WTI Drop Exerted Limited Influence on China Refined Oil Market
Due to the global public health issue, the oversupply in the international crude oil market became increasing severe. On April 20, WTI (May 2020) settled at $-37.63/bbl, hitting the lowest level since the launch of WTI in 1983. Accordingly, many participants in China paid close attention to its influence on China’s refined oil market.
According to SCI’s statistics, the influence of WTI decrease on China’s refined oil market was slight. On April 21, though the prices of refined oil at many refineries dropped, the extent was limited. The prices of gasoline and diesel at most state-owned refineries declined by RMB 50-150/mt, while the prices of gasoline and diesel at Shandong independent refineries dropped by RMB 20-100/mt.
SCI reckons that there were three reasons leading to that. First, the public health issue in China was relieved significantly, and more and more enterprises restarted operation successively, supporting China’s domestic demand for refined oil. Therefore, the overall market sentiment was relatively optimistic.
Second, some state-owned refineries had already finished their monthly sales tasks, and in order to gain higher profits, they maintained their prices of refined oil firm. As for independent refineries, most refiners reckoned that even if they decrease their prices sharply, the demand will not revive dramatically as traders and downstream users may wait for the prices to drop further. Accordingly, the prices of refined oil at Shandong independent refineries stayed largely stable.
Third, the international crude oil prices were below the price floor of $40/bbl set by China’s National Development and Reform Commission. Accordingly, no matter how significant the crude oil price decrease is, the retail ceiling prices of gasoline and diesel in China will not drop further. Therefore, WTI decrease exerted little influence on China’s refined oil retail market.
In the future, the international crude oil price trend will be mainly determined by the revival of global crude oil demand. In China, state-owned refineries will soon receive new monthly sales tasks from the beginning of May. Meanwhile, many participants replenished their inventory intensively before, and their current inventory pressure is relatively serious. Accordingly, SCI reckons that there are risks that the refined oil prices in China may decline in late April or Early May. As for retail market, since the international crude oil prices are far below the price floor of $40/bbl, SCI reckons that the future retail ceiling prices of gasoline and diesel in China will remain unchanged for a period.
Please click "Read more" for more information
For more information please contact us at
