China International United Petroleum & Chemical Corp., the nation’s largest oil trader, will halt imports of diesel this month, according to a company official with knowledge of the plans, as a domestic shortage eases.
The trader imported at least 200,000 metric tons of diesel, or more than five cargoes, in November and December, after a shortfall prompted refiners to maximize production and boost purchases from abroad. The diesel, or gasoil, shortage is “gradually easing,” and inventories of the fuel are rising, the nation’s top economic planner said Dec. 21.
Asian diesel’s premium to crude oil, a measure of the refining profit from making the fuel, is likely to shrink as China’s purchases decrease, Victor Shum, a senior principal at energy consultant Purvin & Gertz Inc., said by telephone from Singapore. The so-called crack spread was at the widest in almost two years in December as the shortage boosted prices, according to data from PVM Oil Associates, a brokerage.
“The recent relatively strong diesel crack spread will certainly go in the opposite direction once the Northern Hemisphere’s winter demand goes away along with the Chinese demand,” Shum said. “This will put downward pressure,” on prices, he said.
Unipec, as China International is known, will also suspend diesel exports for a second month in January, said the official, who declined to be named because of company rules. The company is the trading unit of China Petroleum & Chemical Corp., also known as Sinopec.
Sinopec and China National Petroleum Corp., the nation’s two largest refiners, maximized crude processing after electricity rationing forced factories to fuel power generators on diesel. Local governments limited power supplies to meet energy saving targets that ended in 2010.
China’s net diesel exports in November fell to 90,000 tons, the lowest in 22 months, customs data showed Dec. 21. Imports rose 50 percent to 150,000 tons while exports declined 38 percent to 240,000 tons from a month earlier.
--Winnie Zhu. Editors: Alexander Kwiatkowski, Ryan Woo
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