China’s June diesel imports soar to record

BEIJING – China’s June diesel imports soared to a record near one million tonnes and it turned a net importer of fuel for only the second month on record, as refiners rushed to take advantage of a big hike in fuel prices.

The imports, well above traders’ expectations, were also fuelled by the imminent end of a three-month tax rebate holiday, and government pressure to ensure healthy stockpiles ahead of the Olympic Games which Beijing will host next month. “You would expect the price rise to stimulate demand, because you have better supply,” said Hong-Kong based JP Morgan energy analyst Brynjar Eirik Bustnes.Domestic supply had been stifled for weeks because the unprofitable gap between low state-set prices and soaring crude markets caused refiners to cut back on output.Imports inflicted marginally less damage on bottom lines.And a near-20 per cent rise in retail prices from June 20 helped ease refiners’ losses and brought supply back to normal.The strong shipments may help meet the resulting surge in demand.Prices are still subsidised enough to make a big dent on demand.The world’s number-two oil consumer shipped in 960 000 tonnes of diesel in June, well above traders’ expectations of 650 000 tonnes and easily outstripping a previous high reached in January of 841 637 tonnes, preliminary customs data showed yesterday.Fuel imports of 282 996 tonnes more than offset 150 000 tonnes of exports, also above traders expectations for net shipments into China of only around 80 000 tonnes.The purchases extended a precedent set in May when, for the first time, China bought more petrol than they sold abroad.State-owned oil firms Sinopec and PetroChina are also now anxiously awaiting word on whether import tax rebates that ended in June will be extended into the third quarter.The benefits covered a total 3,5 million tonnes of imports and without them shipments would likely fall significantly.SUMMER PEAK Traditionally China has aimed to have enough refinery capacity to supply its own market, with minimal reliance on imports or export sales, but distorting price controls and delays at new plants have thrown the system off balance.With many of the small, independent refineries that provide up to 20 per cent of China’s capacity off-line before the hike, because of huge losses, the high imports in recent months have bolstered domestic supply.Beijing is also keen to keep the country’s tanks well stocked ahead of the Olympic Games next month, to ensure there are no shortages caused by extra strain at a time of peak domestic demand.China does not reveal inventory figures, so it is hard to pin down exactly how much is being stockpiled.Summer demand is heavy because power shortages and faster construction support diesel sales, while petrol is boosted by middle – class drivers seeking to escape sweltering cities.Recurrent power brownouts caused in part by heavy air-conditioning use also boosts appetite for the fuel to run individual generators, although rising prices and faltering export markets have tempered their use by some.As well as colder weather and the end of the Olympics, the autumn will also bring a rise in output from new refineries, helping cut the need for shipments from abroad.Fuel oil demand was weaker in June, with imports down over 1 million tonnes from the previous month to 1.67 million tonnes, as rocketing prices kept a lid on utility demand from the south.The country had actively sought fuel oil earlier this year, as power firms in southern China have been receiving subsidies since February to encourage them to stay on line and help mitigate the growing electricity supply crisis.Nampa-Reuters”You would expect the price rise to stimulate demand, because you have better supply,” said Hong-Kong based JP Morgan energy analyst Brynjar Eirik Bustnes.Domestic supply had been stifled for weeks because the unprofitable gap between low state-set prices and soaring crude markets caused refiners to cut back on output.Imports inflicted marginally less damage on bottom lines.And a near-20 per cent rise in retail prices from June 20 helped ease refiners’ losses and brought supply back to normal.The strong shipments may help meet the resulting surge in demand.Prices are still subsidised enough to make a big dent on demand.The world’s number-two oil consumer shipped in 960 000 tonnes of diesel in June, well above traders’ expectations of 650 000 tonnes and easily outstripping a previous high reached in January of 841 637 tonnes, preliminary customs data showed yesterday.Fuel imports of 282 996 tonnes more than offset 150 000 tonnes of exports, also above traders expectations for net shipments into China of only around 80 000 tonnes.The purchases extended a precedent set in May when, for the first time, China bought more petrol than they sold abroad.State-owned oil firms Sinopec and PetroChina are also now anxiously awaiting word on whether import tax rebates that ended in June will be extended into the third quarter.The benefits covered a total 3,5 million tonnes of imports and without them shipments would likely fall significantly.SUMMER PEAK Traditionally China has aimed to have enough refinery capacity to supply its own market, with minimal reliance on imports or export sales, but distorting price controls and delays at new plants have thrown the system off balance.With many of the small, independent refineries that provide up to 20 per cent of China’s capacity off-line before the hike, because of huge losses, the high imports in recent months have bolstered domestic supply.Beijing is also keen to keep the country’s tanks well stocked ahead of the Olympic Games next month, to ensure there are no shortages caused by extra strain at a time of peak domestic demand.China does not reveal inventory figures, so it is hard to pin down exactly how much is being stockpiled.Summer demand is heavy because power shortages and faster construction support diesel sales, while petrol is boosted by middle – class drivers seeking to escape sweltering cities.Recurrent power brownouts caused in part by heavy air-conditioning use also boosts appetite for the fuel to run individual generators, although rising prices and faltering export markets have tempered their use by some.As well as colder weather and the end of the Olympics, the autumn will also bring a rise in output from new refineries, helping cut the need for shipments from abroad.Fuel oil demand was weaker in June, with imports down over 1 million tonnes from the previous month to 1.67 million tonnes, as rocketing prices kept a lid on utility demand from the south.The country had actively sought fuel oil earlier this year, as power firms in southern China have been receiving subsidies since February to encourage them to stay on line and help mitigate the growing electricity supply crisis.Nampa-Reuters