Experts: Oil price hikes good for market ( 2003-12-09 22:56) (China Daily)
The recent hike in prices for domestic oil products is expected to help
stabilize the oil market, which has been saddled with a supply crunch for more
than one month, industry watchers said.
But they also warned that the expected demand increase around the Spring
Festival --the Chinese lunar New Year-- in January will likely cause problems
for suppliers..
On December 6, the National Development and Reform Commission increased the
benchmark ex-factory price for gasoline by 200 yuan (US$24.2) a ton, or 6.6 per
cent, to 3210 yuan (US$388.1) a ton. Diesel prices rose by 180 yuan (US$21.8) a
ton, or 6.8 per cent, to 2820 yuan (US$341.0) a ton.
The benchmark retail prices increased by the same margin.
The adjustment aims to help the domestic price match international oil price
hikes, and encourage whole sellers to release the stock to ease the supply
shortfall, experts said.
China sets its benchmark prices for oil products in accordance with average
rates in the Rotterdam, New York and Singapore markets.
Despite the price increase on the international markets, the government has
not adjusted domestic prices since July, partly to stabilize the costs to
downstream industrial users, and thus, stabilize the economy, experts said.
Lower domestic prices have encouraged wholesalers to hold on to their
products in the hopes that prices will rise.The speculation, along with the
rapid increase in market demand, have forced thousands of filling stations in
East, Central and West China to ration the supply of diesel oil since last
month.
An official with Sinopec, Asia's largest refiner, said the price increase was
expected since domestic prices are lagging behind.
"The price hike, together with many other efforts by oil companies, will ease
the market shortage,'' said the official.
Sinopec and PetroChina, the nation's two largest oil companies, have
increased refinery runs and crude imports since last month.
The companies have also reduced the export of gasoline and diesel oil this
month to satisfy domestic demand.
"The effort seemed to have paid off as the supply in the East China area is
recovering,'' said an industry watcher in Beijing. "The South China market is
the next target area for the two companies to step up their efforts to ensure
the supply. And the oil market is likely to return to normal by the end of this
month,'' he added.
But experts also caution that demand will pick up next month as millions of
people will drive home for the Spring Festival, which falls on January 22.
They also warn that heavy traffic will likely slow the transportation of oil
products from refineries to targeted markets.
