UPDATE 2-China rations diesel as record oil hits supplies

"Why not just raise the prices? We are ready to pay a bit more if we can get the oil."

Gao's comments hit the core reason for the supply squeeze -- Chinese refiners cannot pass the soaring crude costs on to consumers. Beijing fears stoking already high inflation and rigidly caps pump fuel rates to shield users from a 50 percent rally in global oil so far this year.

Asked if a price increase may be re-considered as oil jumped to all-time peaks, Sinopec Corp's investment relations chief Huang Wensheng said:

"Ask the NDRC," referring to the energy-policy maker, National Development & Reform Commission.

China last raised pump prices 17 months ago and its top economic planning officials have repeatedly signalled that a near-term price increase was not on the cards despite record-high oil.

FUEL IMPORTS UP

In a quiet defiance to the price cap, state refiners Sinopec Corp and PetroChina (0857.HK) have trimmed output since July by launching heavier-than-usual maintenance or retooling works. As a result, throughput for September was up just 5.7 percent, the slowest increase since April, official data showed on Friday.

China's army of small local oil refiners -- a growing swing supplier making up more than 10 percent of the market -- have cut output more sharply, exacerbating the tightness, officials said.

"Many of them have stopped supplies, or are asking for sky-high prices," said a Sinopec fuel marketing official from Guangzhou.