Refined oil price adjustment at the end of March and is expected to welcome the first downward adjustment during the year

In March 2013, just after the domestic refined oil price was raised, the downward adjustment window will open again. Several market institutions predict that according to the current trend of international oil prices, it is expected that the rate of change in the three places will exceed the red line of -4% in the third quarter of March. Finished oil prices are expected to usher in the first time during the year.

After the increase, the price will be adjusted downward and the time will not be more than one month apart. This frequent price adjustment may become the norm in the future. Zhang Ping, director of the National Development and Reform Commission, made it clear on the 6th that the country is studying the new refined oil pricing mechanism, which will further shorten the price adjustment cycle and eliminate the “4%” increase or decrease limit. “This adjustment will be adjusted within a certain price adjustment period.” The industry believes that the future price adjustment of refined oil will be normalized, and will be adjusted in the next two weeks. This will deter market speculation, increase market activity, and moderately improve oil refining companies.

Down the window or open at the end of the month

Since late February, international oil prices have been falling frequently. Although the news of the death of Venezuelan President Chavez has boosted the international oil market in the short term, the industry believes that Europe and the United States have mixed economic indicators, the dollar oscillates upwards, coupled with political instability in Italy and the US launching government spending reduction plans and other negative factors. Continuing to act on international crude oil, crude oil prices are expected to have limited upside.

Under the influence of lower international oil prices, the rate of change in crude oil in the three places has recently turned negative. According to data released on March 6 by the Xinhua News Agency’s oil price system, the average moving price of crude oil in the three places (Dubai, Brent, and Xinta) on March 5 was -0.58%, which has been negative for three consecutive working days.

An Xun Sixiwang energy analyst believes that if the Brent crude oil futures price is maintained at 110 US dollars/barrel in the later period, according to the current operating pricing mechanism, the average change rate of crude oil prices in the three places will fall below -4% on March 26th. The first time this year, the retail price cuts for refined oil products will open. According to the latest crude oil futures price, the reduction rate is expected to be 300 yuan/ton.

Price adjustment tends to normalization

In the previous round of price adjustment, plagued by the current pricing mechanism for refined oil products, there was a contrast between “international oil price drop and domestic oil price increase”. In response, Zhang Ping, director of the National Development and Reform Commission, frankly stated at the press conference of the 12th National People's Congress held on March 6 that the pricing cycle of “22 working days” in the current mechanism and 4% of the amplitude of the adjustment often lead to time lags in price adjustment. The National Development and Reform Commission is studying the new pricing mechanism, which will further shorten the price adjustment cycle and lift the “4%” price increase limit. “In a certain price adjustment period, this tone will be adjusted.”

An Xun Sixiwang energy analyst believes that the above position shows that in addition to the fact that the future price adjustment cycle will be narrowed to 10 days or less, it also indicates that the future price adjustment will be normalized. The pricing mechanism may refer to the form of Taiwan and other places, with reference to the extent of crude oil changes every two weeks to properly adjust the price of refined oil. It is expected that there will be a maximum or minimum limit on the adjustment of the price of oil in the future so as to avoid excessive price transmission.

Zhuochuang Information Analyst believes that the refined oil price may be adjusted twice a month. The adjustment of the pricing mechanism will facilitate the convergence of oil prices at home and abroad, thereby restraining market speculation to some extent. The higher degree of marketization of domestic oil prices will also attract more funds to enter the refined oil market. By then, the domestic refined oil market will be more active than at present.

In addition, the adjustment of the pricing mechanism may also have a positive impact on the profitability of refineries. Zhuo Chuangxin pointed out that the current settlement of raw materials for the two major oils is once a month, that is, the cost changes once a month. If the selling price is adjusted from one time in the first few months to two in the month, it will make the price and cost more linkage, and the refinery will tend to be moderate regardless of profit or loss.

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