National Development and Reform Commission: Reduced Price of Refined Oil in Time

If the international oil prices continue to fall, or maintain the current price range to the end of the month, the NDRC is expected to promptly reduce the domestic refined oil prices.

International oil prices tumbled 9.2% last week. Goldman Sachs, Barclays, and Morgan Stanley continued to sing well.

Responding to the outside world's accusation that “the international oil price plummeted and domestic oil prices remain indifferent”, the relevant person in charge of the National Development and Reform Commission said in an exclusive interview with Xinhua News Agency on the 8th that the reasons for not temporarily lowering are that the average price of crude oil in the three places has not yet reached the “4% margin” condition". The National Development and Reform Commission promised that if the boundary conditions are reached, "the prices of domestic refined products will be lowered in time."

When the above remarks came out, the United States, which was the world’s largest oil consumer, was downgraded by S&P.

On the previous five days, the New York Mercantile Exchange WTI September crude oil ** settled sharply, falling by nearly 6%, hitting an intraday low of 8 months. As of yesterday's deadline, the New York Mercantile Exchange WTI September crude oil prices fell 3.31 US dollars to US $ 83.57 a barrel, a decrease of 3.81%. The price of Brent crude oil in the North Sea delivered by the London market in September fell by US$2.95 to US$106.42 per barrel, a decrease of 2.7%.

Bloomberg said on the 8th that last week’s data showed that the hedged ** cuts on long positions in crude oil have reached the largest level in six months. Considering that the weak economic recovery will weaken the demand for energy, the market has emerged as a safe haven.

According to data from the US Commodity Exchange Commission, as of August 2, ** and big speculators have reduced long positions by 16% in one week. This is the largest decline in weekly positions since February 25.

Domestic oil prices are "indifferent"

However, even if the week's decline in New York crude oil prices reached 9.2% last week, the domestic retail price of refined oil products remains at historically high levels. In addition, the National Development and Reform Commission has also raised the price of domestic jet fuel and pushed up fuel surcharges on domestic routes.

The last time China adjusted its refined oil prices on April 7, it increased the price of gasoline and diesel by 500 yuan per ton and 400 yuan per ton respectively. This is the second time that China has adjusted the retail price of refined oil products to a record high.

According to China's current "Petroleum Prices Management Measures (Trial)" (hereinafter referred to as "Measures"), the maximum retail prices of gasoline and diesel are announced by the National Development and Reform Commission. When crude oil in the international market changes for more than 4% for a period of 22 consecutive working days, domestic refined oil prices can be adjusted accordingly.

In the four months after April 7, international oil prices have gone out of the roller coaster market. From mid-late April to early May, the average price of the three types of crude oil for reference in domestic refined oil price adjustment reached around US$120 per barrel, far exceeding the price adjustment boundary condition of 4%. Regarding the failure to raise domestic refined oil prices in early May, the National Development and Reform Commission explained on the 8th that it was “taking into account the pressure on the downstream industry’s endurance and rising general price levels”.

After the international oil price plummeted, the National Development and Reform Commission said that if the price of oil in the international market is reduced from the previous high point of US$120 per barrel to the current level, the rate of decline will increase. Exceeded 4%, “But from the moving average price for 22 consecutive working days, the short-term decline in the price at the time has a limited impact on the average price. The average price of the three crude oils under the current price adjustment is still higher than the domestic refined oil price adjustment on April 7. At the time of the price level, domestic refined oil prices temporarily have no downward adjustment conditions."

According to the latest data, as of the 8th, the change in the weighted average price of Sandi crude oil (Brent/Dubai/Sinta) for 22 working days was 2.38%.

"The NDRC's argument is indeed justified, because it really did not reach 4%." Lin Boqiang, director of the China Energy Economic Research Center of Xiamen University, said in an interview with the Post reporter yesterday. "But this needs to reflect on the issue of refined oil pricing mechanism."

Lin Boqiang believes that the current price mechanism for refined oil products is too insensitive to changes in the external environment. Since the average rate of change in 22 working days is the standard, there will be significant price fluctuations in the short term and it will be difficult to satisfy the price adjustment conditions.

Caixinxin quoted Yao Daming, minister of the Petroleum Division of the Guangdong Oil & Gas Industry Association, as saying that under current management measures, if international oil prices remain at current prices (calculated at Brent's price of US$107/barrel), at least until August 23, In order to achieve the 4% price adjustment "red line."

Xiwang Energy analyst Chu Jiewang stated that the public’s understanding of the average rate of change of crude oil prices in the three regions for 22 working days is not so deep. Therefore, why the international oil price fell by more than 9% per week and could not meet the 4% change rate in the three places? Confused, "This shows that the pricing mechanism of domestic refined oil is relatively low compared with international oil prices. If we can shorten the price adjustment cycle, it will undoubtedly reduce public misunderstandings and dissatisfaction."

"It's difficult to adjust upwards."

Regarding whether or not the price of oil will be lowered in the future, the relevant person in charge of the National Development and Reform Commission said yesterday: “If the international oil price continues to fluctuate at current prices or continue to fall, the domestic oil price adjustment refers to the boundary conditions of the average price drop of three kinds of crude oil in the international market reaching 4%. The price of domestic refined oil will be lowered in time.”

In fact, since the "Measures" were introduced, the National Development and Reform Commission has been slow to move up oil prices. According to the data from Shiwang Energy, China has raised domestic refined oil prices 9 times, with an average of eight days of lag, before using the new refined oil pricing mechanism until the oil price hike on April 7. With the intensification of the domestic inflation situation, the National Development and Reform Commission has lags behind in raising the price of oil. The prices of oil were raised twice on December 22, 2010 and February 20, 2011, and they have lagged by 20 jobs from the specified price adjustment window period. day. The downward adjustment of oil prices is relatively timely. Once the red line is hit by -4%, the reduction decision will be announced on the same day.

According to industry analysts, it is difficult to adjust downward adjustments. The core factor is inflation. It can be expected that under the expectation that the July CPI will still be operating at a high level above 6%, if the international oil price falls further, or maintain the current price range to the end of the month, the National Development and Reform Commission is expected to promptly lower refined oil prices.

It is worth mentioning that, when it comes to the recent drop in the wholesale price of refined oil products in some parts of the country, the National Development and Reform Commission stated on the 8th that the international market oil prices have declined since May, and that the refined oil prices have been lowered on July 1. The import tariff of fuel oil, the cost of purchasing raw material oil for local refineries was reduced, and the processing load was on the rise. The contradiction in supply of domestic refined oil products was eased. Therefore, in the areas where the market competition is fierce, wholesale prices have declined.

The big investment bank continued to sing high oil prices. Although the decline in the past week has caused the international crude oil market to slump, there is analysis that the probability of the future international oil prices continuing to decline deep is not great.

"When both optimism and consumer confidence are under pressure, crude oil prices will continue to weaken." Jonathan Barratt, managing director of Sydney's COMMODITY BROKING SERVICES, said in an interview with Bloomberg yesterday. "There is no doubt that there will be some minor casualties now." "But I think that the current price has fallen too much, like a knee-jerk reaction." Jonathan Barratt maintained that the average price of crude oil in New York was forecast at $100 a barrel this year.

Chu Jiewang stated that the supply and demand relationship is the primary factor in determining the international oil price. Whether the international oil price will continue to fall in the future depends on whether the demand for crude oil will be reduced due to the weak economy.

In fact, previous gasoline demand in the United States during the summer driving season continued to show signs of weakening, and has always played an inhibitory role in oil prices. Matt Smith, an analyst at consulting firm Summit Energy, said that the downgrade of the US rating merely added another burden to the crude oil market.

Xinhua News Agency quoted the IEA International Energy Agency's report on the 8th, said that from the perspective of basic demand, the global demand for crude oil continued to grow in 2011, but the increase was only 1.3 million barrels / day, significantly lower than the 2010's 2.8 million barrels /day. However, demand in the third quarter is expected to increase from the second quarter. In addition, demand will continue to grow in the fourth quarter, but the increase is limited.

Economic analyst Yang Guangming stated in his report on the 8th that the geopolitical instability in the Middle East will also provide support for oil prices. This year can be described as an eventful event. Many Middle East countries have political **. This extremely unstable geopolitical landscape heralds the instability of global crude oil supply and the potential for new supply disruptions. "In the short-term, the global supply of crude oil will not be eased, and there is a danger of further intensification. If the situation in Yemen or Syria gets out of control, it may spread to other countries. New supply disruptions may occur at any time."

For the future trend of oil prices, Goldman Sachs continues to maintain its 2012 Brent crude oil price will reach 130 US dollars a barrel of forecast. Goldman Sachs analyst David Greely still suggested when interviewed by Bloomberg yesterday that investors continue to “hold long-term” crude oil contracts for December 2012.

Other large investment banks including Barclays Capital and Morgan Stanley also maintained their respective expectations for oil prices.

China's strategic oil reserve "bargain-hunting"?

The Schork Report analyst said on the 5th that oil prices are still bearish, but for “long-term investors,” oil prices below $90 should be very cheap.

It is speculated by the outside world that "long-term investors" may include China.

According to the Wall Street Journal (blog, Weibo), China plans to build an additional 170 million barrels of strategic oil reserve capacity by mid-2013. Paul Ting Energy Vision president Paul Ting once wrote in a report earlier this year that when oil prices started to advance above 87 U.S. dollars per barrel by the end of 2010, the Chinese companies’ purchase of strategic oil reserves on behalf of the country basically stalled. After the massive sell-off on the 5th, the current price of crude oil in the New York Mercantile Exchange fell below US$85 per barrel in September.