China’s domestic wholesale gasoline and diesel prices have been falling amid weakening international crude and soft market fundamentals recently, and they tend to lose more ground as the glut for refined products grows worse in large parts of Asia.
The prices of national standard 92-RON gasoline settled at CNY5,700-5,950/mt ($827-863/mt) in south, east and north China and Shandong on June 18, down by CNY400-600/mt or 6.45%-9.23% from May 31, JLC data shows. Meanwhile, diesel prices in these regions dropped to CNY5,800-6,000/mt, posting a loss of CNY200-350/mt or 3.28%-5.56%. Gasoline prices tumbled to below those of diesel, which has hardly been seen over the past years.
Gasoline and diesel prices tracked softening international crude that has been hit by demand concerns amid an escalating trade war. They were also dampened by excess supply when demand was slow to grow.
Gasoline prices have dropped more than diesel this year, as the gasoline market sees an aggravating overhang amid slowing demand growth and rising production. China’s apparent consumption of gasoline amounted to 42.59 million mt in January-April 2019, a rise of 3.6% from the same period in 2018, according to data from the National Bureau of Statistics (NBS). Growth slowed down by three percentage points year on year, which indicated decelerating demand growth because of falling car sales and negative impacts from alternative energy. The country’s car sales have been in a downtrend since 2018, while the sales of electric cars have been rising fast.
The country’s gasoline production amounted to 59.19 million mt in January-May, a rise of 4.0% from the corresponding period in 2018, the NBS data indicates. In contrast, its diesel output slid by 7.6% to 67.74 million mt.
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Gasoline supply is expected to grow in H2 2019 as Hengli Petrochemical and Zhejiang Petrochemical begin gasoline and diesel production in new refineries, with both set to have a relatively high output ratio for gasoline.
Competition in the downstream sector is becoming increasingly fierce and retail margins are shrinking as petrol stations have been offering large discounts to boost sales. Petrol stations belonging to PetroChina and Sinopec started a new price war in Shandong, Henan, Hebei, Jiangsu, Zhejiang and Guangdong provinces in March 2019, offering discounts of CNY1-2/liter for gasoline and about CNY1/liter for diesel, and private petrol stations followed suit market sources said.
The market is still strongly bearish and China is likely to cut fuel prices again next week. As of June 18, the fifth working day in this pricing cycle for China’s gasoline and diesel retail ceilings, the crude basket JLC selects to indicate fluctuations in international crude prices has dropped by 4.86% from the previous pricing cycle to $58.61/bbl, indicating a corresponding plunge of about CNY210/mt in the retail ceilings of gasoline and diesel, JLC data shows.
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