Global Oil and Natural Gas Market Overview

China's oil imports decline, Saudi Aramco's revenue drops, and geopolitical tensions rise in the Middle East.

### Global Energy Market Insights: China's Oil Demand, Saudi Aramco's Financials, and Middle East Geopolitical Risks
* 🇨🇳 China, as the largest oil importing country, is facing concerns about oil supply due to a **slight decrease in oil imports** compared to last year. The economic situation of major countries is not favorable, leading to **insufficient expectations for strong crude oil demand**.
* 🛢 Saudi Aramco's revenue and net profit decreased by **24% compared to last year**, with the sharp decline in oil prices, OPEC reductions, and weakened demand significantly impacting **sales volume**.
* 🕌 Geopolitical tensions in the Middle East, especially between Israel and Palestine, are escalating with **Netanyahu losing patience** and Hamas demanding an **end to the war** and **complete Israeli withdrawal from the Gaza Strip**.
* 🔥 The Al-Aqsa Mosque in Jerusalem is a key focal point during the Ramadan period, and even minor issues can lead to **significant escalations** due to its **high symbolism in Islam**.
* 🇪🇺 European natural gas supply is currently at about **60%**, approximately **20 percentage points higher than usual**, and unless a significant surge occurs in the next **15-20 days**, prices are not likely to rise sharply.
* 🇺🇸 In the U.S., colder weather than usual is expected for about **3 days**, hindering the rise in natural gas prices related to winter demand. The market is now starting to consider the possibility of a heatwave due to the increased likelihood of **El Niño** occurring in the summer.
* 📈 The energy market is more focused on achieving a **soft landing** rather than economic recovery, and the end of the interest rate cut cycle is reflecting the **potential demand slowdown**.
* 🌍 Geopolitical risks in the Middle East, such as attacks on container ships and drone strikes, are now somewhat normalized, and **large-scale supply disruptions are relatively limited**.

Hello, I am Kwang-rae Kim, in charge of atoms at the Samsung Gift News Team. This time, I titled it The Subtitle of Uranium and Natural Gas Demand, and now let's briefly look at each issue. First of all, let me talk about China's nuclear issue. Basically, China is the largest oil importing country and has a significant gap with the second-place United States. The problem is that China's oil imports have shown a slight decrease compared to last year, causing concerns internally in China about oil supply. Initially, there was a lack of large-scale stimulus measures in China, and the absence of demand sources to replace such rapid growth in China.

The economic situation of major countries is not very favorable, so it seems a bit insufficient to expect a strong demand for crude oil in this atmosphere. Even just looking at the operating rate of Chinese refineries, despite experiencing a sharp decline due to issues like the COVID-19 pandemic and cold weather from the early 2020s to 2022, if we examine the recent refinery operating rate, even considering seasonality, it is currently about 10% to 20% lower. Therefore, since around November last year, there has been a situation where a backwardation has occurred, and if you look at the demand related to the export of Chinese petroleum products due to the impact of the epidemic, it seems to be following a somewhat weak trend as shown on the right chart. So, I think it is not showing a strong flow yet. As mentioned earlier, there were no large-scale stimulus measures at the Yangtze River, but on the other hand, the Chinese government has

Anyway, there was a mention of restructuring in the real estate industry. So, just a while ago, the second-largest real estate company had issues with credit rating adjustments. Therefore, it seems that in the short term, there might be a prevailing atmosphere of economic downturn. Another news is related to the oil industry. Saudi Aramco's revenue decreased by 24% compared to last year, and the net profit also decreased by about 24%. On the other hand, dividends increased by 30%. It seems that this had a significant impact on the Saudi government, which currently holds over 82% of Aramco shares. In addition, pension funds, national pension funds, and industrial funds now hold about 16%, and 1.7% is currently listed. Some are listed. Originally, the industrial fund held 4%.

I had holdings, but last week, I transferred an additional 88% of P. Therefore, the government's influence is currently at about 98% in total. It seems like the government's influence has played a significant role. Anyway, after the announcement of the increased dividends, the stock price of Saudi Aramco also showed a significant rebound. When we look at the fundamental reasons for the decrease in revenue, it seems that the sharp decline in oil prices, OPEC reductions, and additional reductions have significantly affected the sharp decrease in sales volume. It also seems that the margin itself has deteriorated significantly as demand has weakened, acting as a considerable burden. Therefore, when we look at the Saudi finances, it is highly likely that Saudi's financial deficit will continue steadily, unless there are significant changes.

Due to this, it could act as a significant burden for the Saudi government, and as a result, it is highly likely to have a negative impact on the oil production cut. Ramadan has now started. As of March 11th, according to local time, Ramadan has begun. President Biden has been consistently playing a mediating role, but the situation seems to be deteriorating significantly. Even in early March, negotiations were hoped to be held until March 4th, but it did not happen. It was also anticipated that negotiations could be possible before Ramadan, but again, it did not happen. So, they have been continuing to exert pressure, and now, it seems that Netanyahu is almost losing his patience. By making such statements, a somewhat tense atmosphere is being created between the two sides. Therefore, Israel currently...

Gagam claims that the ceasefire has been achieved, and the rest will be finalized within the next 3 to 4 weeks, at least. By saying this, they seem to imply to the Biden administration, We won't drag you to the election, so please allow this much. Therefore, even now, it seems like behind-the-scenes negotiations are probably ongoing. However, the problematic part is that Hamas is demanding not a temporary truce but an end to the war. Also, they are insisting that the Israeli army completely withdraw from the Gaza Strip. On the other hand, the Israeli side is currently demanding, before engaging in any dialogue with Hamas, to first confirm the status of their prisoners, whose life or death is uncertain. This is what they are requesting. In a way, they are asking each other to first

Given that conditions are continuously being set for shipment, there seems to be ongoing friction in these areas. Ramadan has just begun, and currently, the most attention-grabbing place in the market is the Al-Aqsa Mosque in Jerusalem. Why is this important? Firstly, it is one of the holy sites in Islam, along with Saudi Mecca, Medina, and the Al-Aqsa region. These three places are the three major holy sites in Islam. Currently, a large number of Muslims have already gathered at this mosque. Israel has deployed thousands of soldiers, police, and forces to the area. Therefore, even minor issues could escalate significantly, especially during the Ramadan period when Muslims are

I am fasting, so usually fasting starts from early morning until now, in the evening. As you may know, when people fast, they become quite sensitive. Therefore, even minor issues can lead to group resistance or even minor conflicts. In fact, there were reports of minor conflicts occurring in some areas on the first day of Ramadan. So, I think this is an issue that should continue to be monitored closely in the market. Considering the symbolism of Al-Aqsa Mosque, even though Hamas invaded Israel on a large scale last October, Al-Aqsa was involved in the operation. It was a storm of Al-Aqsa, right? Yes, so because it is a place with high symbolism, it is necessary to look into the news related to this matter.

I think it will be necessary. Next is the natural gas sector. First of all, in terms of natural gas supply, it is currently at about 60%, which is approximately 20 percentage points higher than usual. Of course, there were factors such as European countries actively stocking up until October of last year and the weather being much warmer than usual, so the depletion of supplies was not as large as expected. Typically, by the end of March, the inventory is usually depleted, and from April, the inventory starts to be accumulated in earnest. Therefore, we are now approaching mid-March, with about 15 days remaining. If no significant surge occurs during this period of 15 to 20 days, in fact, the inventory within Europe.

Weather-related issues are not likely to cause a sharp increase in egg prices. When looking at the current inventory situation, France has a relatively lower inventory compared to other countries. Among the major countries, France has about 40% lower inventory, the Netherlands 54%, Italy 56%, and Germany 67%. Germany seems to have managed the situation better. Large inventories located in Germany appear to be relatively well managed. Therefore, we will continue to update the depletion rate of inventory in the future. Unless a large-scale cold wave occurs immediately, as it is not the season for inventory injection, supply-related issues are relatively minor. Next is the forecast for the United States.

This is a related part. In the case of the U.S., currently, until 19 days ago, one day before the 19th, and one day after, so on the 18th and the 20th, for about 3 days, colder weather than usual is expected. However, even until then, until the 17th, it is anticipated that heating demand will be much lower than usual, and even after the 20th, lower demand than usual is still expected. It seems to be hindering the rise in natural gas prices related to winter demand. Of course, the market is mostly aware that the low demand in winter is already known and is expected to be finalized at a level that already meets the demand. Moreover, the possibility of El Niño occurring in the summer has increased, and the market is now to some extent considering the possibility of a heatwave.

Based on the monthly basis, we are now increasing our bets. In this situation, it seems that buying interest is somewhat noticeable, particularly around the original material. Therefore, in reality, even recent monthly materials show some reactions, but the period when summer-related bets start to intensify seems to be around mid-April. The reason for this is that this is the time when related demand begins to emerge prominently. Therefore, it is necessary to pay attention to the natural gas prices around that time. Actually, I think it's a bit vague to make summer bets at the moment. So, the historic wildfires in the Texas area, like Smokehouse Creek, are mostly reported to have been contained now. Also, there has been a slight adjustment in current U.S. natural gas production.

With the rebound, the market is now mentioning the possibility of no further production adjustments. Currently, if we look at the recent weekly basis, Texas, the top producing state, and Pennsylvania, the second top producer, are attracting market attention regarding their production fluctuations. Therefore, it seems necessary to continue monitoring the U.S. production issues. So, this is the content I have prepared. If you have any questions, I will answer them through the chat.

This is the time when the interest rate cut cycle ends. Originally, the reason the Federal Reserve mentioned the possibility of a rate cut after freezing the rate is somewhat reflecting the potential slowdown on the demand side. Therefore, historically, there have been relatively many cases where demand weakened at the beginning of actual interest rate cuts, and it is also correct to express that there were probabilistically many cases. If you look at the chart for the past 20 years, you will understand it better. I have drawn it a few times before, and as you mentioned, it is true that the economy typically enters a rising cycle of commodities, including oil, in the early stages. However, as you mentioned, there is a aspect where commodities tend to react relatively earlier. From that perspective, in the market, rather than the perception of economic recovery, the focus is more on how the market will achieve a soft landing.

It seems to be there. Yes, so now we need to consider the possibility of an economic downturn. I think we need to take into account to some extent, right? Geopolitical risks are present in the market. If we divide it into crude oil and natural gas, speaking of geopolitical risks, if we only focus on the geopolitical risks occurring in the Middle East, it is true that we should pay more attention to the oil side rather than natural gas. If we look at it in a broader sense, such as the war between Russia and Ukraine, in the early stages of the war, it had a significant impact on the oil side, but now it's almost nonexistent. I mentioned this before. Due to the almost non-existent supply disruption issues, as you mentioned, the geopolitical risks in the Middle East are now almost as common as the passing ships in the Hong Kong area every day.

Regarding attacks on container ships, attacks on the Houthis, bombings by the US and UK forces, drone attacks by the US fleet, missile attacks, at this level, it seems like they are not fundamentally affecting the market. The market seems to have already become somewhat accustomed, and in reality, there is a feeling that there is not much disruption in large-scale supplies such as oil production. Therefore, the risks seem to be relatively limited. For example, Mr. Lee Kyung-hoon asked if the natural gas prices would rise when wildfires occur in Canada every year. If a large wildfire occurs and leads to actual supply disruptions, gas prices tend to rise significantly. Normally, natural gas prices would.

During periods of price increases, it is often associated with various supply and demand issues rather than solely winter demand. Therefore, it is rare for prices to rise based on just one issue. Of course, there may be temporary short-term increases, but unless there are significant supply disruptions such as a prolonged LNG export suspension, it seems a bit challenging for prices to continue rising solely based on that issue. As you mentioned, whether the market prices have risen significantly more or less than expected also plays a role. Therefore, if the market experiences larger-than-expected occurrences or if there is a significant increase in production beyond traditional levels, this aspect can clearly act as upward pressure on prices.

Yes, so the question was whether the movements are similar. Basically, the direction can be similar, but the time frame is a bit different. For example, in the case of LNG, there are many long-term contract forms, and in terms of issues related to natural gas, LNG prices do not react sensitively. Natural gas, as commonly discussed, is mostly related to the U.S. market price. The nature of the U.S. natural gas market is somewhat stronger, whereas LNG futures are mainly focused on Asia and Europe. So, although there are times when the movements are similar, there are also times when they are quite different.

You asked if the CPI goes up, will fuel prices go down. First of all, basically, if the CPI comes out higher than market expectations, then it is a part where we need to think about it quite a bit. In this case, there may be concerns that the market might delay the timing of interest rate cuts, which could act as downward pressure. On the contrary, it could have the opposite effect, and if the CPI is lower than expected, there is a high possibility that fuel prices will be exposed to relatively upward pressure. Yes, fundamentally, it seems that the relationship between the two will be like that, and the relationship with oil as well. Yes, if there are no further questions, I will stop here with the answer, and next week, I will come back with more substantial content. So far, this has been Kim Kang-ri from the Samsung Futures Research Team in charge of energy. Thank you for listening.

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삼성선물 

The Impact of China's Oil Imports and Saudi Aramco's Revenue

China is experiencing a slight decrease in oil imports, raising concerns about the country's oil supply.

The operating rate of Chinese refineries has also declined, leading to a weak trend in the demand for Chinese petroleum products.

Saudi Aramco saw a 24% decrease in revenue, but with a 30% increase in dividends, leading to a significant rebound in stock prices.

The decrease in revenue was influenced by the sharp decline in oil prices, OPEC reductions, and weakened demand, causing a considerable financial burden for Saudi Arabia.

Tensions Surrounding Ramadan and the Israel-Palestine Conflict

Ramadan has begun, leading to a sensitive atmosphere, with the Al-Aqsa Mosque drawing significant attention.

The ongoing conflict between Israel and Hamas is creating friction, with demands for a ceasefire and prisoner confirmation.

The situation is further complicated by the involvement of President Biden and the potential impact on oil production cuts.

Current State of Natural Gas Supply and Forecast

The natural gas supply in Europe is currently at a high level of about 60%, with France having the lowest inventory among major countries.

The supply is not expected to see a significant increase in depletion, barring a sudden cold wave, as the winter season ends.

The US is experiencing lower-than-usual heating demand, which is likely to impede the rise in natural gas prices for winter.

The market is now shifting its focus towards the possibility of El Niño and a potential summer heatwave, with increasing buying interest expected around mid-April.

Market Analysis: Production Adjustments, Interest Rates, and Geopolitical Risks

The market is considering the possibility of no further production adjustments after the rebound, with a focus on Texas and Pennsylvania's production fluctuations.

The Federal Reserve's mention of a potential interest rate cut is linked to a potential demand slowdown, historically associated with a rising cycle of commodities.

Geopolitical risks, particularly in the Middle East, are not significantly impacting the market due to the feeling of limited supply disruption, while significant wildfires in Canada can lead to a notable rise in natural gas prices.

Factors Affecting Price Increases and Market Movements

Price increases are rarely driven by a single issue, usually stemming from supply and demand factors rather than just seasonal changes.

Significant supply disruptions or higher-than-expected production can exert upward pressure on prices, impacting market movements.

The relationship between the Consumer Price Index (CPI) and fuel prices is complex, with CPI levels affecting the timing of interest rate cuts, which in turn can influence fuel prices.