SunSirs: Analysis of the Impact of International Crude Oil Price Declines on October 27

On October 27, international crude oil futures closed lower. The settlement price for the December contract of U.S. WTI crude oil fell by $1.86 (1.8%) to $99.90 per barrel. The settlement price for the January contract of Brent crude oil dropped by $1.33 (1.2%) to $115.81 per barrel.

The 1.8% decline in U.S. WTI crude and the 1.2% drop in Brent crude on October 27 represent a moderate decrease. This exerts a generally bearish pressure on domestic crude oil spot and futures prices, leading to a downward shift in the cost basis for energy-related commodities.

Crude oil is the primary feedstock for gasoline production, accounting for a very large share of its total cost. The weakening of international crude oil prices will significantly diminish the cost-side support for gasoline, exerting a generally bearish influence on gasoline spot prices.

Diesel is a direct downstream product of crude oil, with its cost trend closely tied to that of crude. The decline in international crude oil prices lowers cost expectations for diesel, which is generally bearish for diesel spot prices.

Crude oil is the main raw material for asphalt production. While the decline in international crude oil prices weakens the cost-side support for asphalt, steady downstream demand provides a certain floor for prices. On October 27, the main asphalt futures contract (2701) actually closed up by 155 RMB per tonne; consequently, the overall bearish impact is limited, resulting in only a slight downward pressure on asphalt prices.

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