Asphalt presents a dilemma due to the impact of international oil prices
2023/10/23
Poor production efficiency in refineries
In the third quarter, there was a gap of 1.45 million barrels per day in global crude oil supply, which led to a sustained increase in international oil prices. The October monthly report released by OPEC estimates that global demand for the fourth quarter is 103.13 million barrels per day, global non OPEC crude oil production is expected to be 66.88 million barrels per day, and OPEC unconventional oil and gas production is 5.43 million barrels per day. Therefore, OPEC needs to produce 30.82 million barrels of crude oil per day in order to achieve supply and demand balance in the global crude oil market. However, due to Saudi Arabia's 1 million barrels per day reduction, OPEC's current production is around 28 million barrels per day, and there is a certain gap in global crude oil supply. The overall shortage of crude oil still exists. In addition, the situation between Palestine and Israel is turbulent, and geopolitics will also provide some support for oil prices. In the overall strong pattern of crude oil, the cost side has a strong support effect on asphalt.
At present, the overall production efficiency of domestic refineries is poor. On the one hand, international oil prices are at a high level, and the production cost of asphalt remains high. On the other hand, asphalt consumption is currently entering the off-season, and downstream enterprises have poor willingness to purchase goods. In addition, the consumption of other refined oil products is relatively weak, which leads to poor comprehensive profits of asphalt at present. As of the week ending October 17th, the average spot price of Shandong asphalt was 3820 yuan/ton, and the comprehensive profit of the refinery for producing asphalt was -470 yuan/ton. The refinery's losses were at a relatively high level in recent years. Due to significant losses in refineries and limited downstream orders entering the off-season of consumption, many refineries have started to shut down asphalt plants to reduce losses. As of October 18th, the operating load of domestic asphalt refineries was 37.7%, a decrease of 5.3 percentage points compared to the same period last year. Recently, asphalt production has also shown a continuous downward trend, and the market supply is gradually decreasing.
Winter storage and stocking may decrease
At present, domestic refineries are at a normal level, and the overall pressure on refineries to remove inventory is relatively limited. However, at present, the social inventory of asphalt is relatively high, which has statistical implications. However, to a large extent, it still indicates that the inventory of upstream and downstream enterprises and traders in the market is relatively high. A high social inventory may reduce the enthusiasm of enterprises in the subsequent winter storage and stocking process, which will have a significant inhibitory effect on asphalt prices.
At the end of October, except for some completed projects, the market demand for asphalt is very low. The demand for asphalt in the later stage mainly comes from winter storage, and the absolute price of asphalt is not low at present. In addition, the social inventory is high, so it is difficult to have a significant increase in winter storage and stocking of asphalt in the future. The high inventory and low consumption season make the momentum for asphalt prices to rise insufficient.
In summary, asphalt is currently in a dilemma. On the one hand, due to OPEC's production reduction and geopolitical instability in the Middle East, international crude oil prices are at a high level. Moreover, currently, the production of asphalt in refineries is in a significant loss state. In this situation, the cost side has a strong support effect on asphalt, and the downward space for asphalt is limited. On the other hand, currently asphalt is entering the off-season of consumption, with high absolute prices and high social inventory making it difficult to release winter storage and stock. The current supply and demand pattern of asphalt is difficult to change, and prices do not have the motivation to repair losses. In this situation, asphalt is greatly affected by international oil prices, presenting a dilemma.
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