SunSirs: The Price of Refined Oil decreases in 2024 in China, and There will be Little Improvement in 2025

In 2024, the domestic refined oil, gasoline and diesel market prices slightly decreased. The price of gasoline at the beginning of the year was 8,460 RMB/ton, and the price at the end of the year was 7,883.4 RMB/ton, a decrease of 6.82% for the whole year; At the beginning of the year, the price of diesel was 7,189.6 RMB/ton, and at the end of the year, it was 6,985 RMB/ton. The price slightly decreased by 2.85% throughout the year. The overall performance of the refined oil market in 2024 was average, and the market slightly declined throughout the year.

Gasoline: The domestic gasoline market is expected to experience a slight decline in 2024, with the lowest price of gasoline for the year being 7,201.4 RMB/ton, which was recorded on November 8th; The highest price of gasoline is 9,303.4 RMB/ton, which occurred on April 15th, with a maximum fluctuation of 29.18% throughout the year. The price trend of gasoline market in 2024 will decline, and the annual trend can be divided into three stages. In the first stage, from the beginning of the year to mid April, the gasoline market trend will rise; In the second stage, from mid April to early November, gasoline market prices continued to fall; In the third stage from mid November to the end of the year, the gasoline price market bottomed out and rebounded.

Phase 1: From the beginning of the year to mid April, gasoline prices rose from 8,460 RMB/ton to 9,303.4 RMB/ton, with a phase increase of 9.97%. The rising trend of gasoline market prices is partly supported by the strong cost of crude oil, the tense geopolitical situation in the Middle East, and the planned production cuts by oil producing countries, which provide strong support for crude oil. On the other hand, the gasoline supply was relatively stable during this stage, with Shandong refineries operating at around 60% and main refineries operating at over 80%. During this period, gasoline consumption significantly increased due to the impact of the Spring Festival holiday and the Qingming holiday, which provided support for the gasoline market. As a result, the gasoline market trend rose during this period.

Phase 2: From mid April to early November, gasoline prices fell from 9,303.4 RMB/ton to 7,139 RMB/ton, a drop of up to 23.26%. At this stage, crude oil prices have significantly decreased, with a drop of about 20%, mainly due to poor global economic data and an unfavorable outlook for crude oil demand. In addition, the gains brought by geopolitical factors have been continuously digested, resulting in a sharp decline in the crude oil market and a negative impact on the refined oil sector. The domestic gasoline market has also fallen. In addition, the continuous development of new energy vehicles in China is impacting the gasoline demand market, and the penetration rate of new energy vehicles is constantly increasing, which has a significant impact on the gasoline market. In addition, manufacturers have sufficient supply, and gasoline inventories are at a high level. Due to various factors, the gasoline market has significantly declined during this stage.

Phase Three: From mid November to the end of the year, gasoline prices rose from 7,139 RMB/ton to 7,883.4 RMB/ton, with a phase increase of 10.43%. At this stage, the crude oil market price fluctuated widely, and the cost support was still acceptable. During this stage, with a significant decrease in temperature and an increase in residents' travel, coupled with increased use of car air conditioning, gasoline consumption has risen. In recent times, the main business of external procurement has increased, and market traders have concentrated their purchases, driving the growth of local gasoline refining ship sales. At this stage, the gasoline market trend has risen.

Diesel: The trend of domestic diesel in 2024 presents an "N" shape, with the lowest price of diesel in 2024 being 6,501 RMB/ton, and the lowest price appearing at the end of September; The highest price of diesel is 7,607.4 RMB/ton, which occurred in mid April with a maximum fluctuation of 17.02%. Diesel prices have risen in two stages, one from the beginning of the year to mid April and the other in the fourth quarter. The first upward phase was mainly influenced by the support of crude oil, coupled with some businesses replenishing their inventory during the Spring Festival travel rush, resulting in a rise in the diesel market; In the second stage, the middle and lower reaches actively stocked up, coupled with favorable support from exports, the diesel market bottomed out and rebounded. The period of decline in the diesel market was from mid April to the end of September, during which the diesel market continued to decline. On the one hand, the crude oil market price significantly decreased during this stage, and the cost support was insufficient, resulting in a decline in the domestic refined oil market price trend. On the other hand, as the temperature gradually increased, diesel demand declined and outdoor operations were restricted. On the other hand, logistics performed poorly due to low freight rates, leading to a decline in the diesel market trend. Overall, the contradiction between supply and demand in the diesel market is evident in 2024, with diesel market prices experiencing a slight decline.

The retail price of domestic refined oil products in 2024 has undergone 24 price adjustments, with nine increases, nine decreases, and six suspensions. Overall, gasoline prices will be reduced by 130 RMB/ton and diesel prices will be reduced by 125 RMB/ton in 2024.

The trend of refined oil market in 2024 has slightly declined. How to interpret the refined oil market in 2025, specifically from the following aspects:

Cost aspect: The crude oil market directly affects the domestic refined oil market, and fluctuations in the refined oil market are closely related to the crude oil market. In 2024, the international situation is unpredictable, with oil producing countries extending their production cuts, the Federal Reserve cutting interest rates, and the impact of geopolitical instability. Demand growth slows down, upstream investment weakens, and debt expands, causing the global economy to be in a precarious state.

The external environment in which crude oil operates in 2025 is still quite complex, with intricate geopolitical situations and constant conflicts, which will have a direct impact on oil prices from time to time and cause even more drastic fluctuations. In the long run, the supply-demand game still dominates. On the supply side, OPEC's production control will continue to play a role in managing oil price expectations, while on the demand side, there will be more uncertainty. An economic slowdown is likely to constrain oil prices. Overall, due to the high variability of oil prices in 2024, the trend of oil prices has been declining for a long time. It is expected that the average oil price in 2025 may still be slightly higher than in 2024, but due to demand constraints, there will not be much room for fluctuations in oil prices. The domestic refined oil market is greatly affected by international crude oil costs, and there will be some cost support for refined oil costs in 2025.

Supply side: China Refining has become the world's largest refining country, with a total crude oil processing capacity of approximately 1 billion tons per year. In 2024, the production of refined oil products fluctuated year on year. As of October, the total gasoline production in 2024 was 135.677 million tons, an increase of 2.6% year-on-year; The total diesel production was 168.293 million tons, a year-on-year decrease of 4.7%.

In 2024, gasoline production will slightly increase while diesel production will decline. China's refining capacity will continue to remain high in 2025. However, in the context of the implementation of the 14th Five Year Plan to reduce oil consumption and increase production, some outdated refining units will be integrated, which will largely control the growth of refining supply; However, it is expected that the production of gasoline and diesel will still be in a high-yield stage by 2025, and the high production of refined oil products will to some extent suppress the product market.

Demand side: The gasoline consumption in 2024 is approximately 165 million tons, and the diesel consumption is approximately 206 million tons. With China's control of carbon emissions, gasoline will face increasingly strict environmental restrictions, and coupled with the rapid development of new energy substitute products, gasoline demand will be further squeezed. With the continuous increase in the penetration rate of new energy vehicles, gasoline consumption will be further weakened. It is expected that the penetration rate of new energy vehicles will reach around 45% by 2025, and gasoline consumption may slightly decline in 2025. From the perspective of diesel demand, the domestic economic stimulus policies may increase in 2025, and the demand for diesel in industries such as agriculture, animal husbandry, and mining is still acceptable. However, under the slow recovery of the global economic environment, China's real estate industry may enter a destocking stage in the future, and the infrastructure industry may inhibit the expansion of diesel demand. In addition, the substitution effects of LNG heavy trucks, new energy heavy trucks, and new energy light trucks will suppress diesel demand, and it is expected that diesel consumption will continue to decline in 2025.

Overall, in 2025, international crude oil prices will to some extent provide cost support for the refined oil market. There may be some pressure on domestic refined oil supply and demand, with consumption slowing down faster than supply and export policies becoming more flexible. However, the squeeze on refinery profits will promote the reduction of refining capacity and promote the healthy development of the industry. Due to the combined influence of bullish and bearish factors, the overall market situation of domestic refined oil products in 2025 remains relatively stable, and the pressure of supply and demand in the gasoline and diesel markets still exists. It is expected that the overall prices of gasoline and diesel in 2025 will be slightly lower than those in 2024.

If you have any enquiries or purchasing needs, please feel free to contact SunSirs with support@sunsirs.com.