Domestic refined oil products are set to experience their eighth price increase of the year. The National Development and Reform Commission announced on May 21 that, effective from 24:00 on May 21, the retail prices of gasoline and diesel (standard products) will be raised by 75 yuan and 70 yuan per ton, respectively.
This adjustment comes despite significant volatility in the international crude oil market just before the price window opened. Influenced by macro factors such as positive signals from US-Iran negotiations, international oil prices fell sharply on May 20, with a single-day drop exceeding 5.6%. The closing price for "WTI Crude 2607" even fell below the $100 per barrel mark.
Given the drop in international oil prices at the end of the period, why did domestic retail price ceilings still increase "against the trend"? Analysis from multiple institutions points to a core logic: although the single-day decline was substantial, the average price of crude oil over the entire ten-working-day pricing cycle still showed an overall upward movement. This ultimately pulled the comprehensive change rate from negative to positive, triggering the price hike.
Following this increase, fuel costs for end-users like vehicle owners and logistics companies will rise further. Notably, the upstream and downstream segments of the industrial chain are facing contrasting challenges. The domestic refined oil market exhibits a distinct "weak wholesale, strong retail" characteristic. Continuous increases in retail price ceilings have widened the theoretical profit margin for gas stations. On the other hand, wholesale prices for gasoline and diesel have been under frequent downward pressure due to factors like rainy weather, increased penetration of new energy vehicles, and persistently weak market sentiment.
During this pricing cycle, international crude oil prices displayed high volatility, characterized by an initial decline, a subsequent rise, and a sharp drop at the cycle's end. Market hopes for the imminent resumption of energy transport activities in the Strait of Hormuz were reignited, contributing to the price drop. Additionally, a report from the U.S. Energy Information Administration (EIA) on May 20 showed that the U.S. released nearly 10 million barrels of crude oil from its Strategic Petroleum Reserve (SPR) last week, marking the largest single-week drawdown since August 1982.
The National Development and Reform Commission explained in its adjustment announcement that the average price over the ten working days preceding this adjustment was higher than the average over the ten working days preceding the last adjustment. According to the current refined oil pricing mechanism, the adjustment is based on the change in the comprehensive international crude oil change rate over the entire cycle. Data shows that while the cycle's change rate started negative, it ultimately turned positive, leading to the price increase. The final adjustment corresponds to an increase of approximately 0.05 yuan per liter for 89# gasoline, and about 0.06 yuan per liter for 92# gasoline, 95# gasoline, and 0# diesel.
This directly increases fuel costs across society. For example, filling a 50-liter tank for a small private car will cost about 3 yuan more. For the logistics industry, the fuel cost for a heavy truck traveling 10,000 km per month with a fuel consumption of 38L/100km is estimated to increase by around 106 yuan over the next half month.
However, a potential turning point for consumers may be on the horizon. Analysis suggests that short-term international oil prices will fluctuate around the progress of US-Iran negotiations, with geopolitical risk sentiment shifting rapidly. It is forecasted that prices will exhibit a weak, high-volatility trend in the next cycle. Based on current crude oil prices, the recalculated change rate is expected to start in negative territory, corresponding to a potential price reduction of around 60 yuan per ton. The next price adjustment window is set for 24:00 on June 4.
Amidst the interplay of volatile international crude and rigidly increasing retail price ceilings, the divergence within China's refined oil industrial chain has intensified. While retail profits have expanded, wholesale prices have faced downward pressure. This has led to a significant widening of the spread between wholesale and retail prices (批零价差). Theoretical profit calculations for gas stations show notable increases compared to the previous period.
This high profitability at the retail end, however, has not effectively transferred upstream. Refineries continue to face severe pressure from high costs and low margins, as international crude prices remain at elevated absolute levels. Data indicates that domestic average ex-factory prices for 92# gasoline and 0# diesel saw slight declines during the cycle. Overall domestic refining capacity utilization also fell noticeably, partly due to maintenance and profit pressures.
Looking ahead, the gasoline market is expected to remain under pressure from the high penetration rate of new energy vehicles, coupled with a lack of holiday-driven consumption boosts. Demand recovery for private travel and leisure trips is slow. For diesel, although slight warming in the logistics sector supports some rigid demand, it lacks sustainability. Continuous rainfall in southern China hinders construction and mining projects, while demand from the fishing industry has also shrunk, limiting actual terminal procurement.
Consequently, it is anticipated that domestic wholesale prices for gasoline and diesel will remain under pressure in the short term, with a high probability that the spread between wholesale and retail prices will continue to widen.
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