA and EIA, the total global crude oil supply in 2026 is expected to be 102.2 and 101.6 million barrels per day, a year-on-year decrease of 4.0 and 4.75 million barrels per day respectively, compared to the previous month's forecast adjustments of 2.50 and 2.72 million barrels per day. With the continued closure of the strait, EIA and IEA have both lowered their Q3 supply forecasts. The decline in supply is mainly due to OPEC+, with OPEC+ production being negatively affected by geopolitical conflicts. In April 2026, production decreased by 1763 thousand barrels per day compared to the previous month, which is 9986 thousand barrels per day lower than the target production after considering compensating for production cuts, with the deviation increasing compared to March. Demand side: Lowering the annual demand forecast, with significant reductions in demand from European OECD countries and gasoline According to the forecasts of IEA, EIA, and OPEC, the total global crude oil demand in 2026 is expected to be 104.0, 104.2, and 106.4 million barrels per day, a year-on-year decrease of 0.4, an increase of 0.19, and an increase of 1.22 million barrels per day respectively, compared to the previous month's forecast adjustments of -0.33, -0.42, and -0.17 million barrels per day. By region, all three institutions have reduced the demand for crude oil in European OECD countries, with reductions of 0.12, 0.11, and 0.07 million barrels per day in Q2-Q4 respectively. Looking at downstream, according to the IEA, global gasoline, LPG, ethane, and naphtha demand year-on-year decreased by 164, 152, and 80 thousand barrels per day respectively, with monthly adjustments of -156, -97, and -73 thousand barrels per day. Inventory side: Land inventory depleting quickly, expanding supply and demand gap for the entire year Global total crude oil inventories in April amounted to 13.8 million barrels, with floating storage increasing by 30.9 million barrels and land storage depleting by 66.3 million barrels. By country, in April, China's crude oil inventories increased by 4.8 million barrels, Europe's crude oil inventories increased by 1.4 million barrels, US commercial crude oil inventories decreased by 4.5 million barrels, and strategic reserves decreased by 22.4 million barrels. IEA and EIA predict that the global crude oil supply and demand balance in 2026 will be -1.8 and -2.6 million barrels per day, with the gap increasing by 2.2 and 2.3 million barrels per day respectively. It is expected that the global crude oil market supply and demand balance for Q2-Q4 2026 will be -6.0, -1.9, and +1.5 million barrels per day, and -8.5, -4.4, and +2.0 million barrels per day, with the gap increasing compared to the previous month for Q2-Q4. Investment recommendations Oil prices are volatile at a high level, and it is recommended to invest in oil and gas exploration and production companies that benefit from high oil prices, such as CNOOC Limited (600938.SH), PetroChina (601857.SH), China Petroleum & Chemical Corporation (600028.SH), as well as companies related to non-oil process routes with cost advantages, lightweight and coal chemical leader Satellite Chemical (002648.SZ), Ningxia Baofeng Energy Group (600989.SH). Risk factors Significant fluctuations in crude oil prices; changes in OPEC+ production policies; rapid increase in production by non-OPEC+ oil-producing countries; global economic slowdown; decrease in crude oil demand; changes in geopolitical situations, etc.