July 3rd News
The current round of China's refined oil price adjustment window opened at 24:00 on July 3rd. The retail price of refined oil will be reduced again. In 2026, the retail price of refined oil in China will experience eight increases, four decreases, and one suspension. During this cycle, the trend of crude oil prices has significantly declined, and the negative value of the crude oil change rate has expanded. The retail price of refined oil is about to be "the fourth" decrease.
Entering this pricing cycle, international oil prices have experienced a significant downward trend. As of the 2nd, the settlement price for the August WTI crude oil futures contract stood at $68.69 per barrel, while the settlement price for the September Brent crude oil futures contract was $71.80 per barrel. During this pricing cycle, crude oil prices have plunged sharply. This substantial drop in oil prices is not driven by a single piece of news but rather by the simultaneous release of four major negative factors: the resumption of shipping traffic through the Middle East waterways, the agreement reached between Lebanon, Israel, and the U.S. on a ceasefire framework, increased oil and gas production in the U.S., and the extension of Russia's price cap policy. Coupled with the ongoing back-and-forth conflict between the U.S. and Iran, which has intensified the tug-of-war between bullish and bearish forces, these factors have collectively weighed down oil prices. As of the 3rd, the rate of change for crude oil varieties on the 10th working day was -18.81%, corresponding to a reduction of RMB 950 and RMB 915 per ton for gasoline and diesel in China, respectively. Converted into per-liter price cuts, this translates to a reduction of RMB 0.74 per liter for No. 92 gasoline, RMB 0.80 per liter for No. 95 gasoline, and RMB 0.78 per liter for No. 0 diesel.
In terms of gasoline: Recently, Chinese refineries have slightly reduced their operating rates, leading to a modest decline in refined oil production. The operating rate of independent refineries in Shandong remains around 50%, ensuring a sufficient supply of refined oil products in China. Moreover, inventories of gasoline and diesel in China remain at relatively high levels, with inventories held by Shandong’s independent refineries and major oil companies reaching the upper end of the year’s range. Market participants are largely adopting a wait-and-see attitude, resulting in generally subdued buying and selling activity and a downward trend in gasoline prices. Additionally, with recent normal levels of residential travel and other activities, coupled with the continued rise in the penetration rate of new-energy vehicles—which is exerting structural downward pressure—this has significantly impacted the traditional gasoline market. Furthermore, high oil prices themselves have curbed the frequency of vehicle use among some car owners, leaving the demand side of gasoline lacking effective upward momentum. As a result of these negative factors, the gasoline market is experiencing a downward trend.
Diesel: Recently, the supply of diesel in the market has decreased. It is currently in the traditional low season for consumption. The high temperatures during the summer have led to a slight decline in the operating rates of construction, infrastructure, and outdoor mining operations, resulting in weak demand for diesel. As the summer harvest enters its final stage, the demand for agricultural fuel has also contracted. The hot and rainy weather in South China further suppresses downstream fuel demand, leading to weaker diesel demand and a continuous decline in diesel prices.
For the future: With the current loose supply and demand, oil prices may continue to operate on the weaker side. The continuous passage of oil tankers through the Strait of Hormuz, the concentrated export of accumulated crude oil from Saudi Arabia, and the increased production from U.S. drilling rigs are all continuously delivering additional supplies, which will further digest the geopolitical premium, leading to wide fluctuations in oil prices around $70. If the conflict between the U.S. and Iran escalates again or if there is a large-scale disruption to shipping in the Strait of Hormuz, it would quickly boost risk-averse buying, restoring the geopolitical premium and bringing about a phased rebound in prices. In China, refinery operating rates are not expected to change much in the short term, with normal supplies of refined oil products, and it is anticipated that the short-term trend for gasoline and diesel will be mainly downward.
