Since the beginning of this year, international oil prices continued to fluctuate in a range of $40-60/bbl, so the overall market of domestic refined products market started to recover. With the market getting warmer, the refined products market also ushered in many new changes and challenges such as the frequent acceleration of refined product quality upgrade and the rare retail terminal price war in the country starting. Despite the frequent market instability, the overall performance was better than expected. Now JLC will follow the path of time to review the  development of the refined market events in 2017.

    Accelerating the pace of oil quality upgrades forced some low-end varieties to gradually exit market. 

    1. Since January 1st, 2017, China's refined products market has fully entered the National V Standard period and Beijing will fully implement the Beijing VI Standard, with the replacement period from January 1st to February 28th in 2017. 2. On June 30th, 2017, the NDRC website issued a public notice on the upgrade of general diesel quality. Since July 1st, 2017, along with the total supply of general diesel oil with a sulfur content of not more than 50ppm, the the general diesel with a sulfur content over 50ppm had been stopped selling in the country, thus the general diesel with National III Standard officially withdrew from the stage of history. 3. Entering into about October, the State Council agreed to "Notice on Doing a Good Job in the Nationwide Supply of General Diesel with Sulfur Content within 10PPM", the general diesel upgrade for National V standard was required to fulfill since November 1st, 2017 instead of January 1th, 2018. The general diesel with National IV Standard stepped out of the market.

    Price war broke out in the retail sector from the part regions to the nation.

    Since the beginning of April and May, retail sales of gasoline and diesel in most parts of China had been filled with fiercer competition, and the retail price war of gasoline and diesel between Sinopec and PetroChina gas stations had quietly started. Due to the recent declines in international oil prices, the domestic gas station’ profits were increasing due to the decline in domestic wholesale prices. In the meantime, due to the refined products price limit up-adjusting, the consumption demand of gasoline and diesel has been restrained, and the number of gas stations with lower prices and profit sharing has been on the rise. Under the impact of price cuts in the private gas stations, gas stations in most areas provided greater discounts, so PetroChina and Sinopec sales companies in some areas have also been forced into a price war.

    As the new units were launched, the supply of resources in the region showed a new situation.

    On May 6th, PetroChina Yunnan Petrochemical’s refining project with 13 million mt/yr had been put into operation. As Yunnan Petrochemical was officially put into operation, a large number of refined products flowed in Yunnan and the southwest market, so the local market competition pressures will continue to increase. At the same time, it also increased the difficulty of resources from other regions flowing into Yunnan. In the latter part of the year, refined products in Yunnan and even the entire southwestern region will be cheaper, and the arbitrage with the neighboring regions will continue to narrow, which will re-distribute the refined products market in Southwest China. In June, PetroChina signed a series of agreements with Petroleo De Venezuela S.A. (PDVSA) to jointly promote South China Sea refining project with 20 million mt/yr in Jieyang, which is expected to be completed and put into production in 2020. Coupled with CNOOC Huizhou stage II 10 million mt/yr to put into operation within the year, Guangdong region will face a serious situation of excess supply of resources, in South China refined products market competition will become intense.

    With multiple policies’ intensive release, ethanol gasoline really came. 

    In September, 15ministries and commissions promoted ethanol gasoline, and in 2020 it’s expected the ethanol gasoline would be supplied in national range. The public's debate on "China will set a timetable for banning the sale of fuel-efficient vehicles" was slightly cooled, but recently the "Plan for Enhancing the Production of Biofuel Ethanol and Promoting the Utilization of Ethanol Gasoline" issued by 15 ministries and commissions (hereinafter referred to as the "Scheme" ), once again led to widespread concern in the market. According to the plan, by 2020, the country will basically achieve the full coverage of ethanol gasoline for vehicles. By 2025, the country would strive to achieve large-scale production of cellulosic ethanol, and advanced biological liquid fuel technology, equipment and industry reached the international advanced level, forming a more perfect market-oriented operating mechanism. At present, some provinces and cities have already started to promote, declaring the era of ethanol gasoline really comes. According to JLC, Tianjin and Shandong Province have been released the implementation for promoting vehicle ethanol gasoline ahead of the time.

    Independent refineries resources will be integrated and intensive development continues to advance.

    On September 1st, the Economic and Information Technology Commission of Shandong Province issued Reply on Accelerating the Transformation and Development of Shandong Refining Enterprises and Establishing Shandong Refining & Energy Group Co., Ltd., agreeing the refining enterprises to set up Shandong Refining & Energy Group Co., Ltd. The Group was established by key enterprises such as Shandong Dongming Petrochemical Group Co., Ltd. and Shandong Qingyuan Group Co., Ltd., which are qualified to use imported crude oil. After the reply was launched, the market focus once again fell on the development of Shandong's independent refineries. JLC believes that although the consolidation of independent refineries faces greater resistance, but this is not only the trend of market development, but also the propelling force to help refineries break the bottleneck, especially aiming at the current weaknesses, raw materials and retail terminals of independent refineries. Such planning will help improve the overall competitiveness of Shandong independent refineries to grab the right to speak in the market. As the intensive development of the independent refineries, the dominance of the major refineries will be shaken, and the domestic market will also shift from oligopolistic competition to multiple refineries competition.

    Throughout the year, the requirements for the development and operation of the refined products industry in our country have been continuously improved. With the promulgation of various policies, the refined products market in our country has been steadily pushed forward and the marketization process has been further accelerated. As the market becomes more open and order is more regulated, the market-oriented competition will also become more orderly. In order to comply with the development of the times, the refined products market still usher in a new policy adjustment in the future.