China diesel squeeze persists as oil tops $93

By Chen Aizhu

BEIJING, Oct 29 (Reuters) - China's worst diesel rationing in four years may last several more weeks as record oil prices choke output from independent refineries and the top suppliers show no rush to top up imports, industry officials said on Monday.

Although China's big state refiners have made minor cuts in output to trim deepening losses, lower production from small refineries -- supplying up to 15 percent of the world's second-larget oil market -- has triggered a squeeze on supplies, and may take weeks if not months to recover.

"We have been working all the weekends this month to sort out the shortage. We are really worried," a sales official with top refiner Sinopec Corp (0386.HK) told Reuters.

"The part of small refineries is the main gap. We have not yet seen significant improvement in supplies," the official said.

China's independent plants, owned by local governments or private businesses, have either cut production deeply or halted operations altogether as they face losses from processing costly crude or fuel oil into products such as diesel and gasoline, the price of which is kept low by Beijing.

China last raised gasoline and diesel pump prices 17 months ago, and has said it will not increase regulated prices this year in order to keep a lid on inflation, now near a decade high.

Asian benchmark fuel oil FO180-SIN, the most common feedstock for these small plants also called "teapot", has roared to a record above $500 per tonne, an 80 percent surge so far this year.

"How can they survive at these prices?" said a Beijing-based trader close to some of these plants.