Why Hengyuan price run is just the beginning

Why Hengyuan share price rise is just the beginning?

valueguru
Publish date: Fri, 29 Apr 2022, 12:53 PM
Hengyuan rise is just the beginning.

Hengyuan price rise is just the beginning. Does anyone here know yesterday's 28 Apr 2022 Asia gasoline crack spread price? It's historical high, USD22.28 (this is industry spot price). Just to give reader here a comparison, in May 2019, the lowest rate quoted was USD0.83, yes, less than USD1! End of last month when China imposed Shanghai lock down, the spread came down to USD9+ but still high by historical standard but quickly recovered. So why the current run is not over yet? Many factors.

Russia Ukraine war. Russia refining capacity is close to 7mill bpd and by now over 50% is affected. Crude oil sales always appeared on headlines but people in the industry know refined products equally impacted and Russia is also a major exporter. Western buyers shunning Russia refined products and need to source for alternatives. Refiners are not like rubber gloves manufacturers where you just need a few months to expand capacity. They take years! And given the uncertainty as to when Russian refiners would go online again, no one is keen to plan for new ones. In the short to medium term, good luck trying to replace the millions of refining capacity that just went offline. Also, in support of Ukraine war and her refiners being bombed by Russia, western countries will also support her needs.

Next, lifting of Covid 19 restrictions worldwide. People going to travel more and this can be seen from the rise in jet fuel price. Due to jet crack spread (USD47.53) higher than diesel (USD37.38), European refiners are diverting their production to producing more jet fuel. This will push up diesel spread further up sooner or later, which will benefit Hengyuan.

Lastly, if we were to fast forward to end of this year when the western world were to cut off its natural gas intake from Russia completely, where and what will replace it completely? It will be a mixture of LNG, natural gas and refined products and when winter comes, you can imagine another demand spike again. And pray hard that winter doesn’t get too cold!  A link here for further reading https://www.reuters.com/business/energy/asia-oil-refiners-rake-record-profits-tight-global-supplies-2022-04-28/

All above information gathered from respectable news agencies, which due to copyright reason, cannot be quoted here. Anyone who has access to them will come to the same conclusion.  Russia Ukraine conflict will not end soon and unless Russia is willing to return the occupied territories, western sanctions are here to stay. This means the current situation in the energy market will only get worse before they get better. Combined with multiple factors, it's a perfect storm in the making.  For Hengyuan, I think the June quarter result will be the one to lookup for, which I believe it’s just the beginning. Please note that the above are my own opinions, feel free to disagree. And yes, I am vested.  

All the best to all who read this!

 

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1 person likes this. Showing 10 of 10 comments

Johnzhang

I concur his view

2 months ago

gladiator

Hengyuan best recovery stock.

2 months ago

Johnzhang

Valueguru, could you tell us the relative potential between HY and PetronM. If I am not wrong both have about the same refining capacity. I am in both counters

2 months ago

pang72

Good sharing for latest important fa t and figures

2 months ago

probability

https://www.theedgemarkets.com/article/bursa-energy-index-rises-most-l...

Reuters also reported that profit margins for complex refiners in Singapore — the bellwether for Asian refiners — had tipped over US$20 a barrel on Wednesday while crack spreads for gasoline, diesel and jet fuel had set fresh record highs of US$22.28, US$47.53 and US$37.38 per barrel respectively on Thursday, as transportation returns to form amid easing of pandemic containment measures across the globe.

Earlier this month on April 4, rating agency Moody’s Investors Service had also said Asian refining margins will remain buoyant in 2022 as easing movement restrictions boost demand for transportation fuels, while uptake for Asian fuels from Europe has increased due to international sanctions on Russia.

It noted that at the same time, supply has fallen due to significant refinery closures last year, coupled with decreased fuel exports from China.

Strong demand for transportation fuels amid a supply shortfall would drive refining margins even as a recent surge in crude prices bolsters feedstock costs, Moody’s added.

2 months ago

Tobby

Absolutely very true! Valueguru is spot on!

2 months ago

Mr NoNeedToStudy

Too late. Hy value around rm6 - rm7. Buying high dont cry when lost later lol

1 month ago

Tobby

Of course it's just beginning! Probably going RM10!

1 month ago

soon2795

Hi, Valueguru. I am a newbie here. I would like to ask whether is O&G share price affected by Brent crude oil price or gasoline crack spread price? This is because few weeks back there are news that Brent crude oil drop. People panic sell because it is thought that it will adversely affect O&G shares.

Then not too long back, Warren Buffet bought O&G shares. I follow him by buying a bit of Hibiscus share as the Brent crude oil sentiment is still there.

Hope you can enlighten newbie like me on this.

1 month ago

speakup

look like a lot ppl sell plantations swap to oil & gas like Hengyuan & Petron

1 month ago

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