Gasoline dips slightly as geopolitical tensions keep crude elevated and aromatics firm

Introduction: Recent geopolitical conflicts have been frequent, with no signs of de-escalation yet. International crude oil futures remain at elevated levels. In October, the average market price for 92# gasoline in China was 10,193 yuan/ton, a month-on-month decrease of 18 yuan/ton (-0.17%). Although gasoline prices retreated slightly, related aromatic products continued to trade firmly.

1. Resilient Gasoline Market Supports Firm Performance of Aromatic Products

Geopolitical tensions have not eased recently, keeping crude oil prices at high levels, with Brent crude surging to $118/barrel. Replenishment in the gasoline market remained moderate. Domestic major refineries maintained stable gasoline output. High previous prices stimulated the inflow of arbitrage resources. However, after the National Day holiday peak season ended, passenger vehicle consumption weakened marginally. Downstream traders adopted a cautious inventory strategy, primarily purchasing on an as-needed basis. This weak market sentiment suppressed gasoline prices, leading to a slight month-on-month decline in the average price of 92# gasoline. Downstream customers entered the market to replenish stocks when prices dipped. Weekly shipments of aromatic-related products were decent, supported by internal factory usage. Consequently, factory prices fluctuated within a narrow range, and the average price closed higher.

2. Analysis of Demand-Side Changes

International crude oil futures maintained high-level consolidation, supporting replenishment efforts by gasoline customers. Downstream customers showed limited willingness to chase high raw material prices. However, the overall supply of aromatic-related products remained low, with production-to-sales ratios hovering around 80–100%. Supported by demand from factory vessels and internal usage, the production-sales balance remained stable.

3. Market Outlook

Crude Oil:
International oil prices are expected to rise next week, with WTI likely ranging between $97–$107/barrel and Brent between $110–$120/barrel. The core logic behind this forecast is that Middle Eastern tensions have entered a window for diplomatic mediation. While the risk of large-scale conflict has temporarily subsided, potential friction between the US and Iran persists, and Houthi attacks continue, meaning geopolitical risks may flare up again, providing strong support for oil prices. Key focus areas include:

1. Supply Side: Shipping risks in the Middle East remain unresolved. Transit volumes through the Strait of Hormuz are volatile, and tanker traffic through the Bab el-Mandeb Strait remains at relatively low levels, sustaining the risk of supply disruptions.
2. Demand Side: Global crude oil consumption recovery is sluggish. Operating loads at some Asian refineries are under pressure, while Russian refinery processing volumes are hampered by attacks. The peak season for US gasoline consumption has ended, seasonal tailwinds have faded, and overall demand remains weak.
3. Geopolitical Situation: Before the midterm elections, the risk of significant escalation in the Middle East has decreased, with Qatar and the US signaling openness to negotiations. Localized conflicts between the Houthis and Saudi Arabia continue, but risks of US-Iran friction persist post-elections. Although signals of easing tensions appear in the Russia-Ukraine conflict, a short-term ceasefire is unlikely. Geopolitical premiums continue to support oil prices.
4. Financial Factors: The Federal Reserve is highly likely to maintain current interest rates in the near term, though expectations of a rate hike in December remain. Short-term USD fluctuations will have a moderate impact on oil prices.

Gasoline:
With international oil prices expected to rise and initial adjustments to wholesale-retail price caps likely pointing upward, market news remains bullish for the oil sector. Refined product markets in Shandong Province are expected to remain firm. Refineries may raise prices immediately after new price caps take effect; however, high prices will inevitably dampen procurement activities among mid- and downstream players, resulting in mediocre trading activity. Next week, gasoline and diesel prices at independent refineries in Shandong are predicted to rise first and then fall, ultimately closing 100–150 yuan/ton higher.

In summary, crude oil prices may continue to rise due to strong uncertainty surrounding geopolitical conflicts. Domestic gasoline vessel orders are expected to remain robust in November, with rumors suggesting increased export volumes. Vessel demand will continue to support the consumption of aromatic-related products. Therefore, aromatic-related products are expected to trend higher initially before potentially softening, maintaining an overall firm performance.