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Sinopec refutes "hefty storage behind fuel shortage" report
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08:31, June 12, 2008

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China's leading refiner Sinopec Wednesday refuted a media report that refiners in the country were keeping a high storage amid spreading fuel shortage.

Sinopec was not at all piling up oil products and was endeavoring to guarantee market supply, a Sinopec source that declined to be named told Xinhua.

An industry report by the Shanghai-based information provider C1 Energy said some domestic oil enterprises were keeping an ample reserve amid the fuel shortage, carried by Wednesday's Shanghai Securities News.

"These efforts included restructuring product mix to produce more oil products, diesel in particular, entrusting local refineries to turn out more products, continuing importing oil products and guarantee fuel demands in important agricultural provinces of Shandong, Hebei, Shanxi and Shaanxi," the Sinopec source said.

John Chu, information director of C1 Energy, told Xinhua on Wednesday that one reason for the fuel stock increase was that in recent months oil product supplies surpassed actual demand. The other reason was that Sinopec and PetroChina, as well as some independent wholesalers, were in control of fuel resources.

Figures showed the country's apparent gasoline consumption (production volume plus net import volume) that stands for the basic supply level stood at 20.29 million tonnes from January to April, up 17.9 percent year on year. In contrast, the apparent diesel consumption reached 44.996 million tonnes in the same period, up 14.8 percent year on year.

However, Chu predicted the actual annual fuel demand growth in the first half of the year would hover between 6 to 7 percent, slightly higher than previous years, but far from the supply growth pace.

PetroChina, the country's largest oil producer, and Sinopec vowed earlier this month to expand production, cut exports and increase imports to ensure the growing supply on the domestic market partly due to the after-quake reconstruction and summer fuel consumption season.

These efforts would speed the domestic gasoline and diesel supply in the first half by 15 percent to 18 percent year on year, predicted the report.

The short supply of diesel broke out again in some localities in past weeks, including the southern Guangdong Province, the eastern Shanghai and Zhejiang Province and the northeastern Liaoning Province, where thirsty vehicles in long lines waiting to be fueled, Chu said.

On the flip side, oil product stock by Sinopec and PetroChina in Shanghai topped 111,400 tonnes by May 27, an amount which could meet the local demands for eight days. In Guangdong it surpassed 900,000 tonnes by the end of May, enough to quench local demands for 20 to 23 days, according to CI Energy.

Chu added on the one hand, domestic oil companies were piling fuel stock preparing for the coming energy peak season in summer. On the other hand, they were grudging having to sell amid the surging international crude oil prices.

Industry watchers held that international crude price increases have put the government in a dilemma -- to increase market supply of oil products. It then has to increase diesel and gas prices to encourage refineries.

However, price increases would bring new pressure on its efforts to curb the consumer price index (CPI) growth. It rose 8.5 percent year on year in April after a 8.7 percent increase in February, an 11-year high.

The government has set an annual CPI target of 4.8 percent for the year.

Sinopec said last month that it received 7.1 billion yuan (1.03 billion U.S. dollars) in oil subsidies in April, following the 5 billion yuan in government subsidies in 2006, 4.9 billion yuan in 2007, and 7.4 billion yuan in the first quarter this year.

However, Asia's top refiner said this big subsidy could only compensate for half its losses.

Chinese oil refiners have suffered great losses as they have been unable to pass on surging international crude prices to customers because of the government's price controls.

"The government should step up supervision of oil companies' reserves and urge them to sell stored products to ease fuel shortage," said the report. It added that a market-oriented competitive system should be in place for the long-run.

Source: Xinhua

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