According to the Zhitong Finance APP, Ping An Securities released Research Reports stating that the USA commercial Crude Oil Product inventory is decreasing, but consumption of RBOB Gasoline and distillate fuels is falling, entering a stage of inventory accumulation. Europe has entered the heating season, but production and consumption activities remain weak. China's RBOB Gasoline demand is stable, while diesel demand is weak due to temperature drops. In early December, OPEC+ announced at a meeting to extend the voluntary production cut agreement of 2.2 million barrels per day to the end of March 2025, which has helped delay the supply surplus pressure. However, there is significant uncertainty regarding whether countries will comply with the production cut agreement, and concerns about the further slowdown of Crude Oil Product demand growth in China and the USA and Europe remain key factors restricting the improvement of fundamentals and oil prices, expecting that the oil price center will decline somewhat in 2025, but the decline will be narrowed.

The main points of Ping An Securities are as follows:

Review of international oil prices: since December, oil prices have generally fluctuated slightly higher, mainly trading around OPEC+ supply expectations and changes in geopolitical risks.

Key impacting events: 1) On December 5, OPEC+ announced in a meeting that the voluntary production cut agreement would be extended for another three months until the end of the first quarter of 2025, and the additional voluntary cut of 1.657 million barrels per day was extended until the end of 2026 (originally planned for the end of 2025), which has a significant impact on alleviating the Crude Oil Product supply surplus pressure.

2) On December 12, US Treasury Secretary Yellen indicated considering further sanctions on Russia while the oil market is weak, raising market concerns that the Russian oil industry may face a new round of sanctions from the USA and Europe, leading to a rise in oil prices. In practice, US refinery operating rates have increased, and commercial Crude Oil Product inventories have exceeded expectations, but declining consumption of RBOB Gasoline and distillate fuels, along with inventory accumulation, has heightened market concerns about the demand for refined oil products; although Europe has entered the heating season, production and consumption activities remain weak, and Crude Oil Product demand may struggle to get effective support in the short term; China's manufacturing PMI continues to be in the expansion Range, but current demand expectations for gasoline and diesel continue to be weak.

International oil price outlook - Institutions predict

The EIA believes that OPEC+ production cuts will lead to a global average reduction in oil inventory of 0.4 million barrels per day in 2024. The extension of the OPEC+ production cut agreement will reduce oil inventories by 0.7 million barrels per day in Q1 2025, with the average price of Brent crude oil expected to be $74 per barrel in Q1 2025. However, as OPEC+ resumes production increases and supply in regions outside OPEC+ continues to grow, average global oil inventories are expected to increase by 0.1 million barrels per day in Q2-Q4 2025. This inventory increase will put downward pressure on crude oil prices, and it is anticipated that the average price of Brent crude will drop to $72 per barrel in Q4 2025.

International Oil Price Outlook - This report forecasts.

Currently, commercial Crude Oil Product in the USA is maintaining a de-inventory trend, but the Consumer of refined products such as RBOB Gasoline and distillates is declining, entering a phase of inventory accumulation. In Europe, although it is the peak heating season, production and consumption activities remain relatively weak. In China, RBOB Gasoline demand is stable, while diesel is affected by lower temperatures, resulting in weak demand. At the beginning of December, OPEC+ announced at a meeting that it would extend the voluntary production cut agreement of 2.2 million barrels per day until the end of March 2025, which has somewhat mitigated the pressure of excess supply. However, there is still significant uncertainty regarding whether countries will adhere to the production cut agreement, and concerns about further slowing growth in crude oil demand in China and the USA and Europe remain key factors that hinder improvement in the fundamentals and restrict oil prices. We expect that the price center for oil may decline in 2025, but the extent will narrow.

On the supply side, the extension of OPEC+ production cuts may delay the timing of supply surplus and enhance the resilience of oil prices, but it is difficult to change the overall trend of a loose fundamental backdrop. As OPEC+ gradually resumes production increases after April 2025, global Crude Oil Product supply pressure may increase. Since Trump took office, there has been a push to increase domestic traditional energy development, and oil companies may boost Shale Oil extraction, with countries in the Americas led by the USA potentially expanding crude oil production. On the demand side, economic growth in the USA and Europe is slowing, and China’s economy has not shown significant signs of recovery. Moreover, the continuous increase in the penetration rates of LNG heavy trucks and electric vehicles is exerting irreversible pressure on the demand for RBOB Gasoline and diesel. The global crude oil fundamental surplus pattern remains difficult to change, with the Brent crude oil price range in 2025 possibly declining by 3-8 dollars per barrel year-on-year.

Regarding Symbol.

Ping An Securities believes that although short-term supply and demand remain relatively tight fundamentally, and may shift to loose in the medium term, there is still strong short-term support for oil prices, and there are concerns about downward pressure on oil prices in the medium term. However, the turmoil in the geopolitical situation has further highlighted the importance of Energy independence. Traditional energy development expenditure is expected to rise again. At the same time, under the current low domestic interest rate environment, resource companies with stable operations and low valuations still possess good investment value. Companies in the Oil & Gas exploration sector with increased exploration rigor, clear increasing reserves and production targets, significant potential for overseas market expansion, and advanced international technology still have room for value discovery. It is recommended to pay attention to: Offshore Oil Engineering (600583.SH), China Oilfield Services (601808.SH).

At the same time, as the national Energy security strategy is being implemented in depth, the promotion of integrated refining and chemical projects, and the fluctuating international oil prices are less impactful on the performance of leading enterprises. "The Three Oil Giants" are an important guarantee for national Energy security and are expected to continue to benefit from relevant policy support. It is recommended to pay attention to: Petrochina (601857.SH), China National Offshore Oil Corporation (600938.SH), China Petroleum & Chemical Corporation (600028.SH).

Risk Warning

1) The risk of weak demand due to a slowing macroeconomic environment: If the economies of Europe and the USA continue to weaken, and the Consumer recovery in emerging economies like China is weaker than expected, it may lead to weak international Crude Oil Product demand, with a risk of reassessing the fundamentals.

2) Risk of supply disruptions: There is a risk that OPEC+ may change its Crude Oil Product supply plans and adjust production increase or decrease plans; US oil companies' capital expenditure adjustments, Shale Oil production release rates, and rig counts all have significant uncertainty.

3) Uncertainty about the effectiveness of monetary policy: The Federal Reserve has entered a rate-cutting period, but its impact on the economy and Crude Oil Product demand still carries substantial uncertainty.

4) Uncertainty in geopolitical situations: Changes in geopolitical circumstances can cause significant fluctuations in oil price trends.

5) Risk of Energy iteration: The risk that New energy Fund accelerates the replacement of traditional Energy, and the risk associated with the adjustment of Global net zero emissions policies by 2050.