China Increases Fuel Prices for First Time in Five Months

China, the world’s second-biggest oil consumer, increased gasoline and diesel prices for the first time since March after global crude costs climbed.

The maximum at which gasoline can be sold to motorists will rise by 390 yuan ($61) a metric ton and diesel by 370 yuan starting today, the National Development and Reform Commission said in a statement on its website yesterday. The pump price of 90-RON China III gasoline in Beijing will increase about 4.3 percent to 9,490 yuan a ton, or $4.27 a U.S. gallon, according to Bloomberg calculations from NDRC data. The China III specification is similar to the Euro III fuel standard.

China is raising fuel prices for the first time in five months in response to rising crude costs even as it faces economic growth that slowed to 7.6 percent in the second quarter, the weakest pace in more than three years. The nation cut fuel rates three times between May and July, helping truckers and motorists with the lowest pump prices since December 2010. Inflation cooled for a fourth straight month in July to 1.8 percent, data from the National Bureau of Statistics showed yesterday.

“This is the first time the NDRC increased fuel prices in a timely fashion once the threshold for doing so was reached, probably because August is not a month of peak consumption and inflation pressure has eased,” C1 Energy, a Shanghai-based commodity researcher, said on its website.

Gasoline and diesel prices are set by the NDRC under a system that tracks the 22-day moving average of a basket of crudes, including Brent, Dubai and Indonesia’s Cinta. The price of Brent futures in London rose 7.3 percent in July.

Refiners’ Losses

PetroChina Co. (857) and China Petroleum & Chemical Corp. (600028), the nation’s biggest fuel producers, each reported wider refining losses in the first quarter because of state-capped pump rates. China plans to revise its pricing system so domestic rates can better track crude. The new system may shorten the pricing cycle to 10 days, China Petrochemical Corp. said March 28.

“While the timely upward move should be welcomed this time, the bias of NDRC is still towards lower gasoline and diesel prices,” Neil Beveridge, a Hong Kong-based senior analyst at Sanford C. Bernstein & Co., said in a note today. “High oil prices and inflation appeared to scupper reforms.”

Chinese refiners will need a further price increase of 600 yuan for gasoline and 700 yuan for diesel if they are to produce the fuels profitably with international crude prices are around $100 a barrel, Scott Darling, a Hong Kong-based analyst at Barclays Plc said in an e-mail today.

“At these fuel price levels, we believe that most Chinese refiners still are unlikely to break even,” Darling said. “We now see partial fuel price reform in China as a 2013 event, especially considering the upcoming premiership change and the country’s economic growth outlook this year.”

Shares in Sinopec, as China Petroleum & Chemical Corp. (386) is known, rose as much as 1.2 percent to HK$7.48 today and were at HK$7.43 at 10:41 a.m. on the Hong Kong stock exchange. PetroChina shares slid 0.1 percent to HK$9.80.

To contact Bloomberg News staff for this story: Chua Baizhen in Beijing at bchua14@bloomberg.net; Jing Yang in Shanghai at jyang251@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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