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Govt may lower fuel prices soon: analysts

By Ji Beibei (Global Times)

08:10, April 23, 2012

China may soon lower its oil product prices for the first time this year, given the recent drop in international crude oil prices and sluggish market demand, analysts said yesterday.

"We expect fuel prices to drop by some 300 yuan ($48) per ton, or 0.2 yuan per liter, by the end of this month," Chen Qing, an oil product analyst with industry information portal chem99.com, told the Global Times yesterday.

According to China's fuel pricing policy, the government may consider lowering fuel prices if the average price for a basket of internationally traded crudes drops by more than 4 percent over 22 consecutive working days.

The price of internationally traded crudes began dropping in early April following a four-month surge to an average price of a gallon of gasoline to nearly $4.

The moving average prices of Brent, Dubai and Cinta crudes, which China uses as a reference for setting fuel prices, fell by 1.65 percent from March 19 to April 19, according to data from energy market research firm C1 Energy.

Zhong Jian, chief analyst with C1 Energy, predicted that global crude oil prices will see a sharp drop in the coming month.

"Currently the oil price is declining, but not to a very large extent," Zhong told the Global Times yesterday, but noting a plunge is in prospect due to various factors, including the fact that speculative money is clearing from the oil trading market and the US is taking measures to crack down on oil market manipulation, including tapping its oil reserves to pop the speculative bubble.

China has raised its fuel prices twice this year. Gasoline and diesel prices rose by 300 yuan per ton on February 8 and by 600 yuan per ton on March 20.

Price adjustments are possible, the National Development and Reform Commission said last month, partly because of easing inflationary pressures.

The consumer price index, a major gauge of inflation, rose 3.2 percent year-on-year in February, down from the 4.5 percent year-on-year rise in January and the lowest increase since June 2010, following a string of interest rate hikes and other tightening policies from the government.

Some petrol stations, private ones in particular, have reportedly been offering discounts to boost sales recently.

In some cities, including Shanghai, Nanjing and Beijing, petrol refilling stations were found charging car owners 0.13 to 0.15 yuan less per liter, china.com.cn reported over the weekend.

According to OK619.com, a portal that helps find cheap gasoline, nearly one-third of gas stations in Beijing have been offering discounts.

The 93-octane gasoline price in privately owned Beijing Fengsheng Gas Station fell to 7.88 yuan, China National Radio reported yesterday.

Demand for oil products this year has grown at a much slower pace than a year ago, because of a slowing economy, said Zhong at C1 Energy.

"Rainy days have set in since the first quarter, especially in southern parts of China, leading to less transport activity," said Chen from chem99.com.

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