Recently, geopolitical conflicts in the Middle East have escalated again, affecting international oil and gas prices, but the upward trend is not solid. Fundamentally, the loose supply and demand situation does not support a sustained price increase. Industry experts believe that the international crude oil market is oversupplied, and there is significant downward pressure on prices in the fourth quarter. This year, the supply and demand situation in the international natural gas market has been significantly more relaxed than in previous years, with the price center significantly lower year-on-year. It is expected that this winter and next spring, China's natural gas market will continue to be generally balanced with local tightness, and the resources for supply guarantee are relatively sufficient.
Crude Oil Market:
Oversupply and significant downward pressure on prices
In September, tensions between Israel and Iran escalated again, with the market concerned that Israel would attack Iran's oil infrastructure. At the beginning of October, international oil prices once jumped in a single day, but soon turned downward. On October 18th, the New York crude oil futures price closed at $69.22 per barrel, and the Brent crude oil futures price closed at $73.06 per barrel. In early April, international oil prices once reached $90 per barrel.
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It is not that the market has become insensitive to risk signals; the root cause of the weak oil prices lies in the ample total supply of the crude oil market, while demand has not shown a significant improvement.
Recently, the International Energy Agency (IEA), the U.S. Energy Information Administration (EIA), OPEC, and several large international investment banks have all lowered their estimates for global oil demand growth in 2024. On October 9th, Morgan Stanley lowered its expectations for global oil demand growth for this year and next year, and predicted that the oversupply situation in the oil market next year will further intensify, reaching 1.3 million barrels per day, up from the previous expectation of 700,000 barrels.
Fatih Birol, the Executive Director of the International Energy Agency, stated that as the transition to clean energy progresses and the economic structures of some major economies change, global oil demand growth is slowing down and will reach its peak by 2030.
The IEA's 2024 Medium-Term Oil Market Report indicates that with slowing demand growth and a surge in supply, the global oil market is expected to face a severe oversupply by 2030.
The U.S. Energy Information Administration recently lowered its oil price forecasts for this year and next year, reducing the average Brent crude oil futures price to $81 per barrel and the average New York crude oil futures price to $77 per barrel for 2024; further reducing them to $78 per barrel and $73 per barrel for 2025.
Natural Gas Market:Abundant Supply Leads to a Downward Trend in Gas Prices
Affected by heating demand, the seasonal peak and valley difference in natural gas consumption in northern China is significant. As the weather turns cold, preparations are being made for the natural gas supply for this winter and next spring. According to the three major domestic oil companies and the national pipeline, the main units responsible for ensuring supply, the overall state of natural gas resources in the country this winter and spring is significantly better than last year.
Li Chunlin, Deputy Director of the National Development and Reform Commission, introduced at a press conference on October 8th that the energy supply for this winter's heating season can be effectively guaranteed. In terms of natural gas, the supply of resources is relatively sufficient, and the peak-shaving storage capacity has increased by 8 billion cubic meters compared to last year, achieving full storage before winter.
Wang Xin, Deputy General Manager of the Resource and Market Department of CNOOC Gas & Power Group, stated that temperature changes are the primary factor affecting market demand. Under normal climatic conditions, it is expected that the national natural gas consumption from November 2024 to March 2025 will be about 205 billion cubic meters, a year-on-year increase of about 7%.
Energy supply must be not only resource-rich but also reasonably priced.
"We will fully leverage the advantages of mutual protection and supply between imported liquefied natural gas (LNG) and domestic gas to ensure the natural gas supply during the heating season," Wang Xin introduced. The structure of CNOOC's LNG resources is continuously being optimized. Currently, 12 long-term LNG agreements have been signed, and through the optimization of historical long-term agreements and the introduction of new ones, the average slope of long-term agreements linked to oil prices has significantly decreased. At the same time, CNOOC's LNG spot sources cover 25 countries and regions, with the proportion of spot sources increasing from 7% in 2016 to 20% to 30%, making the resource structure more reliable, flexible, and competitive.
Market-oriented supply products have always been an important part of the product system of the Shanghai Petroleum and Natural Gas Exchange.
Wang Zhixin, Deputy General Manager of the Shanghai Petroleum and Natural Gas Exchange, believes that in the future, medium and long-term contract trading products may become an important tool for market-oriented supply. Non-resident natural gas annual contracts may be a new means of market-oriented supply through rights confirmation and redistribution at the exchange. Monthly contract trading and short-term peak-shaving contract trading may become the main players in market-oriented supply.
Since the beginning of this year, the global natural gas market supply has been relatively loose, and international spot gas prices have significantly decreased year-on-year. From January to August, European spot gas prices have decreased by nearly 25%, Northeast Asian spot gas prices have decreased by more than 35%, and U.S. Henry Hub spot gas prices have decreased by nearly 15%. This provides a more favorable external market environment for China's natural gas supply during the winter.
The PetroChina Economic and Technical Research Institute predicts that under the base scenario, from 2026 to 2030, U.S. Henry Hub spot gas prices, European spot gas prices, and Northeast Asian LNG spot prices will decrease by 3.0% to 23%, 41% to 53%, and 35% to 46% compared to 2021 to 2025.Duan Zhaofang, the director of the Natural Gas Market Research Institute at the Economic and Technical Research Institute of PetroChina, believes that before 2030, the global natural gas market will be generally relaxed, with the central international gas price falling. Considering forecasts from international institutions and the Economic Research Institute of PetroChina, it is expected that global natural gas demand will reach 4.5 trillion cubic meters by 2030, and will peak around 2035 to 2040.
From the demand side, Asia is the main region driving global demand growth, with an expected demand for natural gas in Asia of 1.23 trillion cubic meters by 2035, contributing 57% to the global increase. From the supply side, global natural gas production continues to grow, with an expected output of 4.87 trillion cubic meters by 2035, with the increase concentrated in North America, the Middle East, Africa, and other regions. In 2023, the United States has become the world's largest LNG exporter, and future export volumes are expected to further expand.
Yang Hanfeng, Vice President of Singapore's Golden Eagle Group China Company, believes that starting from 2025, the global LNG market will gradually shift to a buyer's market.
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