China Independent Refining Margins to Improve Greatly in April
According to SCI, on March 11, the average refining margin at the independent refineries in Shandong Province was RMB 820.2/mt, up RMB 552.2/mt from the early March. International crude oil prices dropped sharply in March, which caused great reduction in the refining cost. On March 11, theoretically, the feedstock cost at Shandong independent refineries was RMB 2,300-2,500/mt. Gasoline and diesel prices also dropped, but the price decrease was smaller than the cost reduction.
But the actual situation is a little different from the theoretical margin, because most of the independent refineries are still consuming the high-priced crude oil which was purchased before. Therefore, it is predicted that independent refineries will actually be benefited from the crude oil price reduction in April and independent refineries’ actual refining margins will improve greatly in April.
Meanwhile, the National Development and Reform Commission postponed the adjustment of ceiling retail prices of gasoline and diesel on March 3, but Shandong independent refineries’ wholesale prices of gasoline and diesel dropped obviously. Therefore, petrol stations’ retail profits increased greatly. On March 13, the spread between the 92Ron gasoline retail price and the wholesale price was RMB 2,837/mt, and the spread between the 0# diesel retail price and the wholesale price was RMB 1,316/mt. The 92Ron gasoline retail-wholesale price spread increased by RMB 450/mt from the early March, and the price spread of 0# diesel increased by RMB 307/mt.
Saudi Arabia is reducing crude oil offers to occupy more market shares, and Russia is raising crude oil production. In addition, the U.S. crude oil stocks are increasing. All in all, SCI predicts that crude oil prices will continue fluctuating downwards in the short-term. On the demand side, China’s domestic demand for gasoline and diesel is improving, but meanwhile, refineries are raising their output of refined products. And most downstream enterprises are purchasing gasoline and diesel on a need-to basis. Therefore, Shandong independent refineries’ gasoline and diesel prices will also facing downward pressure.
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