Fuel price hike to boost refiners' bottom line

20:57, October 27, 2010      

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China raised gasoline prices by around 3 percent in order to reduce deficits at the nation's two major refineries amid increasing international crude oil prices.

"Starting from Oct 26, gasoline price increased by 230 yuan ($34.3) per ton and diesel by 220 yuan ($33) a ton," the National Development and Reform Commission, the country's economic planner said in a statement posted on its website Monday night.

Since October 1, international crude oil prices have rebounded above $80 a barrel. West Texas intermediate, also known as Texas light sweet crude prices settled at $82.52 a barrel Tuesday, up 1.02 percent.

While on London's Intercontinental Exchange, Brent North Sea crude settled at $83.54 a barrel Tuesday, an increase of 0.70 percent.

"The continuous surge in international prices will push domestic refiners into the red," said Wang Qiang, analyst with the Xiangcai Securities. Citigroup said that the 3 percent hike is a "small positive" for refiners' profitability.

Tuesday, shares of PetroChina, China's largest oil and gas producer, climbed 0.96 percent to 11.56 yuan ($1.73) on the Shanghai Stock Exchange.

Shares for Sinopec, the country's top oil refiner, closed at 9.17 yuan ($1.38) on the Shanghai Stock Exchange, down 0.54 percent.

In Asian markets Tuesday, the Shanghai Composite Index fell 0.32 percent, and Hong Kong's Hang Seng dropped 0.21 percent on concerns the fuel price hike will worsen inflation.

National Development and Reform Commission officials said the price rise was unlikely to push up inflation, as oil prices only account for a small part of CPI calculations, Xinhua quoted commission researcher Zhou Dadi as saying.

While higher fuel charges will affect inflation expectations "to some extent," the effect on overall prices will be "very small," the economic planning agency said in a separate statement Tuesday.

The stronger value of the yuan reduced the extent of the increase, it said.

Share gains were also supported by reported comments from a National Development and Reform Commission official about impending price reforms, which raised hopes that more frequent changes were in the works.

Source: Global Times


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