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Govt likely to cut oil prices this week, analysts predict

By Fang Yunyu (Global Times)

07:59, May 09, 2012

The National Development and Reform Commission (NDRC), the country's top economic planning body, may cut oil product prices as early as this week, analysts said yesterday.

"International crude oil prices have continued to decline since late March, which has opened a window for China to cut oil product prices. We expect that the NDRC will announce a price cut on Wednesday," Wang Jintao, an oil industry analyst at commodity information provider Zibo Zhongyu Information Technology Co, told the Global Times yesterday.

Wang said the NDRC may cut the retail prices of gasoline and diesel by between 260 and 300 yuan ($41 to $48) per ton.

C1 Energy, a Guangzhou-based consulting firm focusing on the oil sector, also said yesterday that they think the NDRC will announce a cut in oil prices today or tomorrow, and that the retail prices of gasoline and diesel are likely to be lowered by 200 to 300 yuan per ton.

"By May 4, the weighted average price of Brent, Dubai and Cinta crude oil had fallen by 3.61 percent from the average price on March 19. It is highly possible that the oil price cut condition will be met on May 9," said a report released yesterday by C1 Energy.

Under the country's oil product pricing mechanism set by the NDRC, domestic gasoline and diesel prices will be adjusted when the international benchmark price rises or falls by 4 percent over a period of 22 working days.

Cheng Ruifeng, an analyst at oil and gas information service firm Shanghai Toprise Information & Technology Co, told the Global Times that he also predicted a price drop this week.

The NDRC last adjusted gasoline and diesel wholesale prices on March 20, raising them by 600 yuan per ton, in response to rising international prices. The raise pushed gasoline pump prices in Beijing to over 8 yuan per liter.

Although the NDRC said the authorities would provide subsidies for people working in some industries heavily impacted by the hikes, such as public transportation, the move raised concerns about energy inflation and its negative impact on the world's second largest economy, which is currently undergoing a slowdown.

"Since the price increase, the sales of oil products of refining giants like Sinopec haven't performed very well in some areas, which is another factor indicating that it's time to cut the prices," said Wang.

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