CITIC Futures: Asphalt follows crude oil decline, paying attention to demand negative feedback

Geopolitical tensions remain the core influencing factor on current oil prices. The United States continues to release messages of de-escalating geopolitical risks. On the same day, asphalt futures followed crude oil in retreating. Data from Steel Union shows that the asphalt-fuel oil 09 price spread sharply rebounded to over 400 yuan/ton intraday. Asphalt refineries’ profits have significantly recovered. The key to the price spread’s rebound lies in the sustained production cuts by refineries. Considering that asphalt’s geopolitical sensitivity is weaker than that of fuel oil, during geopolitical tensions, the asphalt-fuel oil price spread tends to decline, while de-escalation leads to a rebound. After profits are greatly restored, the probability of asphalt refineries exceeding expectations in production cuts decreases. However, with high profit margins in refined oil products and a trend of reducing asphalt output while increasing refined oil, it is expected to divert asphalt production. On the demand side, fixed asset investment in transportation is experiencing negative growth. (CITIC Futures)