Domestic wholesale prices for gasoil dropped continually in late May 2012 because of strengthening ceiling price markdown expectations caused by weaker benchmark crude numbers.
Buyers maintained minimum stocks and this made trading extremely weak. Speculative demand almost disappeared as the market was bearish.
The economic slowdown affected demand in the second quarter. Gasoil demand decreased not only in the architectural sector, as the real estate and infrastructure industries are being depressed by government policies, but also in the fishing sector as the fishing ban season in coastal areas started in May.
In transportation, demand was hampered by high gasoil prices, but was more stable than in other industries.
On the supply side, refinery run rates at major companies bottomed out from April, and stockpiles at the giants’ refineries went up.
At the same time, sales branches of oil majors faced more and more pressure as their sales objective in April and May finished poorly.
It proved difficult to stimulate the market, in spite of majors reducing their quotations step by step.
The oversupply situation will probably continue in June, as the fundamentals affecting global crude and the domestic economy may continue to be weak.
The oil giants may increase their gasoil export volumes in the next few months because of sluggish domestic demand, if the gasoil export quota increases, and export profits are acceptable.
Oversupply in the domestic market will continue as new refineries are built and expansion projects are undertaken in the next few years.
Gasoil exports may be the way ahead for China’s refineries, except during the peak demand season.
Updated June 2012