Worries Grow over China Gasoline & Diesel Prices
State-owned refineries’ operating rates averaged 82.56% as of September 30.
China’s gasoline and diesel demand improved greatly in Q3, 2019.
Price slips are expected to be seen in gasoline and diesel markets in Q4.
In the third quarter of 2019, gasoline and diesel prices in the Chinese market increased a lot, in spite of wild changes in international crude oil prices. But in the fourth quarter, bearish factors are predicted to dominate in the market, which leads to worries over the gasoline and diesel prices.
According to SCI, on September 30, state-owned refineries’ 92 RON gasoline prices averaged RMB 7,834/mt, up RMB 22.35% from the average price on June 30. In addition, state-owned refineries’ 0# diesel prices averaged RMB 7,097/mt on September 30, up 7.56% from June 30.
Meanwhile, state-owned refineries had tight market supply of gasoline and diesel in September, so most of the state-owned refineries limited their wholesale volume, especially the refineries in Southwest China and Northwest China. This factor also supported the gasoline and diesel prices.
The average operating rate of CDUs at China’s state-owned refineries climbed to a high level in September, as most of the refineries concluded their annual maintenance. According to SCI, the average operating rate of state-owned refineries increased to 82.56% on September 30, up 6.15% from the end of June.
On the demand side, the two important holidays in September led to strong demand for gasoline and diesel. In the meantime, gasoline and diesel pipelines and railways in some regions started maintenance during that period, and some state-owned refineries cut their purchase volume of gasoline and diesel from independent refineries. And then, China faced temporary tight supply of gasoline and diesel.
The great price increase of gasoline and diesel in the third quarter was mainly caused by the tight market supply. And the tight supply was mainly caused by difficulties in product flow. For example, in Southwest China, the refined oil pipeline, Lanzhou-Chengdu-Chongqing Line, burst in September, so the delivery of gasoline and diesel stopped. Meanwhile, the railway for transport of gasoline and diesel started maintenance, and transport of the gasoline and diesel mainly relied on the railway in Southwest China. Accordingly, Southwest China had tight supply of gasoline and diesel. Furthermore, the tight supply in Southwest China impacted the market sentiment all over China. Therefore, it is difficult for the price increase of gasoline and diesel to continue in the fourth quarter.
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