SunSirs: Rate of Change Remains Negative; Retail Prices for China Refined Oil Lowered in Current Round

The latest window for adjusting domestic refined oil prices opened at 24:00 on June 4. In this round, retail prices for refined oil have been lowered. Year-to-date in 2026, refined oil retail prices have seen eight increases, two decreases, and one instance of remaining unchanged. During the current pricing cycle, crude oil market trends initially fell before rebounding; however, the calculated rate of change for crude oil remained negative, resulting in the "second" downward adjustment of refined oil retail prices this year.

Entering this pricing cycle, international oil prices followed a trajectory of initial decline followed by a rebound. As of the 3rd, the settlement price for the July contract of US WTI crude oil futures stood at $96.02 per barrel, while the settlement price for the August contract of Brent crude oil futures was $97.81 per barrel. During this adjustment cycle, the trend in crude oil prices shifted from a decline to a rise. The sharp drop in oil prices during the early stages was not driven by a single factor, but rather dominated by three major influences: fluctuating expectations regarding US-Iran negotiations, a recovery in shipping activity through the Strait of Hormuz, and expectations of de-escalating geopolitical conflicts. These factors, combined with US crude oil inventory data, caused the market's trading focus to gradually shift from "concerns over supply shortages" to "anticipation of easing tensions," resulting in a distinct turnaround in short-term oil price trends. In the latter stages, the market focus shifted from supply-and-demand fundamentals to risk premiums driven by the US-Iran geopolitical standoff. This shift—combined with the accelerated depletion of global oil inventories and shipping disruptions in the Strait of Hormuz—created a confluence of factors that pushed oil prices back toward short-term highs, driving the crude oil market upward. As of the 4th—the tenth working day of the cycle—the calculated rate of change for crude oil varieties stood at -11.20%. This corresponds to a domestic price reduction of 525 RMB per ton for gasoline and 520 RMB per ton for diesel. When converted to per-liter prices, 92-octane gasoline was lowered by 0.40 RMB per liter, 95-octane gasoline by 0.42 RMB per liter, and 0-grade diesel by 0.43 RMB per liter.

Regarding gasoline: Recently, domestic refineries have resumed production in concentrated fashion; processing volumes remain at high levels, resulting in increased output of refined oil products. Operating rates at independent refineries in Shandong Province remain below 60%, ensuring an ample supply of refined oil products within the domestic market. Furthermore, domestic gasoline and diesel inventories remain at elevated levels, with stocks held by independent refineries in Shandong and major state-owned enterprises reaching the upper end of their annual range. Market participants largely maintain a wait-and-see attitude; overall trading activity remains sluggish, and gasoline market prices are characterized primarily by volatility. Although recent consumer travel and related activities have returned to normal levels, the steadily rising penetration rate of new energy vehicles has caused actual demand to fall short of expectations; consequently, weighed down by these bearish factors, gasoline market trends remain predominantly volatile.

Regarding diesel: Supply in the diesel market has recently seen an increase. While demand has shown signs of recovery—driven by the resumption of logistics operations and the gradual commencement of construction projects and engineering works across various regions—downstream buyers have demonstrated a diminished willingness to take on new inventory. With little appetite for high-priced diesel, and following a rapid surge in prices during the preceding period, gas stations have seen their profit margins severely squeezed, resulting in a lack of enthusiasm for procurement. Additionally, the onset of the annual fishing moratorium in southern regions has further dampened diesel demand. Overall, diesel market prices have remained relatively stable, hovering predominantly at low levels.

Outlook: The core driver of current oil prices has shifted from fundamental supply-and-demand dynamics to the geopolitical risk premium stemming from regional conflicts. Most institutional analysts generally believe that the current pattern of elevated prices is unlikely to be broken in the short term, and under extreme scenarios, oil prices could surge even further. In the near term, given the apparent lack of willingness to compromise between the U.S. and Iran, and the unlikelihood of a rapid resumption of shipping traffic through the Strait, the geopolitical risk premium will continue to dominate oil price trends. Compounded by low inventory levels and potential shortages of refined oil products, prices are expected to be more prone to rising than falling, making a reversal of the current high-level volatility pattern highly improbable. On the domestic front, refinery utilization rates are expected to remain relatively stable in the short term, ensuring a normal supply of refined oil products; consequently, the market outlook for both gasoline and diesel suggests continued short-term volatility.

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