China Galaxy Securities: High oil prices fluctuate, focus on alternative routes for oil.

China Galaxy Securities released a research report stating that the center of gravity of oil prices in March rose significantly. Due to the impact of the Strait of Hormuz, Gulf countries were forced to reduce oil production, and some overseas refineries have announced cuts in production due to force majeure. The current crude oil market is still focused on the evolving geopolitical situation in the Middle East. It is expected that the price of Brent crude oil in April 2026 will fluctuate around $100 per barrel. Short-term oil price fluctuations will intensify due to geopolitical uncertainties. It is recommended to closely monitor the progress of US-Iran negotiations, the passage status of the Strait of Hormuz, and the operation of oil production facilities in the Gulf region. Alternative routes for oil should focus on oil and gas, coal chemical industry, and light petrochemical industry. The main points of China Galaxy Securities are as follows: Significant increase in the center of gravity of oil prices in March The average prices of Brent and WTI in March were $99.6 and $91.0 per barrel, respectively, representing increases of 43.6% and 41.1% compared to the previous month. On the supply side, according to the IEA March report, shipping in the Strait of Hormuz was nearly disrupted, and oil storage facilities are nearing saturation, forcing Gulf countries to reduce their oil production by at least 10 million barrels per day. On the demand side, over 60% of Asia's imported naphtha comes from the Middle East, and some overseas refineries have announced production cuts due to force majeure, such as KPIC, YNCC, LG Chem, while some Chinese refineries have also reduced their operating rates. Meanwhile, US refinery operating rates are gradually increasing, reaching 92.9% as of March 20, an increase of 1.5 percentage points month-on-month. On the inventory side, as of March 27, US commercial crude oil inventories were 461.64 million barrels, an increase of 22.36 million barrels from the end of February. The current crude oil market is still focused on the evolving geopolitical situation in the Middle East, and it is expected that short-term Brent crude oil prices will fluctuate around $100 per barrel. It is recommended to closely monitor the progress of US-Iran negotiations, the passage status of the Strait of Hormuz, and the operation of oil production facilities in the Gulf region. In January-February, China's apparent demand for crude oil was strong, and it increased by 12.6% year-on-year. In January-February, China processed 123 million tons of crude oil, an increase of 2.9% year-on-year; crude oil production was 36 million tons, an increase of 1.9% year-on-year; crude oil imports were 97 million tons, an increase of 15.8% year-on-year; apparent consumption of crude oil was 132 million tons, an increase of 12.6% year-on-year; external dependence was 73.2%, remaining at a high level. In January-February, China's apparent demand for natural gas was slightly increased, by 0.8% year-on-year. In January-February, China's natural gas production was 44.6 billion cubic meters, an increase of 3.1% year-on-year; imports were 27.6 billion cubic meters, a decrease of 1.1% year-on-year; apparent consumption was 70.7 billion cubic meters, an increase of 0.8% year-on-year; the external dependence was 39.1%, slightly lower than the previous year. In January-February, China's apparent demand for refined oil products showed steady growth, increasing by 5.4% year-on-year. In January-February, China produced 6.8 million tons of refined oil products, an increase of 2.6% year-on-year; exports were 0.8 million tons, an increase of 12.7% year-on-year; apparent consumption was 6.9 million tons, an increase of 5.4% year-on-year, with gasoline, kerosene, and diesel consumption increasing by 0.8%, 2.1%, and 4.0% respectively year-on-year. The increase in gasoline and kerosene consumption in January-February may be related to the increase in private car travel during the winter holiday and the Spring Festival, as well as the increase in civil aviation passenger traffic; the demand for diesel may be related to stable logistics transportation demand and the preheating of agricultural oil demand. Targets It is recommended to focus on targets such as oil and gas, coal chemical industry, and light petrochemical industry, such as PetroChina (601857.SH), Ningxia Baofeng Energy Group (600989.SH), Satellite Chemical (002648.SZ), etc. Risk Factors Risks include the escalation of international trade frictions, interruptions in the supply of key raw materials, lower-than-expected downstream demand, and project production delays.