Crude Oil Prices First Fall, Then Rise; Retail Prices for Refined Oil Products Raised Again in This Round

May 21 news

The latest round of adjustments to China's refined oil prices took effect at 24:00 on May 21. The retail price of refined oil will be increased again. In 2026, the retail price of refined oil in China will have seen eight increases, one decrease, and one suspension. During this cycle, the trend of crude oil prices first fell and then rose, with the crude oil change rate turning from negative to positive. The retail price of refined oil is about to experience its "eighth" increase.

Entering this pricing cycle, international oil prices first fell and then rose. As of the 20th, the settlement price for the July contract of U.S. WTI crude oil futures stood at $98.26 per barrel, while the settlement price for the July contract of Brent crude oil futures reached $105.02 per barrel. During this pricing cycle, crude oil prices initially declined before rebounding. Earlier, optimistic expectations sparked by breakthroughs in U.S.-Iran peace talks led to a rapid decline in the geopolitical risk premium associated with the Middle East. Although the U.S. crude oil and refined product inventories released on that day continued to fall, this inventory boost failed to reverse the downward trend in oil prices. Later, as market sentiment shifted from supply-and-demand fundamentals to the risk premium driven by the ongoing geopolitical stalemate between the U.S. and Iran, coupled with the accelerating depletion of global oil inventories and disruptions to shipping through the Strait of Hormuz, multiple factors converged to push oil prices to higher levels in the short term, driving the crude oil market upward. As of the 21st, the change rate for crude oil varieties on the 10th working day was 1.3%, corresponding to an increase of 75 yuan and 70 CNY per ton for gasoline and diesel in China, respectively. Converted into per-liter increases, this translates to a rise of 0.06 yuan per liter for 92-octane gasoline, 0.06 yuan per liter for 95-octane gasoline, and 0.06 yuan per liter for No. 0 diesel.

Gasoline: Recently, Chinese refineries have resumed production in a concentrated manner, maintaining high processing volumes and increasing the output of refined oil products. The operating rate of local refineries in Shandong has been maintained at around 60%, with an ample supply of refined oil products in China. Additionally, gasoline and diesel inventories in China are at high levels, with inventories at Shandong local refineries and major operators reaching relatively high levels for the year. Market participants are mostly taking a wait-and-see approach, leading to a generally lackluster purchase and sales performance, with gasoline prices mainly fluctuating. However, recent resident activities such as travel have been normal, and the increasing popularity of new energy vehicles has resulted in demand falling short of expectations. Affected by these negative factors, gasoline prices have been oscillating at low levels.

Diesel: Recently, the supply of diesel in the Chinese market has increased. Although demand is recovering with the resumption of logistics and the gradual start of construction sites and projects across China, leading to a gradual warming up of diesel demand; however, the willingness of downstream buyers to purchase has weakened, and there is low interest in buying high-priced diesel. After the rapid rise in diesel prices earlier, the profit margins of gas stations have been severely squeezed, resulting in less active procurement. Additionally, the start of the fishing moratorium in southern China has led to a decrease in diesel demand. Overall, diesel prices have not changed much and remain at a low level.

Looking ahead: The core logic of current oil prices has shifted from supply and demand fundamentals to a premium driven by geopolitical conflicts. Institutions generally believe that the short-term high-price pattern is unlikely to break, and in extreme scenarios, oil prices may rise even further. In the short term, there is no willingness for compromise between the US and Iran, making it difficult for shipping in the Strait to resume quickly. Geopolitical risk premiums will continue to dominate oil price trends, coupled with low inventories and potential shortages of refined products, making it easier for oil prices to rise than to fall, and the high-volatility pattern is hard to reverse. For China, refinery operating rates are expected to remain largely unchanged in the short term, with normal supplies of refined products. It is anticipated that gasoline and diesel prices will mainly fluctuate in the short term.