These Industries Benefit From A 10% Drop In Oil Prices

It’s reported that Saudi Arabia on Saturday reportedly slashed the price of crude it sells to markets abroad, including Europe, the far east and the United States, at the biggest discount in more than 20 years, in an effort to entice foreign refiners to buy its crude.At the same time, Saudi Arabia has privately told market participants it will increase production if needed, even if it reaches a record level of 12m b/d.The drop in demand due to the outbreak of the coronavirus will be exacerbated by the increase in Saudi production.One commodities hedge fund manager said the Saudi move amounted to a declaration of war on the oil market.

The Saudi stock market tumbled 7.15 per cent and aramco shares fell 4.85 per cent as the crude oil price war kicked off, plunging below the IPO price.Trading was suspended in Kuwait after a 10 per cent plunge.

Lower oil prices will hurt the upstream sectors of the petrochemical industry, including upstream drilling, oilfield services and midstream oil processing.

Oil price collapse, directly positive parts of the industry:

1. Aviation.The cost of fuel has accounted for about 30% of the cost of airlines, the benefits are obvious, good: Air China, China Eastern airlines, hainan airlines, China southern airlines and so on.

2. Shipping.The cost of transportation industry will be significantly reduced space, good: sf holding, shentong express, yto express, yunda shares.

3. Cars.The collapse of oil prices has stimulated the consumption willingness of traditional fuel vehicles, superimposed the policy expectation of national support for the auto industry, and focused on the relatively stagnant post-holiday vehicle stocks: JMC, dongfeng motor, faw sedan, saic motor, etc.

4, low oil price + industry boom decline, positive downstream rigid demand fine molecule industry.In the context of low oil prices and a downward cycle in the industry, the prices of plastics (PP, PS, ABS, etc.), synthetic rubber and other products are at historically low levels, and the fall in the price of the cost side is good for the improvement of the profitability of the downstream modified plastics, tires and other industries.On the other hand, modified plastics and tires as rigid demand products, their own relatively steady growth demand, will maintain a high prosperity.

The upstream raw materials of modified plastics (such as PP, PS, PC, etc.) will be supplied in a relatively loose way in the future. The profits are expected to be transferred to the downstream processing links.Optimistic about the high growth of new chemical materials, focus on the golden hair technology, guoen shares;

Tire industry is another important petrochemical downstream application domain, as car ownership has increased will lead to a steady growth of tire market demand, domestic tire enterprises on the one hand, through the factories overseas to evade trade barriers, promote the brand influence on the other hand, increasing its permeability in supporting and retail market, performance is expected to continue to grow, focus on industry leading and exquisite tyre.


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