Thursday, August 7, 2008

China to cut diesel imports as domestic supplies thrive

CHINA, the world's second-largest energy consumer, will cut diesel imports this month and next after domestic supplies improved, insiders said.

China International United Petroleum & Chemical Corp, the nation's largest oil trader, will halt, purchases in August and September, an insider told Bloomberg News. China National United Oil Corp will reduce imports this month by a "big margin" from July after it increased purchases in the past two months, another insider said.

China raised gasoline and diesel prices by about 18 percent on June 20, which encouraged refiners to increase fuel supplies and reduce inventories. State oil companies had stepped up imports to end shortages and build stockpiles before the Olympics Games.

"The improved Chinese supply may also be attributed to refinery upgrades which boosted yields of diesel," Ong Eng Tong, a Singapore-based consultant with Mabanaft International GmbH, said yesterday. "The move will increase diesel supply in the Far East region and weaken regional prices."

Unipec, as China International is known, more than halved diesel imports to 200,000 tons last month from June after the nationwide fuel-price increase. Chinaoil, as China National is known, bought a similar amount in July from June's 400,000 tons, an insider said. Chinaoil, the nation's second-largest oil trader, has not decided on the volume of September imports, the insider said.

China increased diesel purchases to the highest in at least five years in June to meet rising demand during the Olympics Games and for reconstruction after the Sichuan earthquake in May. Diesel imports rose to 960,000 tons, the Customs General Administration of China said on July 15.

Chinese oil refiners boosted crude processing to the highest in at least 17 months to 29.61 million tons in June.

China controls the cost of diesel, gasoline and jet fuel to limit their impact on inflation.


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