May China Gasoline and Diesel Market Trends Show Volatility

May 28 news

According to the commodity market analysis system, the prices of gasoline and diesel from Shandong local refineries in May were mainly fluctuating. By the end of the month, the price of China's 92# gasoline was 8170.29 CNY/ton, with a slight increase of 1.35% in May; the price of China's 0# diesel was 7283.29 CNY/ton, with a decrease of 0.79% in May.

Core Driver: International crude oil prices plunged sharply in May

In May, the international crude oil market trended downward, mainly due to the rapid shift from geopolitical conflict premiums to expectations of negotiation easing and fundamental bearish factors. With the signals of the US and Iran restarting talks, partial resumption of navigation in the Strait of Hormuz, IEA's downward revision of supply and demand expectations, and a sharp increase in API inventories, the risk premium in oil prices previously accumulated rapidly dissipated, leading to a decline in crude oil prices. Additionally, global weak demand and concerns that escalating geopolitical conflicts could drag down the economy and oil consumption further contributed to the significant drop in the crude oil market. Affected by the declining crude oil prices, the prices of gasoline and diesel from China's independent refineries remained at low levels.

China Supply Side: Refinery Operations Maintain + Inventory Accumulation

In May, Chinese refinery operating rates remained at high levels, with processing volumes staying high and refined oil production increasing. The operating rate of Shandong's independent refineries was maintained at around 60%, and the supply of refined oil in China was ample. Additionally, with the continuous increase in gasoline and diesel inventories in China, the inventories of Shandong's independent refineries and major players in May remained in a relatively high range for the year, forcing prices to drop.

Market Demand: Weak demand persists, merchants are cautious in purchasing

The "May Day" holiday had only a limited boost on consumption. After the holiday, with no further holiday-related tailwinds, residents’ travel radius narrowed, and end-use resource consumption slowed down. Demand for private-car fuel remained steady, with no significant growth. New-energy vehicles continued to gain ground, squeezing gasoline consumption. The diesel-end-use sector showed weak recovery, with demand from infrastructure, industrial and mining, and logistics sectors remaining lackluster. Moreover, as coastal regions gradually entered the fishing moratorium period, demand for marine-fishing fuel plummeted. Additionally, heavy rainfall persisted in many parts of southern China throughout May, delaying progress on outdoor construction projects. Traders and gas stations lacked confidence in the market outlook, opting instead to purchase only as needed to avoid the risk of high inventory levels. As a result, market transactions were sluggish, and gasoline and diesel prices remained in a low-range fluctuation under these conditions.

Market Outlook: Pay close attention to negotiations on geopolitical tensions in the Middle East. Shipping through the Strait of Hormuz remains stalled at present. If the Middle Eastern conflict persists for an extended period, it will not only drive oil prices higher but also intensify global inflationary pressures, thereby weighing down global economic growth. In the short term, crude oil prices are expected to experience broad-range fluctuations. As China enters June, the market is likely to continue exhibiting a relatively weak and volatile pattern: both major refineries and independent refineries are forecast to see slight declines in operating rates, which could further tighten supply and provide some support to price floors. However, the ongoing impact of high oil prices, alternative energy sources, and rainy weather conditions may keep gasoline and diesel consumption sluggish, limiting the room for price increases. Overall, the market is highly likely to remain in a wide-range fluctuation with a generally weak trend.