Since the fourth quarter of 2018, international oil prices have changed from the previous upward trend of shocks and continued to fall for 7 consecutive weeks. The futures prices of West Texas Light Crude Oil (WTI) and Brent Crude Oil were changed from nearly $ 75 / barrel and nearly $ 85 / barrel respectively. The four-year stepped high point fell sharply to $ 52 / barrel and $ 62 / barrel, both of which fell by about 30%.

  The analysis believes that the continued rise in international oil prices in the first 10 months of 2018 was due to increased US sanctions on Iran, declines in oil-producing countries such as Venezuela, and OPEC production cuts. These factors, as a whole, are still short-term factors. In the medium and long term, shale oil leads the growth of global crude oil supply potential, the limited expansion of the crude oil demand market, the expected appreciation of the US dollar exchange rate, and the development of alternative energy sources at higher oil prices will inhibit the continued rise in international oil prices. Increasing shale oil production leads to growth in crude oil supply. Due to the continuous rise in international oil prices in the first three quarters of 2018, the upstream development of the global oil and gas industry is generally favorable, and it also provides US shale oil with a large number of participants, flexible operations and full compliance with the market economy Development brings new opportunities, which may further lead the growth of global crude oil supply in the future.

  From a production perspective, from 2014 to 2018, the full cost of US shale oil per barrel has dropped from 76 USD / barrel to 50 USD / barrel at an internal rate of return of 15%. The sharp drop in cost has prompted its current oil price level. The output has grown rapidly. The United States Energy Information Administration (EIA) drilling production report indicates that in the fourth quarter of 2018, US shale oil production reached a record high of 7.6 million barrels per day; the Permian Basin is the absolute protagonist of shale oil production growth, and the output in the fourth quarter reached 3.5 million barrels per day. In addition, according to data from oil service company Baker Hughes, as of October 2018, the number of oil rigs in production in the United States was 861 and remained above 860 for four consecutive months. From a technical point of view, the shale oil development and completion technology that has been constantly improved during this round of low oil prices has a wider application space in the stage of warming oil prices. Among them, the number of wells per unit area has increased significantly, and super well sites with more than 60 wells have become a development trend; the “one-pass drilling” capability has continued to increase, the drilling and completion cycle has been continuously shortened, and the drilling and completion costs have been effectively controlled; the horizontal section length of horizontal wells has been increasing year by year With the increase, the number of fracturing sections and clusters is increasing; the effect of increasing proppant and fracturing fluid production is increasingly obvious; repeated fracturing technology has been carried out in large-scale mines, which will greatly increase single well production. From the perspective of investment and industry, technological progress will further increase the efficiency of shale oil investment in the future. According to expert estimates from consulting firm Wood McKinsey, at this stage, there are approximately 8,000 production wells in the United States that have been drilled but have not yet been fractured, and $ 10 billion in investment can be saved through technological progress.

  In addition, shale oil production also follows the US energy industry's "small companies rely on technology and large companies scale" industrial development model. With the large-scale involvement of oil giants such as Shell, Chevron, ExxonMobil and BP in shale oil Industry, future output will continue to grow. In addition to the increase in shale oil production, from 2017 to 2018, the gradual recovery in oil prices has led to a gradual increase in global upstream investment in exploration and development, which will also become an important factor affecting the supply of crude oil markets in the future.

  According to Wood McKinsey's analysis, since 2018, oil companies have reduced costs and increased efficiency through technology innovation, repaired their balance sheets, and maintained strict investment disciplines. They have generally adapted to the oil price level of $ 50 / barrel; in Brent oil prices 60 to 80 At the level of USD / barrel, the upstream exploration and development investment of oil companies will continue to increase, starting a new round of investment cycles in the oil industry. Norwegian energy consulting company Rystad predicts that global oil and gas upstream investment will re-enter a stable growth stage from 2018 and will continue to increase global crude oil production in the future. According to Global Data data, the 615 oil and gas projects that are about to launch worldwide are expected to have a total investment of US $ 1.7 trillion and will produce more than 88 billion barrels of crude oil in 2018-2025. Brazil, the United States, Russia, Nigeria, Australia and Canada and other countries will see a certain increase in crude oil production in the future. In recent years, in order to cope with climate change and other issues, the international community has reached a series of global environmental governance consensus including the Paris Agreement, and most countries have been actively implementing Carbon development strategy. Australia, South Africa and most of the Northwestern European countries have implemented carbon tax and carbon emissions trading mechanisms. 13% of global greenhouse gas emissions are covered by carbon pricing. The relatively high emissions of crude oil consumption demand are beginning to be constrained by environmental protection, and the related costs required for future development will continue to increase.

  The "BP World Energy Outlook (2018 Edition)" report estimates that the growth rate of crude oil demand will gradually decrease, and it may stop growing in 2025. The International Energy Agency (IEA) 's sustainable development plan based on the sharp tightening of climate policy also pointed out that global crude oil demand may reach its peak in the mid-1920s. The importance that oil companies attach to the natural gas business objectively reflects their understanding of the oil and gas demand market. Shell said that in the next 20 years, the proportion of natural gas business plans to increase to 75%; Total and Chevron also said that in 2035, natural gas business will account for more than 60% of the company's total business. In addition, under the existing technology and energy supply conditions, more and more liquefied natural gas (LNG) trucks, ships and electric vehicles are put into use, which will also reduce crude oil consumption in the near to medium term. The gradual improvement of energy utilization efficiency is another reason for the limited expansion of the global crude oil demand market. BP Chief Technology Officer David Ayton said that in terms of energy efficiency improvement, by increasing the popularity of energy efficiency technologies, it is expected that the total global primary energy consumption, including oil and gas, will be reduced by 40%. The improvement of automobile fuel efficiency in 2035 will reduce crude oil demand About 17 million barrels per day. Bernstein Research also said that the improvement of automobile fuel efficiency in 2030 could reduce crude oil demand by nearly 30 million barrels per day. Wood McKinsey said that gasoline demand under the background of improved energy efficiency is expected to be the primary factor for peak crude oil demand around 2030.

  In addition, the Global Energy Efficiency Report (2018) published by the International Energy Agency in October 2018 shows that, with the relevant capital investment, and proper technology and measures, freight trucks alone can provide about 40% of the energy saving potential. Can significantly reduce demand for crude oil. In fact, in 2017, nearly 240 billion US dollars of funds were used to improve energy efficiency in transportation, industry and other sectors, and it will also have a restraining effect on global oil and gas demand in the future. The appreciation of the US dollar is expected to curb the rise in oil prices from the pricing system. From the second quarter of 2018, the US dollar index rebounded at the bottom and generally showed a volatile upward trend. At present, it is basically stable above 95.

  There are four main reasons for the rise of the US dollar index: First, the overall US economy is improving and the labor market is tightening. Especially in the second quarter of 2018, the US gross domestic product (GDP) was as high as 4.2% and the unemployment rate was less than 3.8%; It is the United States that implements tax reduction policies, and the supply of high-yield government bonds has increased significantly, thereby increasing the attractiveness of US dollar assets, helping the US dollar to return to the US market, and intensifying the depreciation pressure of other currencies. Third, the global economic growth has slowed down in 2018. Signs, especially the signs of a weaker European economic recovery, lower-than-expected rebound in inflation and easy exit practices, also stimulated the purchase of US dollar assets by some liquid capital around the world; fourth, some safe-haven funds will continue to buy US dollars, which will also cause the US dollar to appreciate . In fact, since 2018, currencies of developed economies such as the euro and the pound have depreciated against the US dollar by more than 5%; currencies of emerging economies such as the Brazilian real, the Mexican peso, the Indian rupee, and the Thai baht have also depreciated significantly against the US dollar. The exchange rate trend of the US dollar against other major currencies can also reflect the market's confidence in the expected appreciation of the US dollar exchange rate in the future. In terms of the duration of the dollar exchange rate entering the appreciation cycle, since the 1980s, the duration of the two exchange rate appreciation cycles of the dollar has exceeded several years, and the growth rate of the US dollar index has reached 50% to 100%. It can be seen that if the current trend of the US dollar exchange rate entering a new round of rising cycles is confirmed, the US dollar may remain strong for a long time to come. Due to the existing "petro-dollar" pricing system in the international crude oil market, there is a clear negative correlation between international oil prices and the dollar exchange rate. Even when there is no substantial change in both crude oil supply and demand in the market, the fluctuation of the US dollar exchange rate can still directly cause international oil prices to rise or fall objectively. Therefore, under the market expectation that the US economy is steadily supporting the steady appreciation of the US dollar exchange rate in the near-to-medium term, the US dollar exchange rate will have a certain restraining effect on the rise in international oil prices during its rising cycle. Higher oil prices may trigger disruptive energy market changes. From the perspective of technological innovation, historically, the trend of international oil prices has a positive correlation with the technological R & D investment behavior of oil companies. Taking the upstream sector of an oil company as an example, in addition to most of its increased investment during periods of high oil prices, it is also used to increase the level of investment in exploration and development, and part of it is used to increase the research and development of relevant theories and technologies of upstream oil and gas, and gradually The sustainable development of the oil and gas industry has produced a better promotion. For example, the development of shale oil and gas exploration and development technologies, coal-based oil and gas, and biomass fuels are all more or less related to high oil prices. If oil prices remain high and fluctuating, technological innovation at a relatively high input level will definitely play a greater role in future oil and gas development. It may be possible to promote global oil and gas production through new geological theories, new exploration technologies, and enhanced recovery technologies. Increasingly and continuously reducing costs, thereby expanding the scale of supply in the crude oil market, and ultimately curbing international oil prices from rising in the medium and long term. From the perspective of alternative energy sources, on the one hand, during the current period of low oil prices since 2014, producers such as coal-to-liquids and biomass fuels have generally worked hard at the technological level to reduce the negative impact of low oil prices on the company's production and operation. The full cost per unit of output is significantly lower than a few years ago. According to estimates by relevant experts of the Shenhua Group, at this stage, the output of some coal-to-liquid units in the world has a certain income in the oil price range of 50-60 US dollars / barrel. The Shenhua Ning coal-to-liquids project has a good internal rate of return based on its good coal mining endowment and production and operation technology. The unit price of the oil price range of US $ 40-50 / barrel is already good. Therefore, if the international oil price maintains a relatively high operating range, the output of most coal-to-liquids and biomass fuels on the market will increase sharply, and the supply of crude oil on the market will also be increased objectively, which will affect the high growth of international oil prices. But on the other hand, maintaining the high level of international oil prices for a long time may bring disruptive changes to the global oil industry. Under high oil prices, various energy companies, including oil companies, have generally increased their attention and investment in non-oil and gas energy sources such as wind, solar and geothermal.

  Historically, from 2002 to 2014, the rapid development of the global wind power and photovoltaic power generation industry was largely due to the impact of the strong trend of international oil prices. Since 2014, through technological progress and management optimization, the cost of some new energy projects such as wind power and photovoltaic has continued to decrease, which has begun to compete with traditional oil and gas projects. According to Wood McKinsey statistics, from 2014 to 2016 alone, the average internal rate of return of low-carbon energy projects that 7 international oil companies, such as Chevron, Shell, Exxon Mobil, Total, Eni and BP, have invested or plan to invest are close 15%. Among them, Chevron invested in low-carbon energy projects such as wind energy and solar energy with an average internal rate of return as high as 23%.

With the continuous high operation of international oil prices and the continuous deepening of global environmental governance, various new energy sources may usher in a new round of rapid development, which will compete with oil and gas at the energy supply side, and then affect the rise in international oil prices. On the demand side, long-term high oil prices will also stimulate the continuous expansion of the market size of electric vehicles, shared mobility and other industries. If its future development towards informatization and intelligentization, it will surely cause structural changes in global energy demand, and oil demand may be sharp. Reduction, or will have a disruptive effect on the oil industry in the medium and long term, and fundamentally change the rising trend of international oil prices. As Wood McKinsey pointed out, "If self-driving cars will be commercialized by 2030 and widely accepted by 2035, the impact on crude oil demand will be far more than people think." (From China Energy Network)