Crude Oil Boosts Gasoline and Diesel Prices in Shandong Refineries, China

January 29th News

According to the commodity market analysis system, the recent price trend of gasoline and diesel from Shandong independent refineries has risen. As of the 29th, the price of China's 92# gasoline was 7192.8 CNY/ton, with a 3-day increase of 1.12%; the price of China's 0# diesel was 5854.4 CNY/ton, with an increase of 0.84%.

Cost Side: Crude oil prices are rising, providing clear cost support for refined oil products.

Crude oil market prices have been on the rise. As of the 28th, the settlement price for the March WTI crude oil futures contract in the U.S. stood at $63.21 per barrel, while the settlement price for the April Brent crude oil futures contract reached $67.37 per barrel. The crude oil market is being driven by a confluence of positive factors, including supply disruptions caused by the winter storm in the U.S. and escalating geopolitical tensions in the Middle East. At the heart of this rally is the significant short-term disruption to supply, coupled with a resurgence in geopolitical risk premiums, which has triggered a concentrated release of bullish sentiment, leading to continued upward momentum in crude oil prices. Given the direct link between crude oil prices and China’s refined oil market, gasoline and diesel prices in China have also followed suit, rising accordingly.

Supply Side: Shandong independent refineries maintain operations, ensuring normal supply of refined oil products in China.

Recently, the operation of Shandong's independent refineries has been relatively stable, with the operating rate maintained and the average operating rate of Shandong's independent refineries around 53%. Recently, major refineries across China have increased load reductions, leading to a decline in operating rates. This has resulted in lower inventory levels for some units, and a decrease in social inventories of cost oil, which has had a certain boosting effect on the market, causing gasoline and diesel prices to rise.

Demand Side: Demand is decent, gasoline fluctuates while diesel rises

In terms of gasoline, residents' travel and other activities have been normal recently. However, with the drop in temperature and the expansion of rainy and snowy weather, the use of private cars has increased, ensuring a stable demand for gasoline in China. Nevertheless, the growing popularity of new energy vehicles has led to a lower-than-expected demand, resulting in a slight increase in the gasoline market. As for diesel, the supply side has been normal recently, and the demand is still mainly driven by essential needs. The recent increase in low-temperature and rainy or snowy weather in northern regions has hindered diesel usage in infrastructure and logistics transportation. Additionally, the use of diesel in agriculture has come to a pause, leading to a relatively unchanged demand for diesel. Consequently, the diesel market has experienced a slight increase.

Market Outlook: In the short term, oil prices will continue to be driven by supply disruptions and geopolitical risks. Bullish sentiment is likely to persist. Given that supply disruptions have yet to fully subside, geopolitical risks remain heightened, and expectations are strong that OPEC will pause its planned production increases, oil prices may still have room to rise in the near term. From China’s perspective, refinery operating rates remain relatively stable in the short term, and refined oil supplies are normal. As for gasoline, demand has increased due to the Spring Festival travel rush, and it is expected that gasoline prices will continue to climb in the coming period. Meanwhile, diesel demand currently lacks favorable factors and remains generally subdued; overall, diesel price trends are expected to be volatile.