Traditional Peak Season Effect Absent: October Refined Oil Market May Experience Weak Fluctuations

In September, international crude oil exhibited a volatile trend, and retail prices remained unchanged for two consecutive rounds, with limited guidance from market news for the domestic refined oil market. As we enter the traditional peak demand season, the operating rates of industries such as outdoor mining and infrastructure are expected to rise. However, diesel consumption growth is constrained by the sluggish economic situation. After the end of the summer vacation, tourism and travel decrease, leading to a decline in gasoline consumption. Additionally, this month, major operations were at a high level, and the load of local refineries increased, resulting in a rise in the supply of refined oil. Due to these factors, the fundamentals of gasoline and diesel continue to show an oversupply situation. Under the influence of bearish factors, the refined oil market is showing a downward trend. According to the refined oil price index by Jinlianchuang, as of September 30, domestic 92...Gasoline8138, down 1.19% compared to the end of last month; 0# Diesel 7054Compared to the end of last month, it dropped by 1.12%.

As October begins, the refined oil market may be primarily influenced by factors such as:

Supply side

In October, domestic refined oil supply is expected to see an upward trend in the operating rates of both state-owned and local refineries, leading to an increase in refined oil resource supply. On the state-owned side, entering October, refineries such as Golmud Petrochemical and Fushun Petrochemical, which were under maintenance earlier, will gradually complete their maintenance. The intensity of maintenance at state-owned refineries will further decrease, and this month is a peak consumption season, which will boost refinery processing enthusiasm and support the rise in operating rates of state-owned refineries. On the local refinery side, entering October, Zhenghe Petrochemical is expected to resume operations, but Lanchiao Petrochemical plans to shut down at the end of the month. Jincheng and Kenli Petrochemical, which were under maintenance earlier, both have plans to start operations. According to JLC, the operating rate of local refineries in Shandong is expected to first drop and then rise in October, showing a slight increase overall compared to September.

Demand

In terms of downstream demand for refined oil in October, gasoline demand will be supported by the National Day holiday, while diesel consumption remains stable. For gasoline, during the National Day holiday, increased travel demand will lead to a surge in private car usage, driving gasoline consumption up. However, the overall growth is limited due to the rising penetration of new energy vehicles, and consumption is expected to soften after the holiday. As for diesel, despite being in the traditional peak demand season, the overall economic situation remains weak, and the operating rates in industries such as mining and construction are constrained, resulting in diesel consumption showing a peak season that is not robust.

In terms of exports, according to current information, the gasoline export plan for October is 600,000 tons, a month-on-month increase of 8.89%, and the diesel export plan is 604,000 tons, a month-on-month increase of 15.05%. The limited increase in gasoline and diesel export volumes is unlikely to substantially ease the domestic fundamental contradictions.

Cost aspect

Entering October, the global oil market is primarily characterized by fluctuations. The fundamental environment is not conducive to a rebound in oil prices; on one hand, global oil demand has entered a season of low consumption, and on the other hand, OPEC+ continues to maintain its pace of production increases. The economic environment has improved somewhat; on one hand, the Federal Reserve has cut interest rates again for the first time in nine months, and on the other hand, trade negotiations between the U.S. and various countries are progressing steadily. Thus, it is evident that under the interplay of negative and positive news, oil prices mainly exhibit volatility.

Geopolitical factors remain uncertain. On one hand, the European Union's 19th round of sanctions against Russia has been indefinitely postponed, while on the other hand, the United States' efforts to push Russia-Ukraine negotiations have met with obstacles. To expedite the Russia-Ukraine ceasefire, the United States threatens to continue sanctions against Russia and its oil-consuming countries and calls on NATO to collectively resist Russian energy. Additionally, the Iranian nuclear issue and the situation in Gaza also affect the oil supply in the Middle East to some extent.

Overall, in October, international crude oil prices are expected to remain volatile. Excluding geopolitical risk factors, the anticipated mainstream trading range for WTI is $60-65 per barrel, for Brent is $65-70 per barrel, and for Oman is $68-72 per barrel.

Attitude

After entering the traditional peak season for demand, terminal demand has responded lukewarmly, leading to a setback in industry sentiment. Many are maintaining a cautious approach and have a low intention to stockpile. It is expected that entering October, there will be little noticeable improvement in purchasing sentiment among industry players.

Price Trend

In October, international crude oil futures prices are expected to show a fluctuating trend, with limited guidance from news for the domestic refined oil market. During this month, the operating rates of major and local refineries will increase, leading to a rise in refined oil production. On the demand side, the increasing penetration rate of new energy vehicles continues to suppress gasoline consumption. In the context of a weak economy, the peak season for diesel consumption is unlikely to materialize. Overall, it is expected that the supply-demand imbalance for refined oil will only increase. Due to the lack of positive support in the market for October, the refined oil prices are anticipated to maintain a weak and volatile situation.