Fuel prices at new highs

(Shenzhen Daily)
Updated: 2006-06-12 11:10
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Domestic wholesale diesel soared to new highs following a bigger-than-expected rise in official prices two weeks ago that appears to have barely dented demand, industry officials said Friday.

Top refiner Sinopec Corp. was quoting diesel at 5,700 to 5,850 yuan (US$711 to US$729) a ton in eastern provinces, versus 5,500 to 5,700 yuan a month ago.

The levels are about 6 percent above the government-set retail ceilings, stirring expectations for more increases after the 10 percent rise May 24, officials said.

Sinopec officials say the rise, which took Chinese pump prices up 15 percent so far this year, has hardly dampened sales and most market players expect the government to bring domestic prices closer to international levels by the end of the year.

"The market is taking a breath. But everyone seems ready for more price hikes toward later in the year," said an official with Sinopec from eastern Jiangsu Province.

China needs to raise prices by roughly another 20 percent to lift partially privatized State refiners completely out of the red, if global crude holds at or above US$70 a barrel, analysts say.

With the summer harvesting and planting season unfolding across the country, increasing diesel usage, suppliers said they were under pressure to supply rural users.

The government has ordered State refiners to boost fuel supply to hundreds of millions of farmers, while handing out US$1 billion in subsidies to help peasants cope with surging fuel costs.

"The government is paying special attention to farmers," said the official in Jiangsu.

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