Bloomberg News

China Set to Announce Steepest Fuel-Price Cut Since 2008

June 08, 2012

China, the world’s second-biggest oil user, may reduce gasoline and diesel prices by the most since at least 2008 after a slump in global crude costs.

State-controlled fuel prices will be cut starting tomorrow, C1 Energy, a Shanghai-based commodity researcher that has correctly reported the timing and size of changes before official announcements, said on its website today. C1 cited “two big companies” that it didn’t identify. Prices may drop by as much as 620 yuan ($97) a metric ton, equivalent to 28 cents a gallon, under government rules, it said.

A cut in fuel prices threatens to reduce revenue at China Petroleum & Chemical Corp. (600028) and PetroChina Co. (857), the nation’s biggest refiners, offsetting cheaper crude costs and extending processing losses that widened last quarter. Brent oil in London, a benchmark grade tracked by China’s government, entered a so-called bear market on June 1 after sliding more than 20 percent from this year’s high.

A reduction by 620 yuan a ton would be the steepest since the current pricing system was introduced in December 2008. It is equivalent to 6.4 percent decrease in nationwide average retail gasoline prices published by the government, according to Bloomberg calculations. The size of the cut is still to be determined and it may be less than 600 yuan, C1 said.

The current maximum at which 90-RON, Euro III-equivalent gasoline can be sold to motorists in Beijing is 10,050 yuan a ton, or $4.51 a gallon.

Processing Losses

The National Development and Reform Commission, China’s top economic planner, considers adjusting fuel rates when the 22-day moving average of Brent, Dubai and Indonesia’s Cinta crude changes more than 4 percent from the previous revision. Today is the 22nd working day after the last adjustment on May 10, the official Xinhua News Agency said June 6. Costs at the pump are “almost certain” to be adjusted, it said.

The government may implement a 10 percent reduction to fuel prices this weekend, Gordon Kwan, the regional head of energy research at Mirae Asset Securities Hong Kong Ltd., said in an e- mailed note yesterday.

China Petroleum, or Sinopec, had a 16-fold increase in its first-quarter refining loss to 9.2 billion yuan compared with a year earlier, the company said April 26. PetroChina said its operating loss from processing widened to 10.4 billion yuan in the three months from 6.1 billion yuan a year earlier.

Sinopec rose 1.1 percent to HK$7.10 at the midday lunch break in Hong Kong, while PetroChina gained 0.8 percent to HK$10.12. The benchmark Hang Seng index fell 0.4 percent.

To contact Bloomberg News staff for this story: Chua Baizhen in Beijing at

To contact the editor responsible for this story: Alexander Kwiatkowski at

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