Aug Shandong Independent Refinery Refined Oil Price Forecast

SCI99

2019-08-01

Aug Shandong Independent Refinery Refined Oil Price Forecast

SCI reckons that in August, 2019, the diesel prices at Shandong independent refineries are likely to fluctuate, while the gasoline prices at Shandong independent refineries may rise.

According to SCI’s statistics, up to July 29, 2019, the average price spread between the diesel prices at Shandong independent refineries and the international crude oil prices was RMB 2,380/mt, up RMB 172/mt from last year. The average price spread between the gasoline prices at Shandong independent refineries and the international crude oil prices was RMB 1,774/mt, down RMB 516/mt from last year.

In July, the prices of gasoline trended up. With the increase of state-owned refineries’ gasoline purchases from Shandong independent refineries, many independent refineries raised their gasoline prices. Meanwhile, the international crude oil fluctuated upward, giving support to the gasoline market. From July 4 to July 14, many state-owned refineries started gasoline purchases from independent refineries, and due to the relatively short gasoline supply in North China, the prices of gasoline kept increasing. However, in H2 July, some state-owned refineries stopped gasoline purchases from independent refineries because of the surge of gasoline prices. Moreover, the international crude oil prices decreased from highs, and accordingly, the prices of gasoline started declining.

In terms of diesel, in July, the diesel market shares of Shandong independent refineries increased, and the prices of diesel kept going up. Meanwhile, with the increase of diesel prices, the diesel arbitrage profits from Shandong independent refineries to other regions kept declining. Therefore, the prices of diesel dropped after reaching relatively high levels.

SCI reckons that in order to forecast the gasoline and diesel price trend at Shandong independent refineries in August, the historic refined oil price trends, the change of refined oil imports and exports, the state-owned refineries’ refined oil purchases from independent refineries, etc. should be paid close attention.

First, according to the price spreads between gasoline prices at Shandong independent refineries and international crude oil prices in every August from 2015 to 2018, SCI found that the gasoline prices at Shandong independent refineries used to start increasing from H1, August. Therein, in H1 August 2017 and H1 August 2018, the gasoline prices increased by RMB 200-450/mt. Therefore, the gasoline prices at Shandong independent refineries are likely to increase in August based on the historic price trends.

Currently, the prices of gasoline are at relatively low levels. Meanwhile, with the sales promotions at end gas stations, the gasoline output adjustment at refineries and state-owned refineries’ gasoline purchases from independent refineries, the oversupply at China’s gasoline market is relieved to some extent. Therefore, SCI reckons that the gasoline prices at Shandong independent refineries in August may perform well.

In terms of diesel market, according to the historic price trends in the last four years, the diesel prices at Shandong independent refineries are likely to increase in August. However, the current diesel prices are at relatively high levels, and the increase may limited. Meanwhile, some bearish factors such as the drop of diesel export volume and the decrease of diesel/gasoline output ratio at refineries may lead to the decline of diesel prices at Shandong independent refineries. On the whole, SCI reckons that in August, the diesel prices at Shandong independent refineries may fluctuate.