China Increases Gasoline, Diesel Pump Prices as Crude Costs Rise

China, the world’s second-biggest oil consumer, increased fuel prices for the first time since September after the cost of imported crude rose.

The maximum that gasoline can be sold to motorists will advance by 300 yuan ($48) a metric ton and diesel by 290 yuan a ton effective 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 rise 3.1 percent to 10,030 yuan a ton, or $4.60 a U.S. gallon, NDRC data show. The China III specification is similar to the Euro III fuel standard.

The price increase benefits China Petroleum & Chemical Corp., or Sinopec, the nation’s biggest oil refiner, according to Sanford C. Bernstein & Co. Brent oil, the benchmark price for more than half the world’s oil, has gained 4.6 percent to $113.91 a barrel since China cut fuel prices on Nov. 16.

“The price increase is good news for Sinopec which has been enjoying positive refining margins in recent months,” Neil Beveridge, a senior research analyst at Bernstein in Hong Kong, said in an e-mailed report today.

Gasoline and diesel prices 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 adjust fuel rates when the measure changes more than 4 percent from the last modification. Crude gains have met the threshold since the November cut, the NDRC said.

Sinopec Gain

Sinopec rose as much as 0.9 percent to HK$8.84 in Hong Kong trading today and was at HK$8.78 at 11:47 a.m. local time. PetroChina shares slid 0.4 percent to HK$10.66. The benchmark Hang Seng Index gained 0.1 percent.

PetroChina’s refining operations lost 30 billion yuan in the first nine months of 2012, the company said Oct. 30. Sinopec didn’t give a figure for its crude-processing unit.

China may let oil companies set fuel prices according to guideline rates posted by the government as part of planned reforms, the official Xinhua news agency reported March 28, citing Peng Sen, a former vice chairman at the NDRC. The new system may also shorten the pricing cycle to 10 days from 22 days and replace Indonesia’s Cinta with New York-traded West Texas Intermediate oil, China Petrochemical Corp., the parent company of Sinopec, said in its online newsletter March 28.

“We expect the government to announce the oil product pricing reforms post the National People’s Congress in March,” Beveridge said in the report. “This should improve sentiment towards refiners and reduce losses.”

Inflation Threat

The increase threatens to boost the consumer price index, according to Nomura Holdings Inc. Inflation was 2.5 percent in December from a year earlier, the most in seven months, according to government data. China must be alert to imported inflation and changes in price expectations, the People’s Bank of China said Feb. 6.

“We estimate the weight of gasoline in the CPI basket to be around 0.5 percent, so the direct impact of this hike on CPI inflation will be limited,” Zhang Zhiwei, the chief China economist at Nomura in Hong Kong, said in an e-mailed report today. “But if further price hikes are in the pipeline, which we believe to be the case, then the combined effect on CPI inflation would be visible.”

— With assistance by Jing Yang

Before it's here, it's on the Bloomberg Terminal.