Crude oil futures broke $40 per barrel on Monday as the OPEC and Russia agreed to extend record oil production cuts until the end of July.
The rising prices are also pushing up Chinese oil companies' share prices. Analysts expect the production cut by OPEC will help Chinese oil companies meet their budgets and their crude production could stabilize, but the prices may not seem beneficial to the US.
Brent crude futures, the global benchmark, gained 1.75 percent to hit $43.04 per barrel. The US West Texas Intermediate (WTI) crude futures rose 1.37 percent to $40.09 per barrel on Monday at 2:08 pm.
As a result, PetroChina's H shares climbed to HK$2.84 ($0.37) per share, Sinopec's H shares edged up 1.39 percent to HK$3.64 per share, and CNOOC's H shares boosted 2.79 percent to HK$9.59 per share at 2:27 pm on Monday.
Some analysts think global oil prices will rise further due to the massive production cut by OPEC and Russia. They think that scenario could boost the oil industry in many countries, excluding the US.
If global oil prices are maintained at $50 per barrel, Chinese oil majors could ease their pressure in stabilizing oil production, an industry insider told the Global Times on Monday.
"Take the China National Petroleum Corp (CNPC) as an example. Its average break-even costs remain at $56 per barrel. At a price of $50 per barrel, the CNPC could profit through efforts like low-cost operations," he explained.
Clearly, the rising global oil prices are good news for the domestic oil exploration sector. However, the news may hit the US oil sector.
According to a Reuters report, Russia and Saudi Arabia, the OPEC's de factor leader, have to perform a balancing act of pushing up oil prices to meet budget needs while not driving them much above $50 a barrel to avoid encouraging a resurgence of US shale production.
The insider explained that the average break-even costs of US shale oil range from $60-70 per barrel, meaning US shale oil producers can hardly make profits when oil prices stayed at $50 per barrel.
If US crude prices are not attractive, it remains to be seen how much crude oil China will buy from the US. Experts told the Global Times that China should buy oil based on the principle of market economy.
China, the largest crude oil importer in the world, imported 216 million tons of crude oil during the first five months of 2020, up 5.2 percent year-on-year. Natural gas imports hit 40.12 million tons, up 1.9 percent from a year earlier, according to data released by Chinese customs.
Editor:Cherie
