July 31st News
The latest adjustment window for China's refined oil prices opened at 24:00 on July 31. The retail price of refined oil will be increased again, marking the tenth increase, four decreases, and one suspension in 2026. During this cycle, crude oil prices have risen significantly, with the crude oil change rate remaining positive, leading to the "tenth" increase in the retail price of refined oil.
Entering this pricing cycle, international oil prices have been on an upward trend. As of the 30th, the settlement price for the September contract of U.S. WTI crude oil futures stood at $83.59 per barrel, while the settlement price for the September contract of Brent crude oil futures reached $89.03 per barrel. During this pricing cycle, crude oil prices have risen sharply. The core reason behind the significant increase in oil prices is the growing likelihood of a prolonged blockade of the Strait of Hormuz and the direct attack on the Bab al-Mandeb Strait in the Red Sea—two critical oil export routes from the Middle East are simultaneously under pressure, heightening the risk of supply disruptions and driving up risk premiums. Moreover, although OPEC+ plans to increase production, implementation has proven challenging; at the same time, the EU’s sanctions against Russia have been further tightened, effectively raising overall crude oil trading costs and providing indirect support to oil prices. As of the 31st, the change rate for crude oil varieties on the 10th working day reached 13.25%, corresponding to an increase of RMB 685 and RMB 655 per ton for gasoline and diesel in China, respectively. Converted into per-liter prices, this translates to an increase of RMB 0.54 per liter for No. 92 gasoline, RMB 0.57 per liter for No. 95 gasoline, and RMB 0.56 per liter for No. 0 diesel.
Gasoline: Recently, Chinese refineries have reduced their load, leading to a slight decrease in refined oil production. The operating rate of Shandong independent refineries remains around 50%, and the supply of refined oil products in China is normal. The inventory change of gasoline and diesel in China is not significant, with the inventories of Shandong independent refineries and major refineries still at relatively high levels for the year. The market generally maintains a wait-and-see attitude, and overall trading performance is average. Driven by the rise in crude oil prices, gasoline market prices have increased. During the summer vacation, there has been an increase in resident travel, but the continuous rise in the penetration rate of new energy vehicles has created structural pressure, significantly impacting the traditional gasoline market. High oil prices themselves also suppress the frequency of car usage for some owners, resulting in a lack of effective support for gasoline demand. Due to these factors, the extent of the price increase for gasoline is limited.
Diesel: Recently, the supply of diesel in the Chinese market has decreased. The current period is traditionally a low season for consumption. The hot and rainy weather during the summer has led to a slight decline in the operating rates of construction, infrastructure, and outdoor mining operations, resulting in weak demand for diesel. The summer harvest has ended, leading to a contraction in agricultural fuel demand. The hot and rainy weather in South China has further suppressed downstream fuel demand, weakening the demand for diesel. However, strong cost support has pushed up diesel prices.
Looking ahead, current low inventory levels are setting the stage for persistently high oil prices. The U.S. Strategic Petroleum Reserve has already fallen to its lowest level since 1983, and overall crude oil inventories have hit multi-decade lows. Coupled with the significant challenges OPEC+ faces in increasing production, the supply side is unlikely to ease its tight situation in the short term. Moreover, geopolitical factors are amplifying the volatility of crude oil prices, and with insufficient inventory reserves, it’s difficult to deploy large-scale hedging measures against the risk of geopolitical supply disruptions. Once shipping lanes experience a substantial closure, the only option left will be to rely on price hikes to curb consumption and balance supply and demand; thus, oil prices are likely to continue surging in the near term. Although high crude oil prices are providing strong support for Chinese gasoline and diesel prices, the impact of high oil prices, alternative energy sources, and prolonged rainy weather continues to weigh on demand. As gasoline and diesel prices remain at relatively low levels, further price increases in the coming period may be constrained.
