Inventory Reached a High Level at Shandong Independent Refinery
In the past several years,after the Spring Festival holiday, most traders and downstream users started toreplenish their inventory intensively, reducing the inventory pressure atrefineries and supporting the prices of gasoline and diesel to grow. However,in 2020, due to the public health issue, civilians’ use of cars dropped sharplyduring the Spring Festival holiday, suppressing the demand for gasoline. InShandong, the sales volume of gasoline at some petrol stations decreased byaround 50% from the past several years. Meanwhile, the operating rates atmining, infrastructural constructions, projects, etc. dropped to low levels aswell, and many participants postponed their restart of operation. Therefore,the diesel demand underperformed. As a consequence, the sales of gasoline anddiesel at Shandong independent refineries weakened, and the inventory ofgasoline and diesel continued rising.
Upto February 27, the total gasoline inventory at Shandong independent refineriesreached 819kt, up 139.19% M-O-M, and the gasoline storage capacity utilizationreached 35.85%. The total diesel inventory at Shandong independent refinerieswas 1,170.2kt, up 120.21% M-O-M, and the diesel storage capacity utilizationreached 35.14%. Both the gasoline and diesel storage capacity utilization hitthe highest level in the last two years, and the inventory pressure at Shandongindependent refineries was severe. Accordingly, some refineries either shutdown their units or reduced their operating rates to cut the inventorypressure. During February, the average operating rate at Shandong independentrefineries once hit 41.84%. Though at the end of February, with some downstreamusers slightly replenished their inventory, the operating rates at a fewrefineries inched up, the overall operating rate at Shandong independent refineriesstill stayed at a low level.
In March, the public healthissue is likely to become a global issue, and the international crude oilprices may trend down. Meanwhile, the OPEC conference will be held soon, andthe crude oil output reduction is likely to be strengthen, supporting theinternational crude oil prices to some extent. In China, more enterprises willgradually resume to normal operation, and the demand for gasoline and dieselwill revive. However, due to the high inventory and the risk that theinternational crude oil prices may drop, the prices of gasoline and diesel maydecrease further. SCI reckons that after the inventory at refineries drops tolevels and downstream demand revives, the prices of gasoline and diesel atShandong independent refineries will increase.
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