SunSirs: Analysis of the Impact of Lower International Crude Oil Prices on Related Commodities (October 29)

On October 29, international crude oil futures closed lower. The settlement price for the December contract of U.S. WTI crude oil was $102.00 per barrel, down $0.78 (0.8%). The settlement price for the January contract of Brent crude oil was $110.80 per barrel, down $0.84 (0.7%).

The declines of 0.8% for the U.S. WTI December contract and 0.7% for the Brent January contract on October 29—while modest—exert a generally bearish influence on both spot and futures prices for crude oil, suggesting a weaker short-term price trend.

As crude oil is the primary upstream raw material for asphalt, this slight decline in international crude oil prices weakens the cost support for asphalt, exerting a generally bearish pressure on both its spot and futures prices. On the Shanghai Futures Exchange (SHFE), the primary asphalt contract (2701) closed up 161 RMB/ton on October 29; however, its future performance is likely to be constrained by this weakening cost support.

Since gasoline production costs are directly linked to crude oil, the slight decline in international crude oil prices reduces production costs, exerting a generally bearish influence on gasoline spot prices and creating expectations for a potential downward adjustment in domestic retail prices for refined petroleum products.

Diesel production costs are highly correlated with crude oil prices; therefore, the slight weakening in international crude oil prices will drive down diesel production costs. This exerts a generally bearish influence on diesel spot prices, suggesting the possibility of a softening in terminal retail prices.

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