In 2023, the domestic refined oil, gasoline, and diesel market prices have shown an upward trend. The starting price of gasoline was 7,477.6 RMB/ton, and the ending price was 8,460 RMB/ton, with an annual price increase of 13.14%; At the beginning of the year, the price of diesel was 7,180.2 RMB/ton, and at the end of the year, it was 7,189.6 RMB/ton. The price increased by 0.13% throughout the year, with a significant increase in gasoline prices. The overall performance of the refined oil market in 2023 was not strong during the peak season and not weak during the off-season.
Gasoline: The domestic gasoline market is on the rise in 2023, with the lowest gasoline price for the entire year being 7,477.6 RMB/ton, which occurred at the beginning of the year; The highest price of gasoline is 9,142 RMB/ton, with the highest price appearing on September 21st and a maximum annual fluctuation of 22.26%. The price trend of gasoline market in 2023 has increased, with the main increase concentrated in January. Firstly, in terms of costs, the crude oil market rose in January, and OPEC's policy of reducing production provided support for oil prices; In addition, the positive recovery of demand from China is driving the maintenance of high oil prices, and the strong cost side supports the domestic refined oil market. Secondly, in January, due to the impact of the Spring Festival holiday, the demand for gasoline was supported by the Spring Festival transportation, resulting in a significant increase in the gasoline market.
From February to the end of the year, the gasoline market was mainly volatile, with an average gasoline price of around 8,500 RMB/ton, with a fluctuation range of less than 5%. During this period, crude oil prices fluctuated greatly. On the one hand, supported by news of production cuts in oil producing countries, coupled with some geopolitical factors, the crude oil market was boosted. On the other hand, poor global economic data and poor demand for crude oil, coupled with bearish factors such as interest rate hikes by the Federal Reserve, suppressed the crude oil market, The crude oil market on the cost side has fluctuated widely. In 2023, domestic gasoline demand has strong resistance to decline, with gasoline consumption being the main demand. During this period, it was supported by various small and long holidays, and the increase in summer air conditioning usage supported gasoline demand. Positive factors still exist. However, the continuous development of new energy vehicles is impacting the gasoline demand market, and the penetration rate of new energy vehicles is constantly increasing. In 2023, the penetration rate of new energy vehicles will rise to around 36%. The combination of bullish and bearish factors has led to fluctuations in the gasoline market trend, with the overall price trend of the gasoline market rising throughout the year 2023.
Diesel: The domestic diesel trend in 2023 shows an "M" shape, with the lowest price of diesel in 2023 being 6,806 RMB/ton, and the lowest price appearing in early July; The highest price of diesel is 8,182.8 RMB/ton, with the highest price occurring in mid September and a maximum amplitude of 20.23%. There are two stages of diesel price increase, one is in January and the other is from July to September. The first upward phase was mainly influenced by the support of crude oil, and in addition, some merchants replenished their inventory during the Spring Festival travel period, resulting in a rise in the diesel market; In the second stage, a large amount of active stocking was carried out in the middle and lower reaches, and diesel reached a low point in 2023, leading to an increase in the enthusiasm for bottoming out in July and a continuous rise in diesel market prices. The diesel market has experienced two stages of decline, one from February to June and the other from October to December. The first round of diesel decline: From February to June, as the temperature gradually rises, the demand for diesel has declined, and outdoor operations have been restricted. In addition, logistics has performed poorly due to lower shipping costs, resulting in a decline in the diesel market trend. The second round of diesel decline: In July and August, diesel merchants built more warehouses and replenished inventory, and some merchants sold in the fourth quarter. In addition, the impact of rain and snow weather, diesel demand was poor, resulting in a decline in diesel market prices in the fourth quarter. Overall, diesel market prices have slightly increased in 2023.
In 2023, the retail price of domestic refined oil products has undergone 26 price adjustments, with 10 increases and 13 decreases and 3 setbacks. Overall, gasoline will be reduced by 50 RMB/ton and diesel will be reduced by 50 RMB/ton in 2023.
The trend of the refined oil market in 2023 has increased, and how to interpret the refined oil market in 2024 will be explained from the following aspects:
Cost side: The crude oil market directly affects the domestic refined oil market, and the volatility of the refined oil market is closely related to the crude oil market. The international situation in 2023 is unpredictable, with the Federal Reserve's interest rate hike leading to high interest rate shocks, as well as the impact of geopolitical turbulence such as Russia Ukraine conflict and Palestine Israel conflict. Demand growth slows down, upstream investment weakens, debt expands, and the global economy is in turmoil. International crude oil has also experienced macroeconomic pressures, risks of supply disruptions, and constraints from expectations of declining demand, resulting in sharp fluctuations and twists and turns.
The external environment in which crude oil operates in 2024 is still quite complex, with a complex geopolitical situation and constant conflicts. This will have an unpredictable direct impact on oil prices, resulting in even more drastic fluctuations. In the long run, the supply-demand game remains dominant. From the supply side, OPEC's production control will continue to play a role in managing oil price expectations, while the demand side faces more uncertainty. The economic slowdown is likely to create constraints on oil prices. According to the EIA report in December, the EIA lowered its forecast for Brent crude oil prices in 2024 to $83 per barrel, a decrease of $10 per barrel compared to the November forecast. Overall, due to the large number of oil price variables in 2023, oil prices have been operating at low levels for a long time, and the base oil price is not high. It is expected that the average oil price in 2024 may still be slightly higher than in 2023, but due to demand constraints, oil prices will not increase significantly. The domestic refined oil market is greatly affected by international crude oil costs, and there is some positive support for the cost of refined oil in 2024.
Supply side: In 2023, China's refining capacity reached a new high and has become the world's largest refining country, with a total crude oil processing capacity of approximately 984 million tons per year. In 2023, the production of refined oil increased significantly. As of November, gasoline production reached 148.391 million tons, an increase of 10.87% year-on-year; The diesel production was 198.863 million tons, an increase of 15.68% year-on-year.
In 2023, the production of gasoline and diesel increased significantly, with a greater increase in diesel production. In 2024, there were still three companies with a total production capacity of 37 million tons per year, and China's refining capacity continued to rise. However, in the context of the implementation of the 14th Five Year Plan to reduce oil consumption and increase production, some outdated refining facilities will be integrated, which to a large extent controls the growth of refining supply; However, it is expected that there will not be much room for decline in gasoline and diesel production in 2024, and it is still in the high production stage. The high production of finished oil will to some extent suppress the increase in product prices.
Demand side: In 2023, gasoline consumption will be around 168 million tons, and diesel consumption will be around 216 million tons. With China's control over carbon emissions, gasoline will face increasingly strict environmental restrictions, and the rapid development of new energy substitute products will further squeeze gasoline demand. More than 97% of gasoline consumption is gasoline vehicle fuel consumption. As the penetration rate of new energy vehicles continues to increase, gasoline consumption will be further weakened. It is expected that the penetration rate of new energy vehicles will reach around 40% in 2024, and gasoline consumption may reach its peak in 2023. In 2024, gasoline consumption may enter a downward phase. From the perspective of diesel demand, in 2024, China will enter the challenging year of the 14th Five Year Plan, and domestic economic stimulus policies may increase, which may increase diesel demand for industries such as agriculture, animal husbandry, and mining. However, under the slow recovery of the global economic environment, China's future real estate industry may enter a stage of destocking, and the infrastructure industry may suppress the expansion of diesel demand. It is expected that diesel consumption will not change much in 2024.
Import and export: In 2023, the import and export volume of refined oil products increased year-on-year. As of November, China's imported refined oil products were 43.225 million tons, and the total export volume was 58.176 million tons.
At the end of December 2023, the Ministry of Commerce issued the first batch of China's refined oil export quotas for 2024, totaling 19 million tons, a year-on-year increase of 0.05%. The issuance of the first batch of quotas will help alleviate domestic supply and demand pressures, and the decline in the domestic gasoline and diesel market will slow down. It is expected that the total amount of China's refined oil export quotas in 2024 will be higher than in 2023, which will alleviate domestic supply contradictions and support the domestic refined oil market to some extent.
Overall, the international crude oil prices in 2024 will provide a certain degree of cost support for the refined oil market, and there may be pressure on the domestic refined oil supply and demand. Export policies will become more flexible, and both long and short factors will affect the overall situation of the domestic refined oil market in 2024. The pressure on gasoline supply and demand is relatively high, and the domestic gasoline market prices may be slightly lower than the 2023 price level. However, the demand for diesel in the market is better than that of gasoline, The pressure on supply and demand is relatively small, and it is expected that the overall diesel price in 2024 will be slightly higher than the price level in 2023.
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