Oil supply tightens in East and South China

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Last updated at: (Beijing Time) Tuesday, November 25, 2003

Oil supply tightens in East and South China

Supply shortages of refined oil products in economically booming East and South China have continued since early this month while demand has surged, analysts say.

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Supply shortages of refined oil products in economically booming East and South China have continued since early this month while demand has surged, analysts say.

Experts have attributed the supply shortfalls to lower domestic oil prices that have caused oil producers to export some domestic supplies and stimulated retailers to regrade the products.

They said it is still too early to judge how long the shortages will last, pending on the changes in domestic supplies and in oil prices.

Retail stations in East China's Zhejiang and Jiangsu provinces and Shanghai Municipality, and in South China's Guangdong Province have run short of diesel oil throughout this month.

Filling stations have had to ration products.

Diesel oil is mainly used in trucks, buses, tractors, and fishing boats, and in some power generators and plants.

The rationing has not affected petrol in areas up until now, but supplies are also tight as the demand is surging with the craze of cars on China's roadways.

Local retailers have increased prices to the upper limits of the government-set ranges to deal with the shortages. Shanghai, for instance, raised its prices twice in two weeks.

Officials from PetroChina and Sinopec-the largest two oil companies-said they have increased their refinery runs to keep up with the demand, and are working to transport products from neighbouring regions.

Gong Jingshuang, an expert with a consultant institute under PetroChina, said the tightened supply is partly because electricity shortages in the region have forced many power users to start operating their own diesel-fired generators.

He also said the disparity between the domestic and international oil prices has prompted oil companies to export products.

Sinopec has also started to increase its daily supplies to Shanghai Municipality this week.

Partly due to international price hikes, China's diesel oil exports surged by more than 200 per cent year-on-year to 1.9 million tons in the first nine months.

Petrol exports rose 32 per cent during the period to 5.9 million tons.

The insider also said some retailers are stockpiling their products, anticipating the government will raise the prices in the near future.

Gong said the demand for diesel is expected to drop in coming months, and petrol demand will increase.

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