Gas prices firm due to signs of slowdown

08:38, August 03, 2010      

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China's top economic planner said Friday that time has not yet come to adjust domestic oil prices, the official Xinhua News Agency reported Sunday.

The last gasoline retail prices adjustment by the National Development and Reform Commission (NDRC) was on June 1, by 230 yuan ($33.95) per ton.

International crude prices dropped slightly in July from June 25's high of $78.86 a barrel, which triggered domestic rumors that the retail oil prices would decrease.

In 2009, a new oil pricing mechanism was introduced by the NDRC that allows the adjustment of retail gasoline prices when the moving average of global crude shifts more than 4 percent over a period of 22 business days.

Fears of a slowing economy may be behind the NDRC's reluctance to lower prices.

China Federation of Logistics & Purchasing (CFLP) released the purchasing managers' index (PMI) Sunday, which fell to 51.2 from 52.1 in June, the lowest point since March 2009.

The PMI, which covers more than 730 companies in 20 industries, is expected to remain above the 50 threshold demarcating expansion and contraction.

The PMI drop stimulated confidence that the central government was unlikely to take any new measures to curb inflation.

"China is the world's second largest oil consumer after the US, and slowdown in the manufacturing industries will affect its huge oil demand," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, Fujian Province.

The International Energy Agency (IEA) said China's oil demand in 2010 will grow by 9.1 percent, or 761,000 barrels a day, which is the equivalent of over 40 percent of global oil consumption growth.

J.P.Morgan lowered its forecast for 2011's average price to $79.25 a barrel from $90 for New York oil prices this year on speculation a slowdown in global economies will limit crude's potential to increase.

By Li Woke

Source: Global Times


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