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On January 13, the Guangzhou Municipal Bureau of Industry and Information Technology publicly solicited opinions on the "Several Policies of Guangzhou Municipality on Promoting the High-Quality Development of the Integrated Circuit Industry Across the Entire Chain During the 15th Five-Year Plan Period (Draft for Solicitation of Opinions)". The draft mentions accelerating breakthroughs in the design of high-end general-purpose chips such as processors, memory chips, and edge computing chips; actively supporting the development of specialized chips such as RISC-V (an open-source instruction set architecture based on the principle of reduced instruction set), automotive-grade, display drivers, sensors, optical communication, and 6G; strengthening support for the first-round tape-out of integrated circuit companies products; and providing subsidies of up to 50% of the tape-out cost to qualified companies that conduct tape-out of 28nm and below chips with independent intellectual property rights or significant competitive advantages.On January 13, at the ceremony marking the production of the 1 millionth Seres vehicle, Zhang Xinghai, Chairman of the Seres Group, announced that the first million-vehicle sales of the Wenjie brand were achieved after five years. In the next two years, the company will strive to achieve the second million-vehicle target, namely, an average annual sales volume of over 500,000 vehicles from 2026 to 2027.On January 13th, Morningstar analyst Jeff Zhang stated in a report that Pop Marts domestic revenue growth may slow in the fourth quarter. He indicated that due to a "high base and delays in the launch of new plush keychains featuring its flagship IPs," the companys overall revenue growth in the Chinese market in the fourth quarter may be lower than in the third quarter. He added that some Labubu products are experiencing inventory backlogs in certain retail stores, indicating that market interest in older products is waning. Morningstar maintains its fair value estimate for the stock at HK$280. "After the recent sharp decline in share price, Pop Marts valuation is now attractive, and we believe the markets concerns about its short-term revenue fluctuations are excessive."On January 13th, the Reserve Bank of New Zealand (RBNZ) announced that its newly formed Financial Policy Committee has finalized its seven members, including two external appointees. The committee will hold its first meeting in February. This move stems from several surveys conducted last year regarding competition in New Zealands banking sector, which recommended that the RBNZ strengthen its financial policy-making capabilities. With the support of Finance Minister Willis, the RBNZ Board of Governors established the committee to enhance the professionalism of policy decisions. The committees responsibilities include setting prudential regulatory requirements for financial institutions and making decisions on macroprudential policy. In addition, the committee will advise the Finance Minister on legislative reforms, regulatory measures, or other regulatory activities, and will be responsible for approving the central banks semi-annual Financial Stability Report.On January 13th, former Bank of Japan (BOJ) policy board member Makoto Sakurai stated that the BOJ may raise interest rates as early as April due to the continued weakness of the yen caused by escalating market concerns about Prime Minister Sanae Takaichis "dangerous" fiscal policies. "The BOJ must raise rates at least once before June or July, but the action could come in April." (The market generally expects the BOJ to raise rates approximately every six months, so an April rate hike would be earlier than the market consensus.) These remarks came as the yen further depreciated following reports in Japanese media that the Takaichi municipal government was considering holding an early general election next month. Sakurais comments indicate that he believes the BOJ will not take action to support the yen at its next two meetings, and if the yen continues to depreciate, the responsibility for maintaining the exchange rate during this period will fall on the Ministry of Finance.

IEA raises demand estimates that Saudi Arabia refuses to increase production, and U.S. oil closes above US$81, the highest in nearly seven years

LEO

Oct 26, 2021 11:04

On Thursday (October 14), US crude oil futures rose 0.87 US dollars, or 1.08%, and settled at 81.31 US dollars per barrel, a seven-year closing high. Burundi oil rose 0.82 US dollars, an increase of 1%, to close at 84 US dollars per barrel, the highest settlement price since October 2018. The EIA inventory report shows that as of the week of October 8, US crude oil inventories increased by 6.088 million barrels, the highest level since August, and the new inventory was mainly concentrated in the Gulf of Mexico. However, inventories in Cushing, Oklahoma, fell by 1.968 million barrels. Cushing crude oil inventories fell the most since June, wiping out the increase in the previous two weeks, and inventories are currently at their lowest level since October 2018.

The US Energy Information Administration (EIA) weekly report shows that as of the week of October 8, refined oil inventories decreased by 24,000 barrels and gasoline inventories decreased by 1.958 million barrels. Last week, US domestic crude oil production increased by 100,000 barrels to 11.4 million barrels per day. The four-week average supply of US crude oil products was 20.734 million barrels per day, an increase of 12.5% over the same period last year. U.S. crude oil exports increased by 400,000 barrels per day to 2.514 million barrels per day last week.

Energy analyst Fernando Valle pointed out that with lingering energy supply concerns in Europe and Asia, the divergence of gasoline and diesel trends seems to continue in the coming weeks, which may stimulate the purchase of diesel as an insurance policy. However, congestion at US ports has a negative impact on diesel, as shipping demand is hampered by trade impacts. Continued consumer price inflation may begin to hurt gasoline demand, thereby exacerbating the impact after the busy summer. Refinery maintenance may help balance supply, but we still expect some growth in the oil market in the coming weeks, especially gasoline.

The financial blog Zero Hedge commented on US EIA data that last week, US crude oil inventories recorded the largest increase since March, which was the third consecutive week of rising. Gasoline and distillate had not fallen much. Diesel demand is the highest year since 2018. At the same time, natural disasters due to trucking demand forced the refinery to shut down due to prolonged power outages earlier this year, so stocks before winter were lower than usual. Due to soaring natural gas prices, it is expected that more refined oil will be used for heating this winter.

Saudi Arabia, the leader of the Organization of the Petroleum Exporting Countries (OPEC), ignored calls to speed up oil production on Thursday, saying that it has worked hard with allies and protected the oil market from violent price fluctuations in the natural gas and coal markets. OPEC+, formed by the oil-producing allies headed by OPEC and Russia, has done “excellent” work as the “so-called oil market regulator”. The natural gas market, coal market and other energy markets need a regulatory agency. This situation tells us that people need to copy and paste what OPEC+ has done and achieved.

When asked about the United States and other major oil-consuming countries calling for OPEC+ to further increase production to cool the rising crude oil prices, Prince Abdulaziz said, I have been telling people that we are increasing production. OPEC and its allies need to take a gradual and phased approach to increase supply. It will increase production by 400,000 barrels per day in November, and then continue to increase supply in the next few months.

The International Energy Agency (IEA) said on Thursday that the global energy shortage is expected to increase oil demand by 500,000 barrels per day, and may stimulate inflation and slow the global recovery from the new crown epidemic. In its monthly report, the IEA raised its estimate of global oil demand growth in 2022 by 210,000 barrels per day. It is currently estimated that the total global oil demand in 2022 will reach 99.6 million barrels per day, slightly higher than the level before the epidemic.

Royal Bank of Canada raised its Brent crude oil price forecast for 2022, and its previous target has been achieved at the beginning of the fourth quarter. RBC analyst Michael Tran and others pointed out that “the oil market is still in the early stage of a strong structural cycle spanning many years”, and demand will increase and supply tightening will occur simultaneously in 2022. The previous target of US$75 for Brent oil prices in 2022 was reached last week, so the target price for next year was raised to US$84. As the shortage of natural gas in Europe and Asia boosts demand for crude oil, the shortage of crude oil supply will intensify and keep the market strong in the coming months.

(U.S. Oil Hour Chart)

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