A research note from Guotai Haitong Securities Co., Ltd. indicates that as summer winds down and schools reopen, US highway travel has declined from peak season levels, leading to softer gasoline demand at the margin. Aviation travel retains its resilience, while the start of the Northern Hemisphere's agricultural harvest season provides support for jet fuel and diesel demand.
On the supply side, US refineries have maintained high utilisation rates, keeping gasoline output elevated. However, jet fuel production has been on a downward trajectory since late July, and distillate inventories are hovering near historically low levels for this time of year.
The August 2026 spread data reveals overall improvement across sectors, though product performance remains mixed. In the refined products segment, domestic main refiner gasoline and diesel cracks rose 53.4% and 42.4% month-on-month respectively, while overseas diesel and jet fuel cracks sustained their strength and gasoline cracks pulled back from highs.
The olefins and downstream sectors strengthened markedly, with ethylene-naphtha and propylene-naphtha spreads widening by 159.5% and 136.5% respectively. Propylene-propane and butadiene-naphtha spreads also improved noticeably. Aromatics spreads staged a broad recovery, with toluene-naphtha advancing 111.3%.
The chemical fibres segment showed divergence, as PTA-PX spreads improved while polyester chip and PA6 spreads retreated. Other chemicals exhibited clear differentiation, with butyl acrylate and dimethyl carbonate-related spreads improving, while maleic anhydride-n-butane, methyl ethyl ketone-mixed C4, and rubber-related spreads came under pressure. Overall, domestic refined product cracks continued their improvement in August, overseas diesel and jet fuel maintained high prosperity, olefins and aromatics spreads rebounded strongly, while downstream fibres, rubber, and other chemicals showed mixed performance.
Domestic main refiner gasoline and diesel cracking margins continued to improve on a sequential basis in August. On the demand side, the month still fell within the peak summer travel period, with tourism and road trips underpinning gasoline consumption. Diesel faced disruptions from high temperatures and rainfall during the month, but with the traditional peak consumption season approaching, demand is gradually transitioning from off-season to peak-season dynamics.
On the supply side, earlier low refinery utilisation had kept domestic refined product supplies relatively tight. With maintenance shutdowns largely concluded in August and operating rates steadily recovering, gasoline and diesel inventories showed initial signs of stabilising, though they remain at low levels. On pricing, rising crude oil prices during the month transmitted to product prices, and with low inventories and tight supply providing support, wholesale gasoline and diesel price increases outpaced crude cost gains, driving a further expansion in cracking margins.
US refined product cracks showed divergent performance in August, with diesel and jet fuel cracks continuing to strengthen while gasoline cracks retreated from elevated levels. As summer draws to a close and schools resume, US highway travel has decreased relative to early summer, softening gasoline demand at the margin. Aviation travel remains resilient, and with the Northern Hemisphere entering the agricultural harvest season, jet fuel and diesel demand are well-supported.
On the supply side, US refineries have sustained high operating rates, keeping gasoline output at elevated levels. Jet fuel production has declined steadily since late July, and distillate inventories sit at low historical levels for the season. Overall, with waning gasoline demand and ample supply, gasoline cracks have come off their highs. Diesel has performed strongly, driven by global supply disruptions, low inventories, and seasonal demand factors, while jet fuel has also firmed on the back of robust aviation demand and reduced output.
Olefin spreads showed notable repair in August, with product pricing relative to naphtha improving. The propylene-naphtha spread widened compared to July, and the ethylene-naphtha spread expanded as well, reversing the narrowing seen the previous month. Domestic propylene prices trended higher in August, supported by firm international crude oil prices as a cost anchor, combined with concentrated plant maintenance, typhoon-related supply disruptions, and expanded downstream external procurement gaps. The Shandong propylene monthly average price stood at 8,543 yuan per tonne, up 5.16% month-on-month. With both ethylene and propylene spreads recovering, olefins showed stronger pricing relative to feedstock, easing the previous squeeze on cracking margins from the raw material side.
Risk factors include macroeconomic policy changes, sharp fluctuations in crude oil prices, force majeure events, geopolitical developments, and demand falling short of expectations.