Middle Eastern petrochemical production base hit, chemical raw material sector erupts

Ask AI · How will oil prices fluctuate under conflict persistence?

On April 7th, the A-share market experienced wide fluctuations throughout the day, with the three major indices ultimately closing in the green, and the Sci-Tech Innovation 50 Index rising over 1%. In terms of sectors, the chemical raw materials sector saw a surge, with Jiangtian Chemical hitting the 20% daily limit, and multiple concept stocks such as Xinghua Shares, Liuhua Shares, and Xinjiang Tianye hitting the daily limit.

According to reports, on the early morning of the 7th, Xinhua News Agency reported that the Iranian Fars News Agency cited unnamed sources stating that an explosion occurred in the Jubail Industrial Zone in northeastern Saudi Arabia involving US capital, which was a large-scale strike. The report said that the Jubail Industrial Zone is one of the world’s important petrochemical production bases, with an annual output of about 60 million tons of petrochemical products, accounting for 6% to 8% of global total output. The zone hosts many large petrochemical companies and projects. Among them, Saudi Basic Industries Corporation (SABIC) is one of the main investors in the industrial zone. Additionally, the Sadara project involving Dow Chemical Company from the US, and a project jointly invested by Saudi Aramco and France’s TotalEnergies, are also located within the industrial zone.

Ping An Securities believes that the conflict is unlikely to end quickly in the short term, and there remains a high risk of staged escalation. The ongoing impact of the conflict on Middle Eastern refineries and the supply of oil products should not be underestimated. Even if the war gradually subsides, entering a prolonged mode of “fighting while negotiating,” the resumption of navigation through the Strait of Hormuz, the restart of Middle Eastern energy facilities, and the resumption of refinery/oilfield production may take several weeks to months, making it difficult to fully return to pre-war levels. Therefore, Ping An Securities forecasts that in the short term, Brent crude oil prices may hover around $90 to $100 per barrel, and in the medium term, it is also unlikely to return to the pre-conflict fundamental oversupply expectation of $60 per barrel (expected around $80 per barrel).

(Disclaimer: The content of this article is for reference only and does not constitute investment advice. Investors operate at their own risk.)