Recently, the epidemic of COVID-19 and the plunge in oil prices have become the most concerned topics, and many businesses are worried about the impact. Below we will talk about it in detail, hoping to help industry insiders.
It is always said that what happens to one part of the body happens to the whole body. From the perspective of the capital market, for the downstream petrochemical industry chain enterprises led by refining and chemical, the cost will be significantly reduced, but the degree of profit improvement also depends on whether the pricing power of the industry is controlled or not.
The sharp drop in international oil prices has adversely affected the global commodity market, especially the temporary negative impact on oil companies. However, for the consuming countries with high oil dependence, although Chinese oil companies may suffer a certain impact in the short term, they may benefit from low oil prices in the long term, because it will greatly reduce costs. For other industries, the overall benefit is that the decline in oil prices can reduce the cost of energy consumption, especially for the transportation industry.
The development of the upstream and downstream oil industries will gradually increase the commercial inventory due to the decline in oil prices, so as to import cheaper crude oil and benefit from the future reduction of the cost of the whole industry chain.
The sharp drop in crude oil prices will further enhance the concentration of the petrochemical industry. For enterprises with large inventories, on the one hand, they can hedge their risks through crude oil futures hedging; on the other hand, they should clear their inventories as soon as possible to prevent further drops.
The plunge in oil prices will have a great impact on the upstream crude oil exploration companies, but it is conducive to the reduction of raw material costs for chemical production companies. Specific to the domestic chemical industry, each round of oil price fluctuations will promote the industry "survival of the fittest". Because of the downturn in oil prices, high-quality companies can often expand against the trend and increase market share through their advantages of scale, capital and brand.
For the middle and lower reaches of petrochemical industries, the cost of raw materials will be reduced, and industries such as plastics, rubber, tires, pesticides and fertilizers will benefit directly, which will help these industries expand production and reduce product prices.
In my opinion, the decline in oil prices will have a certain impact on the oil services industry, but the magnitude is not large. As people's demand has not diminished, oil development projects are still in progress. As long as oil extraction projects exist, the products and services of oilfield service companies are needed.
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