A government price rise in gasoline and diesel is expected to boost
demand for refined oil products in the domestic market, which has
been afflicted with oversupply since mid last year.
However, analysts claim the frail market recovery will only gain
depending on the future development of international crude oil
prices.
The State Development Planning Commission yesterday announced an
increase in the domestic ex-factory price of gasoline by 260 yuan
(US$31.4) a ton from 2,320 yuan (US$280), and that of diesel by 240
yuan (US$29.0) a ton from 2,060 yuan (US$249).
The price hike, the second of the year, is in line with the rise in
international crude oil prices, caused by supply worries following
the conflicts in the Middle East, and the output cut by the
Organization of Petroleum Exporting Countries (OPEC).
"The price increase will help inject confidence into the domestic
refined oil market, as users and dealers anticipate the price will
go up further," said an official from the price department of
PetroChina, China's largest oil company.
But the official added market demand would grow strong only when
international oil prices maintain their current high in the
following months.
China linked the domestic refined oil product prices to Rotterdam
and New York markets in addition to the Singapore market in the
second half of last year. Sinopec and
PetroChina, the
only two authorized oil companies to wholesale gasoline and diesel,
are allowed to fluctuate their retail price by 8 percent from the
government-set benchmark.
But the two companies failed to push their prices to the normal
range most of last year, due to overproduction in the market and
the weak demand, with stockpiles lingering around 10 million
tons.
Gong Jingshuang, an oil analyst with the China National
Petroleum Corp, said the domestic market is rebounding after
the two companies joined hands to curb the market glut by the end
of last year, and the demand is growing for seasonal planting.
Gong said the two companies' joint efforts to improve the market
condition, including cutting output and agreements made to avoid
dumping, have paid off, but the international oil price in the
coming months is vital for the domestic market rebounding.
"The recovery is fragile if international prices drop again," said
Gong.
A
PetroChina official said the price hike in the international market
will end when political tension is eased.
The official also said the price rise will benefit domestic oil
companies, which suffered heavy losses last year.
But he warned market recovery will also spur production, which will
detrimentally hurt the market, though the senior management of both
companies are cautious at raising the output.
(China
Daily April 5, 2002)