To The Moon

According to a recent research report, the global economy remains in a Kondratieff winter phase. Historically, such periods are characterized by slowing economic growth and heightened geopolitical competition. During these times, essential commodities like oil, natural gas, and coal, as irreplaceable strategic physical assets, demonstrate significant resilience against inflation. Their prices often exhibit wide fluctuations or a rising price trend, markedly outperforming general financial assets, particularly in stagflationary environments. The investment thesis for energy companies is increasingly shifting towards them being viewed as dividend assets, defined by strong free cash flow, high dividend payouts, and sustained share buybacks. The key points from the analysis are outlined below.

Crude Oil: Renewed Tensions Drive Prices Higher This Week

Oil prices continued their earlier downward trend at the start of the week. Following a temporary US-Iran ceasefire, crude flows through the Strait of Hormuz resumed, leading to a rapid unwinding of geopolitical risk premiums, with ample supply dominating market sentiment. However, by Wednesday, the situation reversed. The former US President declared the ceasefire over, and US forces launched new airstrikes against Iran. Attacks on commercial vessels in the Strait of Hormuz, the revocation of US waivers for Iranian oil exports, alongside drone strikes on Russian refineries and new Russian diesel export bans, caused geopolitical risks to surge back into focus. This triggered a sharp spike in oil prices. Looking ahead to the second half of the year, as Middle Eastern supply recovers and floating storage is drawn down, a tug-of-war is expected between limited demand recovery elasticity and regionally low inventories. Oil prices are likely to transition into a phase of wide-ranging volatility. This week, Brent crude spot prices averaged $74.27 per barrel, up 5.92% week-on-week, while WTI crude spot prices averaged $71.20 per barrel, an increase of 2.79%.

Xinjiang Coal Chemical Industry: Poised for a Golden Era

From a national strategic perspective, Xinjiang benefits from two major shifts: the transition from a coastal economy to the Belt and Road Initiative, which transforms Xinjiang from a hinterland into a strategic frontier, granting it significant geopolitical advantages. Furthermore, the balance between energy security and dual-carbon environmental goals is tilting, leading to a resurgence of the coal chemical industry. Xinjiang, leveraging its resource advantages, is becoming a focal point for national energy security. Internally, promoting development to ensure stability has become the central theme for Xinjiang. Historically, the region has navigated a balance between growth and stability, and it is currently in a crucial strategic period for high-quality development. The development of Xinjiang's coal chemical sector shares similarities with the US shale gas revolution, as both require long-term, state-backed investment in foundational technologies and infrastructure to ultimately overcome external energy dependence.

Natural Gas: Qatar Halts LNG Expansion, Tightening Global Supply

Due to the escalating situation in the Strait of Hormuz, Qatar has suspended efforts to restore capacity at its Ras Laffan liquefied natural gas (LNG) facility. Operations will be maintained at minimal levels, and the number of vessels scheduled to dock will be reduced. Previously, Qatar was advancing a plan to restore most of its LNG capacity within two months. This decision could further tighten the global natural gas market, intensifying competition between Asia and Europe for winter stockpiling. Asian LNG spot prices are already more than 80% higher than pre-conflict levels. As of July 11, US natural gas inventories stood at 2,983 billion cubic feet (Bcf), an increase of 61 Bcf from the previous week and 30 Bcf higher than the same period last year. The weekly average NYMEX natural gas price was $3.14 per million British thermal units (MMBtu), down 2.1% from the prior week.

The report concludes with risk warnings, including the potential for significant volatility in international oil prices, the risk of downstream demand recovery falling short of expectations, and risks associated with overcapacity and policy interventions.