Mid-Aug China Social Diesel Storage Capacity Utilization Inched Up
According to SCI’s statistics, up to August 13, the social diesel storage capacity utilization was 28.05%, up 0.57% from the end of July.
In the first half of August, the global demand for crude oil was weak, while the crude oil stocks in the U.S. dropped. The overall international crude oil prices continued fluctuating. China’s National Development and Reform Commission maintained the retail ceiling prices of gasoline and diesel stable, and most participants adopted a wait-and-see attitude. At the middle of August, the international crude oil prices increased to the highest levels since March 5, 2020, while the prices of diesel at Shandong independent refineries were at relatively low levels. Accordingly, diesel traders replenished their inventory intensively for a short period. Meanwhile, in the first half of August, many regions in China still experienced continuous rainy weather, and a few regions even suffered from flood disaster, suppressing the downstream consumption for diesel. As a consequence, the diesel inventory at diesel traders was consumed slowly, and the social diesel storage capacity utilization at the middle of August inched up from the end of July.
In terms of prices, in the first half of August, China’s domestic demand for diesel was sluggish, and the sales of diesel at both state-owned refineries and independent refineries underperformed. Therein, the prices of diesel at some state-owned refineries dropped by RMB 50-100/mt. However, Sinopec and PetroChina set strict profit targets for their refineries, and therefore, many state-owned refineries were reluctant to cut their prices of diesel. As for independent refineries, the overall prices of diesel declined from the end of July.
According to SCI’s statistics, up to August 14, the average price of 0# diesel at Shandong independent refineries was RMB 4,754/mt, down RMB 25/mt from the end of July. The average price of 0# diesel at state-owned refineries was RMB 5,416/mt, down RMB 7/mt from the end of July. As for refined oil retails, up to August 14, the theoretical profits of selling diesel produced by independent refineries at petrol stations were RMB 1,361/mt, up RMB 25/mt from the end of July. The theoretical profits of selling gasoline produced by independent refineries at petrol stations were RMB 2,108/mt, down RMB 33/mt from the end of July.
SCI reckons that in the second half of August, the international crude oil prices are likely to continue fluctuating, but the average price may inch up. Therefore, China’s National Development and Reform Commission is likely to raise the retail ceiling prices of gasoline and diesel on August 22, supporting the refined oil market to some extent. However, the rainy weather will remain in many regions, continuously suppressing the end demand for diesel, and therefore, the dealings in the diesel market are unlikely to revive significantly. SCI estimates that in the second half of August, the prices of diesel at state-owned refineries will be stable-to-rising, while independent refineries will adjust their prices of diesel based on their own situations. Diesel traders will reduce their replenishment and keep consuming their inventory. On the whole, SCI reckons that the social diesel storage capacity utilization at the end of August will decrease slightly from the middle of August.
