(Adds NDRC confirmation, details, official comments)
* Gasoline down 4.6 pct, diesel down 4.8 pct from Wed
* China cuts prices by a combined 13 to 14 pct since May
* Squeezes refining margin; fuel demand lacklustre
By Judy Hua and Chen Aizhu
BEIJING, July 10 China, the world's
second-largest user of fuel, will cut retail prices by around 5
percent from Wednesday, its third reduction in just over two
months and a move that leaves refiners in the red but may lure
consumers back to the pumps.
Oil demand in China, which still makes up nearly half of the
incremental global total, posted its first yearly fall in at
least three years in April and edged up just 0.8 percent in May
as economic growth slowed.
With effect from Wednesday, the ceiling for gasoline retail
prices will be lowered by 420 yuan ($65.9) a tonne and diesel
price by 400 yuan, the National Development and Reform
The latest cut would bring the reductions to a combined 13
to 14 percent since early May, which came off record highs of
about $1.22 per litre for diesel and $1.17 for gasoline.
"Let's hope for the demand to come back after this cut, so
that our tanks won't be that full," said an official with a
But industry officials were reluctant to predict that the
cheaper fuel would spur an immediate rebound in consumption.
"There are few signs yet of a real power shortage this
summer, the logistics sector is lackluster...It could mean the
real economy is weaker than we thought?" said a fuel marketing
official with top refiner Sinopec Corp.
BLOW TO REFINERS
The cut could also deal a blow to refiners such as China
Petroleum and Chemical Corp (Sinopec Corp)
and PetroChina , who are struggling to
recoup crude costs amid a downward spiral in oil prices.
The much anticipated price cut has prompted some analysts to
slash earnings outlooks for refining giant Sinopec.
"With China likely to cut domestic fuel prices again next
week, we have lowered our Sinopec profit estimates by 38 percent
and 5 percent for 2012 and 2013 respectively to reflect
worse-than-expected downstream performance in refining and
petrochemicals," Mirae Asset Securities analyst Gordon Kwan
wrote last Friday.
Under China's fuel pricing rules, the government would
consider changing fuel prices if a weighted moving average price
of three types of international crude oils rises or falls 4
percent, and the interval between two price changes will be at
least 22 working days.
In addition, the government will take into account other
factors such as inflation, supply and demand.
Fuel price cuts are usually on schedule but price hikes are
often postponed or their scale reduced to ease inflation or ease
the burden for consumers, leaving refiners to incur losses
caused by insufficient hikes in fuel prices.
Beijing asked oil firms to use profits from their upstream
businesses to make up for downstream refining losses.
China has been considering changes to the current fuel
pricing scheme to better reflect refining costs, with plans to
lower the trigger point, shorten the review period and change
the composition of the basket of crudes governing pump prices.
A midpoint at which international oil prices are at a
reasonable level and can meet the cost of domestic fuel
production is a good time to launch the new scheme, an NDRC
pricing official said on Monday.
(Reporting by Judy Hua and Chen Aizhu;Editing by Clarence