CITIC Securities: Oil Shortage in Asia Gradually Spreading, Oil Prices Continue to Rise

CITIC Securities Research Report states that last week, energy infrastructure became an important variable in Middle Eastern geopolitical situations. Regional differences in global oil prices began to emerge, with spot prices in Dubai and Oman soaring above $150 per barrel, while Brent also diverged from WTI by over $10 per barrel. This indicates that oil shortages in Asia are gradually spreading to Europe. Due to transportation capacity limitations, U.S. crude oil even experienced inventory buildup, making WTI relatively weaker. From a long-term perspective, Kondratiev depression periods are often accompanied by declining economic growth and intensified geopolitical struggles. During this phase, oil, gas, and coal, as irreplaceable strategic physical assets, not only demonstrate resilience against inflation but also show significant volatility or upward shifts in price centers under stagflation environments, outperforming typical financial assets. The investment logic for energy companies is shifting toward dividend assets with “strong free cash flow + high dividends + ongoing buybacks.”

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CITIC Securities: Asian Oil Shortages Gradually Spread, Oil Prices Continue to Rise

From a long-term perspective, Kondratiev depression periods are often accompanied by declining economic growth and intensified geopolitical struggles. During this phase, oil, gas, and coal, as irreplaceable strategic physical assets, not only demonstrate resilience against inflation but also show significant volatility or upward shifts in price centers under stagflation environments, outperforming typical financial assets. The investment logic for energy companies is shifting toward dividend assets with “strong free cash flow + high dividends + ongoing buybacks.” The increased probability of the Sanmenxia conflict raises systemic risk premiums for energy assets. From the perspective of national energy security, it is necessary to focus on energy self-sufficiency projects in Xinjiang.

Crude Oil: Asian Oil Shortages Gradually Spread, Prices Continue to Rise

This week, energy infrastructure became a key variable in Middle Eastern geopolitical tensions. Iran attacked energy facilities in Saudi Arabia, Qatar, and others, pushing up oil and gas prices. Notably, regional differences in global oil prices are becoming apparent: spot prices in Dubai and Oman soared above $150 per barrel, while Brent diverged from WTI by over $10 per barrel. This signals that Asia’s oil shortages are gradually extending to Europe. Due to transportation constraints, U.S. crude experienced inventory buildup, weakening WTI. This week, Brent spot price is $111.01/barrel, up 13.73% week-over-week; WTI spot price is $96.08/barrel, up 4.46% week-over-week.

Xinjiang Coal Chemical Industry: Energy Security + Cost Advantages, Potential for a Golden Era

From a national strategic perspective, Xinjiang benefits from two major shifts: from coastal economy to the Belt and Road Initiative, transforming Xinjiang from a hinterland to a frontier gateway with geographic advantages. The balance between energy security and dual-carbon environmental goals is tilting, leading to a resurgence of coal chemical industries. Xinjiang relies on resource advantages to become a focus of energy security. Development-driven stability remains the main theme for Xinjiang. Historically, Xinjiang has balanced development and stability, and currently, it is in a critical period for high-quality development. The development of Xinjiang coal chemical industry shares similarities with U.S. shale gas, requiring long-term investment in core technology and infrastructure to ultimately reduce external energy dependence.

This week, Xinjiang Shanneng Chemical announced an EPC bidding for a 800,000-ton/year coal-to-olefins project’s methanol synthesis unit. On February 26, Xinjiang Shanneng Chemical issued a public tender for the EPC of the methanol synthesis unit in the Quhongwan project, with a total investment of 20.858 billion yuan, including 1.667 billion yuan (8%) for environmental protection. The methanol synthesis unit will use purified gas from upstream purification and green hydrogen from electrolysis, producing MTO-grade methanol and hydrogen, while recycling excess heat for power generation. With the upcoming Two Sessions, attention is recommended on the latest industry positioning and planning for coal chemical industry in Xinjiang’s 14th Five-Year Plan.

Natural Gas: Iran Attacks Could Destroy 17% of Qatar’s LNG Capacity, Recovery Could Take Up to Five Years

Qatar’s energy CEO and Minister of State for Energy Affairs told Reuters on Thursday that two of Qatar’s 14 LNG plants and one of its gas liquefaction facilities were damaged in the unprecedented attack. Repairs are expected to impact LNG output by 12.8 million tons annually over three to five years. Long-term force majeure declarations may be necessary for LNG contracts to Italy, Belgium, South Korea, and China.

Kondratiev Depression and Physical Asset Revaluation in Energy Security

We are still in the Kondratiev depression phase. Historically, this period is characterized by declining economic growth and intensified geopolitical struggles. During this phase, oil, gas, and coal, as irreplaceable strategic physical assets, not only show resilience against inflation but also exhibit significant volatility or upward shifts in price centers under stagflation, outperforming typical financial assets. The core support for prices is the systemic long-term underinvestment in upstream capital expenditures. Over the past five years, disciplined capital spending and carbon reduction policies have led to a supply elasticity shortage in oil capacity, creating a strong barrier to supply that can offset demand slowdown during a depression. Geopolitical tensions further elevate risk premiums. Consequently, the investment logic for oil companies is evolving toward assets with “robust free cash flow + high dividends + ongoing buybacks.”

Crude Oil: Capital Expenditure Constraints Highlight Resource Value During Kondratiev Depression

Global oil remains in a Kondratiev cycle downturn. Historically, this phase features declining growth and geopolitical tensions. As an essential strategic physical asset, oil prices are resilient against inflation and tend to fluctuate or shift upward during stagflation. The main support is the systemic long-term underinvestment in upstream capacity. The past five years’ discipline and carbon policies have limited capacity expansion, creating a supply-side barrier that can counteract demand slowdown. Geopolitical conflicts further increase risk premiums. The investment logic for oil companies is shifting toward assets with “strong free cash flow + high dividends + ongoing buybacks,” with prices remaining high.

Asian Oil Shortages Continue to Spread, Prices Rise

This week, energy infrastructure became a key variable in Middle Eastern geopolitical tensions. Iran attacked energy facilities in Saudi Arabia, Qatar, and others, pushing up oil and gas prices. Regional differences in oil prices are emerging: Dubai and Oman spot prices soared above $150 per barrel, while Brent diverged from WTI by over $10 per barrel. This indicates that Asia’s oil shortages are gradually spreading to Europe. Due to transportation capacity limits, U.S. crude experienced inventory buildup, weakening WTI. Brent spot price is $111.01/barrel, up 13.73%; WTI spot price is $96.08/barrel, up 4.46%. Overall, recent attacks on Middle Eastern energy facilities, combined with short-term U.S. releases of Iranian crude, have caused supply disruptions and policy countermeasures, making geopolitical tensions a key factor in oil price fluctuations.

Xinjiang Coal Chemical Industry: Energy Security + Cost Advantages, Potential for a Golden Era

Xinjiang’s coal chemical industry benefits from strategic shifts: from coastal economy to Belt and Road, transforming Xinjiang into a frontier hub with geographic advantages. The balance between energy security and environmental goals is tilting, leading to a revival of coal chemical industries. Xinjiang leverages resource advantages to become a key energy security hub. Development-driven stability remains the main theme. Historically, Xinjiang has balanced development and stability, and now it faces a critical period for high-quality growth. Similar to U.S. shale gas, Xinjiang’s coal chemical development requires long-term investment in technology and infrastructure to reduce external energy dependence.

This week, Xinjiang Shanneng Chemical announced an EPC bid for a 800,000-ton/year coal-to-olefins project’s methanol synthesis unit. On February 26, the company issued a tender for the EPC of the methanol synthesis unit in the Quhongwan project, with a total investment of 20.858 billion yuan, including 1.667 billion yuan (8%) for environmental protection. The methanol unit will use purified gas and green hydrogen from electrolysis, producing high-quality methanol and hydrogen, while recycling heat for power. With the Two Sessions approaching, attention is advised on Xinjiang’s 14th Five-Year Plan for coal chemical industry.

Natural Gas: Carbon Neutrality Could Boost Natural Gas as a Primary Energy Source

In 2024, global LNG supply grew by 2.5%, reaching 4,190 bcm, below the 2016–2020 average growth rate. Over the past decade, the U.S. has surpassed Qatar as the largest LNG exporter, driven by shale revolution. The IEA expects U.S. LNG exports to increase by 14% by 2025 with new projects. Natural gas has lower carbon emissions than coal and oil, making it a key energy source in global low-carbon transition. Different countries’ resource endowments lead to varying shares of natural gas in primary energy, but overall, its share is rising. Global natural gas consumption in 2024 is projected at 4,212 bcm, up 2.8%, reaching a record high. Asia remains the main driver, with a 5.5% growth rate, accounting for over 40% of new demand. India surpasses European countries as the fourth-largest LNG importer, accounting for nearly 7% of global LNG imports. China, Japan, and South Korea remain top importers. Under the global carbon neutrality goal, demand for natural gas is expected to continue rising.

Attention should be paid to the impact of the Iran Strait blockade on natural gas supply. According to CCTV, as of February 28, oil tanker traffic near the Strait has largely halted. The EU states that no ships are allowed to pass through the Strait. Qatar’s Ras Laffan and Oman’s Qalhat LNG terminals are key export points. Data from Kpler shows Qatar’s Ras Laffan exported 79.55 million tons of LNG in 2024, and Oman’s Qalhat exported 5.84 million tons, accounting for about one-fifth of global LNG trade. Unlike crude oil, LNG transport depends heavily on port infrastructure, with limited alternatives, meaning physical supply could be disrupted. LNG’s price elasticity is high, so geopolitical risks should be closely monitored.

1. Risks of Significant Volatility in International Oil Prices

Crude oil, as the core benchmark for the petrochemical industry chain, is influenced by geopolitics, OPEC+ production policies, global supply-demand, and macro liquidity. Unexpected sharp fluctuations could directly impact upstream exploration profitability and significantly disturb downstream refining and chemical margins, affecting overall industry stability.

2. Risks of Underwhelming Downstream Demand Recovery

Weak global economic recovery, sluggish domestic manufacturing and real estate demand, and high overseas interest rates could suppress demand for refined oil and basic chemicals, leading to price pressures, high inventories, and continued profit compression in refining and chemical sectors.

3. Overcapacity and Policy Regulation Risks

The global refining and chemical industries face increasing supply from new capacity, intensifying competition and narrowing profit margins. Stricter environmental regulations, dual-carbon policies, and energy consumption controls will raise compliance costs and capital expenditure pressures. Geopolitical conflicts and trade barriers may also disrupt raw material supply and export stability.

(Source: People’s Financial News)