China Cuts Fuel Prices 1st Time Since July as Crude Drops
China cut gasoline and diesel prices for the first time since July, threatening to reduce processing margins for refiners in the world’s second-biggest oil-consuming nation.
The maximum at which gasoline can be sold to motorists falls by 310 yuan ($50) a metric ton and diesel by 300 yuan starting today, the National Development and Reform Commission said on its website yesterday. The pump price of 90-RON, China III gasoline in Beijing will decline 3.1 percent to 9,730 yuan a ton, or $4.46 a U.S. gallon, according to data compiled by Bloomberg from the NDRC. The China III specification is similar to the Euro III fuel standard. Brent crude has dropped 6.5 percent since fuel prices were last revised Sept. 11.
The cut, which follows increases in August and September, may hinder efforts by China’s oil companies to curb losses from selling fuel at state-controlled prices. PetroChina Co., the nation’s second-biggest refiner, reduced its processing loss in the first nine months of this year by 11.5 billion yuan from the same period in 2011 to 30 billion yuan, it said Oct. 30. China Petroleum & Chemical Corp. (600028), Asia’s biggest refiner known as Sinopec, didn’t give a figure for its refining unit as it posted a total third-quarter profit that beat analysts’ estimates.
“Sinopec will still be able to make a profit from refining after the price cut, though the margin will be close to its break-even point,” Shi Yan, a Shanghai-based energy analyst at UOB-Kay Hian Ltd., said by telephone. “The price cut is within market expectations.”
Sinopec fell 10 cents, or 1.3 percent, to HK$7.75 at 10:04 a.m. in Hong Kong, while PetroChina gained 0.2 percent to HK$10.12. The city’s benchmark Hang Seng index gained 0.2 percent.
Brent crude, the benchmark price for more than half the world’s oil, was at $107.89 a barrel, down 12 cents, on the London-based ICE Futures Europe exchange today. Prices have dropped 16 percent since reaching a high this year of $128.40 on March 1.
Gasoline and diesel costs are set by the NDRC under a system that tracks the 22-day moving average of a basket of crudes comprising Brent, Dubai and Indonesia’s Cinta. The government may revise fuel rates when the measure changes more than 4 percent from the last adjustment. That figure was reached Nov. 14, the NDRC said in a separate statement yesterday.
C1 Energy reported the price cut after the Hong Kong stock market closed and before the official announcement, citing information from two unidentified oil companies. The Shanghai- based commodity researcher, which has previously reported fuel- price adjustments before the government statement, had predicted the revision would happen Nov. 14. It may have been postponed because of the Chinese Communist Party congress, C1 said.
The 82 million-member party that has run China since 1949 yesterday announced its fifth generation of leaders, headed by Xi Jinping, who replaces Hu Jintao as general secretary.
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