SunSirs: Retail Prices in China have Experienced the Largest Decline in 2024, Leading to a Decrease in Domextic Fuel Costs

https://www.chemnet.com   Aug 12,2024 SunSirs

During this pricing cycle, multiple negative factors in market news have suppressed the trend of international oil prices, causing a fluctuating downward trend. Iraq's crude oil supply still exceeds the OPEC+limit, exacerbating investors' concerns about oversupply of crude oil. As the summer driving season draws to a close, investors expect a gradual decrease in US crude oil demand. In terms of geopolitical situation, Israel's efforts to avoid causing a broader Middle East conflict have eased investors' concerns about the geopolitical situation in the Middle East and weakened its support for oil prices.

Affected by the decline in crude oil prices, the rate of change maintained a negative range and eventually realized a downward trend, with the largest decline of the year.

After the current round of reduction in retail prices of refined oil products, the social cost of oil consumption has decreased. In terms of private cars, according to the estimated capacity of a general fuel tank of 50L, filling a full tank of gasoline after August 8th will save about 12 RMB; After the price adjustment, private car owners will reduce their fuel costs by approximately 40 RMB per month for models that run 2,000 kilometers per month and consume 8 liters of fuel per 100 kilometers. In terms of logistics transportation, taking a truck with a load capacity of 50 tons as an example, the fuel consumption for heavy-duty driving is about 40L per 100 kilometers, and the monthly fuel consumption cost will be reduced by 1,000 RMB after the price adjustment is realized.

In terms of wholesale markets, the decline in crude oil futures prices and the suppression of demand caused by hot and rainy weather have resulted in a weak operation of the wholesale market for refined oil products. The performance of gasoline consumption during the summer is still acceptable, with stable prices being the main factor in recent times. Diesel continues to be in the off-season of demand, coupled with the decline in crude oil, which has kept the market cautious. The lack of sustainability in industry replenishment has put pressure on the market to decline. But with the support of low production and cost factors, the market decline is limited. Overall, there has been little change in the refined oil market, so the price difference between wholesale and retail is limited. According to data from Jinlianchuang, as of August 7th, the wholesale and retail price differences for domestic main units of gasoline and diesel were 1,526 RMB/ton and 1,290 RMB/ton, respectively. Compared with July 26th, the wholesale and retail price difference for gasoline decreased by 8 RMB/ton and diesel increased by 34 RMB/ton during the cycle. The retail price has dropped significantly in this round, and after redemption, the price difference between wholesale and retail will noticeably narrow.

Looking ahead, pressure from the global economic outlook and expectations for crude oil demand will continue to weigh on the crude oil market. Although the geopolitical situation in the Middle East remains tense, the boost to the oil market is limited as it has not yet affected oil producing countries. Next, we need to pay attention to whether the relationship between Iran and Israel will deteriorate. Once Iran joins the war, it may boost the oil market, otherwise it will be difficult to stop the sluggish pace of the oil market. Overall, international oil prices are expected to fluctuate weakly next week.

According to current calculations, the new round of change rate will start in a negative direction, or around -0.3%. On the first working day, the corresponding decrease in finished oil will be 30 RMB/ton. Considering the weak trend of crude oil in the later stage, the change rate may widen, and there is a slight downward adjustment expectation in the next price adjustment window (24:00 on August 22). As the peak season for diesel consumption approaches, rigid demand will improve, and market stocking demand is expected to increase, providing support for the market. Gasoline is still in the summer vacation stage, and demand remains stable. Operators will replenish it moderately according to demand. It is expected that the wholesale market for refined oil products will experience narrow fluctuations in the later stage, and the price difference between wholesale and retail will tend to stabilize after narrowing.

If you have any questions, please feel free to contact SunSirs with support@sunsirs.com.

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