Additional diesel imports to help feed China's domestic demand

2007-12-27 02:46:03 Xinhua English

BEIJING, Dec. 27 (Xinhua) -- China National Petroleum Corporation (CNPC) is considering importing another 300,000 tons of diesel oil following the Sinopec Group to guarantee domestic supply during the upcoming Spring Festival.

The imported diesel is scheduled to arrive next month, sources with Shanghai Securities News said. This meant a total of 800,000 tons of diesel would be provided to the domestic market next month, as Sinopec Group announced previously it would import 500,000 tons during the same period.

It would help provide for a large demand increase the market usually experienced in the first quarter, said Li Yu, Inc senior editor.

"Oil demand will surge in the transport sector because many Chinese travel home during the traditional Spring Festival, which falls on Feb. 7, 2008). Construction projects and infrastructure buildings will begin shortly after the festival, and farmers will also need diesel to fuel their tractors when the planting season comes."

The government controlled oil prices in the domestic market -- which was unable to cover the international crude cost -- had been blamed for a shortfall of oil supply in China. Some refineries would stop processing to avoid losses while some producers and dealers would hoard oil to gain more profit in case of possible price increase.

China has raised domestic oil prices since November and asked state-owned oil giants to import oil and make orders with local refineries.

The situation highlighted the importance of a state strategic oil reserve base program started in 2004. The first national oil reserve base under the program had been filled with crude oil earlier this month. It was designed to offset oil supply risk and reduce the impact of fluctuating energy prices worldwide on China's domestic market for refined oil.

The bases were designed to maintain strategic oil reserves equivalent to 30 days of imports, or about 10 million tons.