abc3 January 2024Global Research and Evidence LabPowered byUBS Evidence LabYESChina Oil Product MonthlyUBS Evidence Lab inside: Refiners' CUR and product exports may rise MoM in JanGasoline price up 1-2% / diesel fell 1-2% MoM in Dec-23; major refiners' CUR fellThe Brent crude price fell 6% MoM / 5% YoY in Dec 2023. Domestically, the average gasoline prices rose 1-2% MoM, while average diesel prices fell 1-2% sequentially. China's refined product market didn't see any tailwind from crude market news flow in Dec. Gasoline demand stabilised; while commuting was the top purpose of Chinese mobility trips, private car driving increased in frequency, which led to a marginal improvement in gasoline demand. As for diesel, demand was overall lukewarm, as infrastructure and other industrial projects have seen their operational activity fall. As per SCI99.com, major refineries' blended capacity utilisation rate (CUR) fell another 1.59ppt MoM to 77.6% in Dec, the lowest level since Sept 2023, primarily as refineries were not bullish on refined product demand in Dec and most of them were already close to their annual production targets. Blended CUR of independent refineries in Shandong province rose 0.65ppt MoM to 65.08%.Retail prices: realisation rates stable in Dec, wholesale-retail discounts widerPrice realisation rates: The Brent crude average price retreated 6% MoM to US$77.41/bbl in Dec 2023. Meanwhile, Asia's refining gross profit rose 17% MoM to US$8.8/bbl ( vs. -4% in Nov). In China, the retail price ceilings for gasoline/diesel were cut twice in Dec, resulting in a net decline of Rmb470/Rmb450 per tonne for gasoline/diesel. According to UBS Evidence Lab data (> Access Dataset), SOEs' gasoline/diesel realisation rates held at 95%/96%, slightly below the 2023 full-year average of 96%/97%, while those of independent refineries were largely flattish at 92%/95%. Wholesale-retail discounts: Gasoline and diesel saw their retail-wholesale price discounts deteriorate sharply MoM in Dec 2023; both independent refineries and SOEs recorded wider wholesale discounts for gasoline/diesel.China issued 1st batch of oil product export quotas/two batches of crude import quotas for 2024For Jan 2024, no additional refinery maintenance plans have been announced, and we think domestic gasoline demand could improve significantly around the Chinese New Year holiday. We hence expect major refineries' blended CUR to recover YoY in Jan. Late last month, the Ministry of Commerce (MOFCOM) issued a total of 183.69 million tonnes (mt) of crude oil import quotas for the first two batches of 2024. Among the non-SOE refineries, most have seen their 2024 quotas fully issued now, and the Yulong Island refining project is likely the only non-SOE one to be covered by quota announcements in the rest of 2024. The MOFCOM has also issued the first batch of export quotas for refined...
