It is projected that China's gasoil prices will kick off a three-month uptrend since June based on the fundamentals and news front, after the prices bottoming out in late May, per OilChem prediction model.
The wholesale prices of domestic gasoil averaged Yuan 7,507/tonne as of May 29, marking a gain of Yuan 101/tonne over May 28 and 29, OilChem data showed.
Source: Mysteel OilChem
Looking ahead over June, the daily gasoil consumption is projected to be down 4.4% month on month (MoM) at 577,000 tonnes/day, a drop of 4.7% from last year.
The falling consumption is primarily attributed to the rainy season in South China which is likely to slow the progress of infrastructure construction and other outdoor projects, though the wheat harvest in the north will support the gasoil consumption. The logistics sector is estimated to stay flat.
Source: Mysteel OilChem
On the supply side, domestic daily gasoil production is estimated to fall 3.6% MoM at 582,000 tonnes/day in June, down 9.2% year on year (YoY).
Specially, the state-owned refineries have reduced their production scheduling on soft demand, and the gasoil production is likely to drop 1.05 million tonnes MoM in June. For independent refineries, the CDU capacity utilization rates are projected to fall below 50% in the first half of June in Shandong Province due to extensive maintenance.
Source: Mysteel OilChem
With regard to the export, the exports are planned at 0.9 million tonnes in June, down 0.11 million tonnes MoM and up nearly 0.3 million tonnes YoY.
Taken together, domestic gasoil inventory is likely to fall 0.75 million tonnes through June at 19.40 million tonnes by end-June, a medium level in history.
The gasoil price is likely to gain momentum from rapidly falling production in June. And the traders and end-market users are estimated to stockpile actively in the face of low gasoil crack spread, as well as an anticipated consumption recovery, and high possibility of rising international crude oil prices in August. But the lack of rigid demand is a potential bear.
Written by Aggie Hu, huchenying@mysteel.com
Edited by Navy Liu, liuchuanjun@mysteel.com