Crude Oil Prices First Fall, Then Rise; Retail Prices of Refined Oil Products See First Increase Since 2026

January 20th, News

The current round of China's refined oil price adjustment window opened at 24:00 on January 20. The retail price of refined oil is about to increase. In 2026, the retail price of refined oil has experienced one increase, zero decreases, and one suspension. During this cycle, the crude oil market first fell and then rose, and the crude oil change rate turned from negative to positive, leading to the first increase in the retail price of refined oil in 2026.

Entering this pricing cycle, international oil prices initially fell and then rose. As of the 19th, the U.S. WTI crude oil futures market was closed, and the settlement price for Brent crude oil March contracts stood at $63.94 per barrel. During this pricing cycle, crude oil prices first declined and then rebounded. On the one hand, as geopolitical tensions eased, the risk premium rapidly dissipated; geopolitical factors were the key driver behind the reversal in oil price trends. Market concerns about disruptions to Iranian supply have shifted from intensifying to easing, prompting a concentrated withdrawal of previously accumulated safe-haven buying. Additionally, worsening conditions in Venezuela introduced further negative factors, yet overall, the downward trend in the crude oil market was mitigated. On the other hand, the U.S. continues to tighten sanctions against Iran, and with supply chains related to Iranian oil exports also affected by these sanctions, Iran's crude oil supply could decline further in the future, providing support from the supply side. Although the market anticipates an increase in Venezuelan exports, the country’s oil industry infrastructure remains weak, and the recovery of its export capacity is proceeding slowly. Despite these positive developments supporting higher international oil prices, overall, crude oil prices have risen during this cycle. As of the 20th, on the 10th working day, the rate of change for crude oil varieties reached 1.80%. Accordingly, gasoline prices in China will be raised by 85 CNY per ton, and diesel prices by 85 CNY per ton—equivalent to an increase of 0.06 yuan per liter for 89# gasoline, 0.06 yuan per liter for 92# gasoline, 0.07 yuan per liter for 95# gasoline, and 0.07 yuan per liter for 0# diesel.

Gasoline: The operation of Shandong independent refineries is relatively stable, with the operating rate maintained and the average operating rate of Shandong independent refineries at around 53%. Recently, major refineries across China have increased their load reductions, leading to a slight decline in the operating rate, which has resulted in lower inventory levels for some units. Resident travel and other activities are mainly normal recently, but as temperatures drop and snowy and rainy weather expands, the usage frequency of private cars increases, ensuring a certain level of demand for gasoline in the Chinese market. However, the continuous rise in the adoption rate of new energy vehicles has led to a performance in demand that is below expectations, causing a slight increase in gasoline prices.

Diesel: Recently, the diesel market supply in China has been normal, with demand mainly driven by essential needs. The recent increase in cold and snowy weather in northern regions of China has led to disruptions in diesel use for infrastructure and logistics transportation. Additionally, the use of diesel in agriculture has come to a halt. As a result, the recent demand for diesel has weakened compared to before, causing the diesel market to fluctuate at a low level.

Looking ahead, short-term international oil prices are expected to remain volatile amid the interplay between supply and demand and fluctuations in geopolitical developments. Any resurgence in geopolitical tensions could trigger a short-term surge in oil prices. However, underlying factors such as weak demand, high inventory levels, and the long-term trend toward renewable energy substitution will continue to weigh on oil prices, making it difficult for them to sustain a sustained upward trend. As a result, the overall price range may widen further. In China, refinery operating rates remain relatively stable in the short term, ensuring normal supplies of refined petroleum products. Coupled with positive market signals and an expanding impact of rainy and snowy weather, expectations for rigid diesel demand have been dampened, keeping diesel prices weak. Gasoline demand, meanwhile, still provides some support, and gasoline prices may see a modest increase.