Guotai Haitong: The annual inventory reduction has expanded, and crude oil in Q4 is adjusted to a tight balance.

Guotai Haitong released a research report stating that international oil prices showed a strong fluctuation in July. Looking ahead, the geopolitical situation remains complicated, and the process of opening the strait has experienced ups and downs. In Q3, inventory reduction is likely to make prices rise easily but difficult to drop, although the upward space is limited. Oil prices have retreated from previous highs, and the rebound potential is limited. It is recommended to focus on leading companies in the polyester industry and refining sector, where cost and demand pressures are easing, and prospects for improvement are promising. Guotai Haitong's main viewpoints are as follows: Oil Price Outlook With ongoing geopolitical uncertainties and the variable progress of strait opening, prices are likely to rise more easily but fall less easily in Q3, although there is limited upward potential. The drivers for the rebound come from: (1) the recurring geopolitical situation and delays in the strait opening, alongside globally low crude oil inventories as time progresses; (2) shipping routes through the Mandeb Strait are similarly affected; (3) previous buffering measures may change, including the nearing end of IEA's inventory releases, resumption of sanctions on Russia, and increased Chinese crude oil imports. Upside constraints are from: (1) the peak season for refined oil demand is coming to an end; (2) the approaching mid-term elections means a lower probability of escalating geopolitical tensions. Supply Side: Q3 and Q4 Supply Forecast Downgraded Global crude oil supply is expected to be 102.0 and 100.8 million barrels per day in 2026, down 4.3 and 5.3 million barrels per day year-on-year, with adjustments of -0.6 and -1.07 million barrels per day from last month. The IEA and EIA forecast global crude oil supply for 2027 to be 110.3 and 109.74 million barrels per day, increasing 8.3 and 8.92 million barrels per day year-on-year. According to IEA and EIA predictions, global crude oil supply for Q3 and Q4 2026 is expected to be 101.3, 106.6 and 99.7, 103.7 million barrels per day, respectively, with adjustments of -1.7, -0.9 and -1.6, -3.5 million barrels per day from last month. The geopolitical conflict has led to both EIA and IEA downgrading their Q3 supply forecasts, with Q4 supply also being adjusted downward. Demand Side: Diverging Demand Forecasts from Three Major Institutions According to predictions from IEA, EIA, and OPEC, global crude oil demand in 2026 is expected to be 103.3, 102.73, and 105.7 million barrels per day, representing year-on-year changes of -1.13, -1.23, and +0.62 million barrels per day, with adjustments from last month of -0.18, -0.04, and -0.2 million barrels per day. For Q1-Q4 2026, the average global crude oil demand is estimated at 104.4, 100.91, 104.27, and 106.13 million barrels per day, with adjustments of 0.06, -0.14, -0.34, and -0.14 million barrels per day from last month. Due to high prices, there are concerns about demand destruction in Q2, and the negative feedback effect has been gradually slowing down over time. Inventory Side: Expecting an Expansion of Inventory Reduction in 2026, IEA and EIA Adjusting Q3 and Q4 Balances to Tighten IEA and EIA expect the global crude oil supply to be generally tight in 2026, with a yearly supply-demand balance of -1.3 and -1.9 million barrels per day, and adjustments to the balance of -0.40 and -1.02 million barrels per day, leading to an expansion in inventory reduction. For Q3 and Q4 2026, the supply-demand balance in the global crude oil market is expected to be -1.8, +0.2 million barrels per day and -3.84, -0.63 million barrels per day, respectively. Both IEA and EIA have tightened their Q3-Q4 supply-demand balance adjustments. Risk Warning: Significant fluctuations in crude oil prices; changes in OPEC+ production policies; too rapid growth in production rates of non-OPEC+ oil-exporting countries; global economic slowdown and decline in crude oil demand; changes in geopolitical situation, etc.