China could hike petroleum prices in June - analyst

28 May 2008 07:52  [Source: ICIS news]

SHANGHAI (ICIS news)--Beijing is likely to cancel the restriction on domestic oil prices and increase prices of petroleum products next month in response to high crude prices, an analyst from Jianghai Securities said on Wednesday.

The price gap of diesel between home and abroad has widened to yuan (CNY) 6,000/tonne ($863/tonne) at a high-point, a company source from Sinopec told a local newspaper.

Rising international oil prices have squeezed the margins of state-controlled oil refiners and the government had to provide subsidies for them to mitigate their losses in order to keep sufficient supply in the domestic petroluem market.

Sinopec, Asia’s largest refiner, said it received a CNY7.1bn subsidy for imported crude oil in April early this week, although board chairman Su Shulin said it would still not cover its heavy refiining losses at its annual shareholder's meeting.

The company got CNY5bn government subsidy in 2006, CNY4.9bn for 2007 and CNY7.4bn for the first quarter of 2008 before.

“We have not received the announcement of oil price increase from the government,” a company source from Sinopec said.

“We can’t increase the domestic prices of gasoline and other refined oil products without the government’s approval, as the government expects to curb the prices to ensure domestic market stable."

A source from PetroChina said “we are not clear about the price rise and we follow the government’s policy”.

Sinopec posted a 69.1% fall in first-quarter profits to CNY6.06bn year on year on a weak refining and chemicals business sector.

The analyst said that high oil prices were a negative pull on Sinopec's performance.Sinopec will increase its crude oil output to 42m tonnes this year, higher from 41.02m tonnes last year.

However, the earthquake in Sichuan province did not have a negative impact on the company’s production and operation, an announcement from Sinopec said.

($1 = CNY6.95)

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By: Judith Wang
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