China's gasoline prices are projected to keep falling after experiencing a dull month in October, primarily because the demand seems unsustainable based on current market trades. China's gasoline wholesale price recorded Yuan 8,434/tonne as of November 15, down 0.6% from November 1. The price drop has been mild recently amid low production and narrow crack spread, in addition to slightly better consumption expectations compared with gasoil.
Looking ahead, it is expected that the average daily gasoil consumption will drop 1.5% month on month at 450,000 t/day in November, a low through 2023, based on OilChem predictive model. The decline is attributed to the ending of travel peak as well as reducing use of vehicle air-conditioning, especially in South China. Though such decline is seasonal, it has been greater than expected.
Source: Mysteel OilChem
The daily production, meanwhile, is estimated to fall 6.3% from October at 488,000 t/day in November, per OilChem survey.
Specially, the production scheduling of state-owned refineries has been lowered by roughly 0.9 million t amid accumulating in-plant stocks when the consumption weakens rapidly post the National Day holiday. The independent refineries have been weighed on by poor refining profits in early November, as well as insufficient supply of feedstock due to depleted crude oil import quotas, and their planned production is down 0.4 million t.
Source: Mysteel OilChem
In November, the gasoline exports are planned at around 0.4 million t, a drop of 0.5 million t from October, and the imports at 0 t.
Taken together, China's gasoline inventory is estimated to fall nearly 0.2 million t to 17.6 million t, a medium level compared with historical data.
In summary, the fundamentals in November are comparatively bullish, though insignificant. But the speculative demand has been weighed on by expanding crack spread as well as prices consolidating in mid-November. Therefore, the market will once again be filled with rigid demand, keeping the prices rangebound with mild drops in the rest of November.
Written by Aggie Hu, huchenying@mysteel.com
Edited by Navy Liu, liuchuanjun@mysteel.com
