SunSirs: Gasoline and Diesel Prices Retreat from Highs This Week

I. Key Drivers: International Crude Oil Prices Surge Then Retreat; Geopolitical Tensions Drive Volatility

This week, international crude oil prices generally followed a pattern of surging and then retreating. The primary factors driving volatility centered on the shifting geopolitical situation in the Middle East, compounded by changes on the supply side, which directly impacted expectations in the domestic refined oil market.

1. Reasons for the Spike: Escalating tensions in the Middle East triggered supply concerns. During the week, U.S.-Iran negotiations reached an impasse, with both sides claiming the upper hand in the conflict; the Houthi rebels in Yemen launched missiles at Israel, further intensifying regional tensions; Trump issued a stern warning to Iran, stating that if the Strait of Hormuz is not reopened, the U.S. would destroy its oil wells and power plants, and would respond swiftly to any Iranian attack on Israel’s Haifa refinery. This fueled market concerns that a blockade of the Strait of Hormuz could lead to a disruption in crude oil supply.

2. Reasons for the Pullback: Expectations of a de-escalation in geopolitical tensions grew. Later in the week, Trump stated that the U.S. had ensured Iran would not possess nuclear weapons and was prepared to end the war “soon”; he also claimed that the Iranian president had requested a ceasefire, which would be considered once the Strait of Hormuz was reopened and navigation restored. As market risk appetite declined, oil prices retreated from their highs.

3. Supply Factors: Market surveys indicate that due to the U.S.-Israel war against Iran and the actual closure of the Strait of Hormuz, Iran’s crude oil exports have been reduced, leading to a significant decline in OPEC’s March oil production. This has provided some support for oil prices at the bottom.

II. Domestic Retail: Clear Expectations for Price Adjustment, High Probability of an Increase

During this pricing cycle, the crude oil price change rate has shifted from negative to positive. According to calculations, as of the eighth working day on April 2, the average price of the reference crude oil blend was $101.16 per barrel, with a change rate of 1.81%, corresponding to a proposed increase of 160 yuan per ton in domestic gasoline and diesel retail prices. It should be noted that the international crude oil market has been highly volatile recently, and the final adjustment to this round’s retail prices for gasoline and diesel will be subject to official announcements. This week, domestic retail prices for gasoline and diesel remained stable and did not follow the downward trend of the wholesale market.

III. Domestic Wholesale: Prices Retreat from Highs; Trading Sluggish Due to High Prices

This week, the domestic refined oil wholesale market saw prices retreat from their highs, with trading activity remaining sluggish. The core conflict centered on the tug-of-war between “high prices suppressing demand” and “supply-side price support.”

1. Price Trends: Early in the week, coinciding with the transition between the old and new sales cycles, major domestic operators maintained a strong stance on price support, keeping gasoline and diesel prices at high levels. As the new month began, major operators sought to actively move inventory, with some companies gradually increasing discounts, leading to a rational correction in gasoline and diesel prices. Although prices have retreated somewhat, current levels remain high, so the average price of gasoline and diesel for the week still rose compared to the previous week.

2. Demand and Transactions: As the weather warms up, residents’ travel ranges have expanded, and outdoor infrastructure and other industries have resumed operations. While gasoline and diesel demand was expected to improve gradually, high prices have become the key constraining factor—end-users had already completed restocking earlier, and market participants have adopted a cautious attitude toward purchasing at high prices. Their willingness to re-enter the market for procurement remains low, leading to sluggish market transactions and a slowdown in the pace of demand recovery.

IV. Wholesale and Retail Margins: Spread Widens, Retail Margins Rise Month-on-Month

This week, as retail prices remained stable and wholesale prices retreated from their highs, the domestic spread between wholesale and retail prices for gasoline and diesel widened significantly. According to data from Jinlianchuang, the average retail margin for 92# gasoline this week was 576 yuan/ton, up 172 yuan/ton month-on-month; the average retail profit for 0# diesel was 460 yuan/ton, up 48 yuan/ton month-on-month.

V. Outlook for Next Week: Primarily High-Level Volatility, Limited Upside Potential

Taking into account factors such as international crude oil prices, supply, demand, and market sentiment, domestic gasoline and diesel prices are expected to remain at high levels next week, with limited upside potential. The specific analysis is as follows:

1. Market Sentiment: With the situation regarding the U.S.-Iran ceasefire still unclear, international crude oil prices may continue to fluctuate. The crude oil price change rate is likely to remain in positive territory, making an upward adjustment in retail gasoline and diesel prices this round highly probable, which provides a generally positive signal for the market.

2. Supply Side: Operating rates at major domestic and local refineries are expected to continue their downward trend, further tightening market supply and providing support for prices.

3. Demand Side: During the Qingming Festival holiday, increased private vehicle travel is expected to boost gasoline consumption. Meanwhile, as temperatures continue to rise, operating rates at construction, infrastructure, and outdoor fuel-using enterprises are expected to increase.

Combined with the boost to agricultural fuel demand from spring plowing, diesel demand is also expected to improve.

4. Constraints: Although the fundamentals provide supportive factors, the pace of recovery in gasoline and diesel demand remains slow, downstream inventory drawdowns are limited, and market participants exhibit significant resistance to high prices. As a result, they remain cautious about restocking, making it difficult for market transactions to see a substantial improvement, which will limit the upside potential of prices.