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         Petrochemicals and chemicals: multiple factors promote oil prices to new highs silicone big rally
　　
         Geopolitical conflicts, possible OPEC production cuts, weaker US dollar and other factors drive oil prices to new highs

This week, driven by multiple factors such as the U.S.-Commission crude oil trade conflict, possible OPEC production cuts, forecasts of rising demand in East Asia and the Middle East, and Turkish-Iranian tensions, crude oil prices hit new highs, with WTI once reaching $101 a barrel.BRENT, WTI, and DUBAI weekly ringgit were up by 2.2%, 3.7%, and 0.2%, respectively; and the latest prices were $97.1, $99.0, respectively, 90.9 USD/bbl. As the impact of subprime debt comes to an end in the short term, the factors dominating crude oil prices return to geopolitical conflicts, regional trade conflicts, short-term supply and demand conditions for crude oil, and capital flows. In the short term, we believe that due to the continued weakness of the U.S. dollar and the frequency of geopolitical conflicts, and the capital market flows into the crude oil futures market, which may drive oil prices to continue to hit new highs; especially the situation in the U.S., the situation in Iran, the African region, the Middle East and other factors such as political fluctuations in the short-term fluctuations in oil prices, the possibility of significant fluctuations in oil prices may exist.

　　International refined oil prices hit record highs; domestic prices stable

This week, the American Petroleum Institute's latest oil report showed that: crude oil inventories rose by 1.4 per cent, distillate inventories fell by 4.5 per cent, and refinery capacity utilisation was 84.5 per cent, down 2.3 percentage points compared with last week. International refined oil product prices hit new highs due to record crude oil prices and an explosion at a large U.S. refinery; the week-over-week increases for the three refined oil products were 5.4 per cent, 5.0 per cent and 4.6 per cent, respectively; and the latest prices were 106.6, 115.4 and 96.9 U.S. dollars per barrel, respectively. We believe that after the peak of heating oil consumption has passed, the demand for refined oil products will be in the process of gradually declining, forming the off-season of demand; driven by the record-high crude oil price, the rising cost pushes the price of refined oil products to a new high. In the future, the price of refined oil products may remain in the state of following the adjustment of crude oil prices, until the peak of gasoline demand in summer to form a new dominant price force. Domestic refined oil prices remained stable.

　　Domestic and foreign gasoline and diesel oil price difference changes

Comparison of domestic and foreign gasoline prices: 07/2 to 08/2, the domestic gasoline prices increased by 14.2%, the current price of 6,508 yuan/ton (Sinopec Shanghai 90# gasoline wholesale price); during the same period, the international gasoline prices rose sharply, or 62.4%, the current price of 107 U.S. dollars/barrel (Singapore No. 92 unleaded gasoline), the import duty-paid price of 8,542 yuan/ton; The price difference between domestic and foreign gasoline reached RMB 1,338/tonne; while the price difference between domestic and foreign gasoline was RMB 162/tonne at the end of 06.

　　Comparison of domestic and foreign diesel prices: 07/2 to 08/2, the domestic diesel price increase, up 16.0%, the current price of 6300 yuan / tonne (Sinopec Shanghai 0 # diesel wholesale price); during the same period, the international diesel prices rose sharply, or 62.0%, the current price of 115 U.S. dollars / barrel (Reg 0.5% diesel in Singapore), the import duty-paid price of 7418 yuan / tonne; The price difference between domestic and foreign diesel reached RMB1,408/tonne, while at the end of 06 this price difference between domestic and foreign diesel was -400 RMB/tonne.

Silicone prices rebounded sharply

DMC prices in the Yangtze River Delta region rebounded sharply this week, from the previous 23,000 yuan / tonne rose to 25,000 yuan / tonne, which verified our earlier judgement that the price of silicone monomer is about to rebound. The price rebound is mainly due to the continued growth in demand for silicone monomer. Although more new domestic production capacity in 2007, but still can not fully meet domestic demand, the amount of annual imports of polysiloxane still reached 188,700 tonnes, equivalent to about 420,000 tonnes of monomers, an increase of 11.81% compared with 2006; the average price of imports from 3659 U.S. dollars / tonne in 2006 rose to 3719 U.S. dollars / tonne, basically remained stable. The continuous fall of domestic price in the previous period was more of an overreaction of the market.

　　As the market gradually return to rationality, domestic silicone manufacturers: Xinan shares, Blue Star New Material, Hongda New Material is worth paying attention to, its monomer production in 2008 is expected to reach 100,000 tonnes, 180,000 tonnes and 40,000 tonnes, respectively, Blue Star New Material will become the biggest beneficiary of the monomer price rebound, we continue to maintain the Blue Star New Material's "cautious recommendation We continue to maintain Bluestar New Material's "cautiously recommended" investment rating. The price of glyphosate, another leading product of Xinan shares, has reached a record high, the Yangtze River Delta region market price this week has reached a record high of 85,000 yuan / tonne, the company's performance is expected to exceed expectations, continue to maintain the company's "recommended" investment rating.
　　With the rise in international crude oil prices, ethylene PVC (s700) prices rose from 7,550 yuan / tonne a year ago to 7,800 yuan / tonne.

　　As the downstream formaldehyde demand has not yet recovered after the Spring Festival, and the dimethyl ether market is still uncertain, methanol prices continued to decline this week, and Lunan Chemical's ex-works price dropped to RMB3,000/tonne.

　　 The price of BDO gradually recovered, and the market price in Yangtze River Delta rose to RMB 17,000/tonne from RMB 16,800/tonne a year ago; the price of PVA remained at RMB 19,800/tonne.

　　 The price of MDI was basically stable, with the market price of M-200 in the Yangtze River Delta region at RMB 23,500-23700/tonne. TDI maintained the upward momentum of a year ago, with the market price in the Yangtze River Delta region rising to around RMB 42,000/tonne this week.