October 26, 2007 / 5:34 AM / 11 years ago

UPDATE 2-China rations diesel as record oil hits supplies

(Adds rationing in another province, Sinopec comment, oil price)

By Chen Aizhu

BEIJING, Oct 26 (Reuters) - China is rationing diesel at pump stations in at least four booming coastal provinces in the widest-scale rationing seen since 2003, as red-hot global oil prices hit output at loss-making Chinese refiners.

With U.S. crude CLc1 soaring to new highs above $92 a barrel on Friday, the supply squeeze is a telling sign that high oil is taking its toll on demand in the world’s second-largest consumer by forcing refiners to limit output.

“We are rationing. Supplies are getting short,” said a sales executive with top refiner Sinopec Corp (0386.HK) from east China’s Jiangsu province.

Truck drivers reported long queues at petrol stations along a national highway linking Fujian and Zhejiang provinces, with each truck getting 100 yuan ($13) worth of diesel, or around 20 litres, per visit at a state-run station and 40 litres at a private kiosk.

Many in southern China’s Guangdong province, China’s manufacturing and export hub, suspended business due to the dearth of fuel, industry officials said. Central Hunan province also saw rationing in some cities and along a main highway, a local newspaper reported on Thursday.

The rationing, which started about a week ago, reflected official data released earlier on Friday that showed China’s apparent oil demand nearly stalled in September with only a 0.3 percent rise from a year earlier, the lowest growth in 20 months, according to Reuters calculations. [ID:nPEK125857]

“What’s wrong with the oil market? Our drivers had to queue the whole night for only a small amount of fill, slowing the traffic by almost one day,” said Gao Meili, who manages a logistics company.

“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.

These supply cuts have forced China to boost its imports from international markets, traders said.

Following a rare surge in gasoline imports in September, top refiner Sinopec also extended strong diesel imports into November, buying at least 60,000 tonnes and looking for more to replenish dwindling stocks. [ID:nSP254798]

“The market is chaotic now. We are worried that supplies in the coming months could be even tighter,” said the Guangzhou official.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below