Shandong independent refineries' CDU operating rate refreshed its two-year low recently, as per OilChem survey. The CDU operating rate of Shandong independent refineries was 50.52% as of July 4, down 9.65 percentage points compared with that at the beginning of 2024 and down 10.28 percentage points year on year.
2022-2024 Shandong CDU Operating Rate
Source: OilChem
Low operating rate resulted in production reduction. The gasoline weekly production was 477,300 tonnes as of July 4, which was the bottom since March 2020, while the gasoil weekly production was 949,200 tonnes, which was the lowest level since September 2022. Refineries actively cut down their production due to poor refining profit and soft demand.
However, production reduction did not push up gasoil prices, and low market confidence weighed on the price appreciation of gasoil. The gasoil crack spread was at Yuan 265/tonne on July 9, which was basically the same as the 10-year average.
Gasoil Crack Spread of Shandong Independent Refinery
Source: OilChem
The slowdown of economic development has suppressed the confidence of downstream users in construction investment. The sales volume of LNG heavy trucks continues to rise in 2024, which dampens the consumption of gasoil due to its lower transportation cost.
It is projected that the overall gasoil market supply will stay relatively low in July, as few refineries plan to resume production and the low operating rate of infrastructure construction, industry and mining will constantly weigh on market demand.
Written by Ariel Guo, gq@oilchem.net
Edited by Navy Liu, liuchuanjun@mysteel.com