Energy
Power crisis forces halt to diesel exports
By Zhou Yan (China Daily)
Updated: 2011-05-14 10:17
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BEIJING - China will halt diesel exports to guarantee domestic supply of the fuel as electricity outages continue to put pressure on the country's power supplies.
China will suspend diesel exports in the near future, other than to the Hong Kong and Macao special administration regions, China's top economic planning body said in a notice on Friday.
The National Development and Reform Commission also called for increased production of oil byproducts and ordered businesses not to hoard petrochemicals for speculation and price gouging.
"It is highly likely that China will suffer another diesel shortage if the fuel continues to be exported," said He Wei, a senior analyst at BOCOM International Holding Co, an investment bank headquartered in Hong Kong.
"The widespread electricity outages may trigger higher diesel consumption as more companies tend to use diesel power generators to sustain production during summer," said Zhu Fang, vice-director of the information and marketing department at the China Petroleum and Chemical Industry Federation.
The federation predicted earlier that in the first quarter of 2011 China's apparent diesel consumption, which includes domestic production and imports but excludes exports, was likely to rise by up to 15 percent from a year earlier to 41.57 million metric tons.
China Petrochemical Corp, the country's biggest oil refiner by capacity, announced on April 19 that it had suspended exports of oil products to guarantee domestic supply.
The company, which is also known as Sinopec Group, reported a refining loss of 576 million yuan ($89 million) in the first quarter of the year, as the government-set retail diesel price failed to keep up with rapidly rising international crude oil prices.
The crude oil price, if converted from China's trading diesel prices, was about $94 a barrel, while global crude prices have hovered above $100 a barrel for most of 2011, Zhu said.
The Brent oil price for June was set at $112.85 a barrel on Friday on the ICE Futures Europe exchange in London.
"Crude prices have been experiencing volatility recently, but we expect the average price of Brent crude will still hover around $100 to $125 a barrel in six months because of balanced supply and demand," said BOCOM's He.
In this regard, domestic refiners are reluctant to sell diesel in China to make losses when exports can produce profits.
"There's a shortage of wholesale diesel supply in South China, as traders are hoarding refined oil in anticipation of the government raising retail diesel and gasoline prices further if global crude prices remain high," said Cindy Liang, a senior analyst at energy information provider Platts.
According to figures from the National Development and Reform Commission, the nation's inventories of refined oil products grew by 450,000 tons to the end of April from the previous year.
It is hard to predict when the government will lift the exports ban, especially when the prospects for global oil prices are uncertain, analysts said.
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