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Domestic fuel prices hit new highs
Latest Updated by 2006-04-28 15:29:58
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The country's wholesale diesel and gasoline prices climbed to new highs on rising seasonal and holiday demand and hopes the government would soon raise retail prices again, China-based fuel distribution officials said yesterday.

Top refiner Sinopec Corp. was quoting wholesale diesel at 5,200 to 5,350 yuan (US$650 to US$669) per ton in eastern provinces, nearly 2 percent higher than two weeks ago and 6 to 8 percent above the government-set retail ceiling.

The wholesale market, where State-run refiners sell fuels to direct bulk consumers such as factories and independent dealers, is the best indicator for the domestic oil market as the government tightly controls retail prices.

With global crude benchmarks boiling near record highs, the government will be under renewed pressure to raise pump prices for the world's second-largest oil consumer, after a smaller-than-expected increase last month.

The government has not yet announced a much-anticipated new pricing program for refined fuels that is to reflect crude costs to help State refiners recoup heavy losses, but industry officials believed the government was already on track for the new system since the March price hike.

"We think the government has decided on the new crude-linked system although it has not officially announced it," said a marketing executive from eastern China.

But the lack of transparency keeps the market guessing over when and how much the next price move would be, after China raised prices by 3 to 5 percent March 26, the first increase in eight months.

The market is now betting the next price increase would be around late May when the peak planting season ends so as not to upset the vast number of farmers, the most vulnerable consumers, said the official.

Key diesel-using sectors, transportation and construction projects have entered a peak demand season, keeping inventories tight, officials said.

Though domestic refiners are raising production to new highs, they are also shying away from money-losing diesel imports due to sky-high import costs versus capped domestic prices.

Also limiting domestic supply is China's sharply lower imports of fuel oil, nearly a third of which are processed into diesel, due to scorching Asian markets, on which Chinese imports are priced.

A main demand factor that may have kept China away from a supply crunch seen in 2004 is the rapid increase in power generating capacity fueled by coal and hydro, reducing demand for diesel generators.

But overall Chinese fuel demand appears set for a rebound after a tepid 2005, with first-quarter daily crude imports up 25 percent at 3 million barrels and net imports of refined fuels also edging up.

The upcoming May Day "golden week" would see China's gasoline demand rising as more people drive to their holiday destinations.

Wholesale rates for benchmark 90-octane gasoline, widely used by taxis, were at 5,650 yuan a ton in Guangdong Province, China's export hub and wealthiest region, up from 5,500 yuan two weeks ago.

The 93-octane grade, burned mostly by private cars, is at 5,850 yuan and the highest 97-octane grade neared 6,200 yuan in Guangdong.

Marketing officials have said the government's 5 percent increase in pump price last month, which left domestic gasoline still about half the rates in Singapore or New Delhi, was too small to slow demand.

Car sales in China, the world's second-largest vehicle market, leapt 54 percent in the first quarter to 1.25 million sets.

In March alone, 486,000 new cars hit the road, a 37 percent increase over a year ago and 45 percent more than in February.

Editor: Yan

By: Source: Szdaily web edition
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