The growing international crude oil price recently engendered fears of price rises in the domestic market. On May 7, PetroChina and Sinopec, the two leading Chinese refineries both upped their wholesale price of petroleum and diesel. No oil price adjustment was enacted by the National Development and Reform Commission at 0 a.m. today, confounding market expectations.

According to an official with the Price Department of the NDRC, although all conditions for a price modification have been met, the commission still wants to continue to observe price trend of international crude.

Oil giants boost price

Yesterday, PetroChina and Sinopec both increased their refined oil price. Taking Changsha as an example, prices of #93 petrol and 0# diesel both went up by 50 yuan (US$7.33), and were later respectively priced at 6,550 yuan (US$960.41) and 5,450 yuan (US$799.12) per ton. Meanwhile, the quotation by PetroChina's 0# diesel also grew by 150 yuan (Us$21.99) and stabilized at 5,500 yuan (US$806.45) per ton.

"This is already their second price modification within this week." An analyst observed that earlier this week the quotations of 93# petro and 0# diesel had already been brought up respectively to 6,400 yuan (US$938.42) and 5,350 yuan (US784.46) per ton. After yesterday's growth, the price has almost reached the maximum of the country's guideline price.

NDRC needs further observation

In fact, rumors of a price rice started in the middle of April. An NDRC official previously revealed that if the international crude price kept rising or falling for 20 consecutive days at a minimum rate of 4 percent, the commission would consider adjusting the domestic oil price. This condition has applied since the closing quotation on April 24.

However, the domestic oil market has not followed the international step exactly. Chief Analyst Zhong Jian of Oilgas.com.cn expressed the view that "to adjust the oil price in this agricultural season will inevitably place a burden on farmers. Additionally, economic recovery has only just started; to raise the oil price will hamper this development". This, he concluded, is the reason why government has refrained from acting on the domestic oil price.

However, the surging international oil price is a factor that the Chinese government cannot ignore. On May 6, futures of sweet crude due in June went up by US$2.5 and closed the day at US$56.34 per barrel, setting a six-month record. And yesterday, the price kept increasing by US$0.44 and ended at US$56.78.

Considering that domestic oil consumption depends more and more on the international market, the likelihood of an adjustment of the government's guideline price remains high. "However, regarding the recovering domestic economy, the price change will most probably be a modest one, especially for that of diesel oil, for the benefit of agricultural users," Zhong Jian indicates.

For more information, please consult the Chinese coverage at:

http://www.china-cbn.com/s/n/000002/20090508/000000114915.shtml  

(China.org.cn by Maverick Chen, May 8, 2009)