Mainland cuts petrol and diesel prices on cheaper crude

First drop in fuel prices since July to reduce profit margins of refiners

PUBLISHED : Saturday, 17 November, 2012, 12:00am
UPDATED : Saturday, 17 November, 2012, 4:13am


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Beijing yesterday cut petrol and diesel prices for the first time since July, threatening to reduce processing margins for refiners in the world's second-biggest oil-consuming nation.

The maximum at which petrol can be sold to motorists falls by 310 yuan (HK$385) a tonne and diesel by 300 yuan, the National Development and Reform Commission said on its website.

The pump price of 90-RON, China III petrol will decline 3.1 per cent to 9,730 yuan a tonne, or US$4.46 a gallon. The China III specification is similar to the Euro III fuel standard.

Brent crude has dropped 6.5 per cent since fuel prices were last revised in September.

The cut, which follows increases in August and September, may hinder efforts by mainland oil companies to curb losses from selling fuel at state-controlled prices.

PetroChina, the nation's second-biggest refiner, said it reduced its processing loss in the first nine months of this year by 11.5 billion yuan from the same period last year to 30 billion yuan.

China Petroleum & Chemical (Sinopec), Asia's biggest refiner, did not give a figure for its refining unit as it posted a third-quarter profit that beat analysts' estimates.

"Sinopec will still be able to make a profit from refining after the price cut, although the margin will be close to its break-even point," said Shi Yan, a Shanghai-based energy analyst at UOB Kay Hian. "The price cut is within market expectations."

Shares in Sinopec yesterday closed unchanged at HK$7.85, while PetroChina rose 0.4 per cent to HK$10.14. The benchmark Hang Seng Index gained 0.24 per cent.

Brent crude, the benchmark price for more than half the world's oil, was at US$108.25 a barrel yesterday afternoon, compared with a high this year of US$128.40 on March 1.

Petrol and diesel costs are set by the NDRC under a system that tracks the 22-day moving average of a basket of crudes comprising Brent, Dubai and Indonesia's Cinta.

The government may revise fuel rates when the measure changes more than 4 per cent from the last adjustment. That figure was reached on Wednesday, the NDRC said in a separate statement.

C1 Energy reported the price cut after the Hong Kong stock market closed on Thursday and before the official announcement, citing information from two unidentified oil companies.

The Shanghai-based commodity researcher, which has previously reported fuel-price adjustments before the government statement, had predicted the revision would happen on Wednesday. It might have been postponed because of the Communist Party congress, C1 said.