Independent Refineries’ Oil Refining Margins Improving

US crude oil output and inventory fell, the United States imposed sanctions on Iran, and the US trade war spurred investors' serious concerns about the global economy. Brent crude oil was in a high-level downtrend this month, and refining costs fell sharply. According to SCI, as of July 18, the oil refining cost of Shandong independent refineries were around RMB 4,195 /mt.

The construction industry is seriously affected by the high temperature, so the demand for diesel is in the off-season. But the amount of oil used in automotive air conditioners increases, and gasoline demand is in the peak season. In July, some refineries are intensively overhauled. The average operating rate of CDU at Shandong independent refineries fell to 55.4%, the lowest in the year, which led to a decline in gasoline and diesel output. Under the influence of the fundamentals of supply and demand, the prices of most Shandong independent refineries output are in upward trend, with the mainstream increase of RMB 50-100/mt.

In July, Brent crude oil approached the $80/bbl but then declined subsequently, which meant that the raw material costs of refineries were also at a high-level downtrend. On the other hand, most of the refineries’ maintenance was in July and the overall supply was tight. The prices of naphtha, gasoline, diesel and liquefied petroleum gas were in upward trend. Under the influence of falling raw material costs and rising sales, the average comprehensive profit at Shandong independent refineries were RMB 292.8/mt this month, slightly lower than the previous month's RMB 301.9/mt.