June 06th, 2012 | Global Times Further cut in fuel prices expected soon
China is likely to announce a cut in gasoline and diesel prices for a second time this year as early as Friday after a fall in global fuel prices passed the 22-working-day review period, energy officials and analysts predicted yesterday.
“There is no need to speculate. The adjustment of fuel prices is a normal practice rather than a temporary decision. It follows the rules. When it reaches a certain point, the county will definitely adjust the prices,” Dai Yande, deputy director of the Energy Research Institute of the National Development and Reform Commission (NDRC), told the Global Times yesterday.
Dong Lizhu, an analyst at JYD Online Co, a Beijing-based bulk commodity consultancy, told the Global Times that it is almost certain the government will announce a cut in fuel prices Friday as the conditions for the cut will have been met by then.
“Usually the price cut is very timely. International fuel prices have dropped by more than 4 percent over the 22-working-day window period. If there’s no surprise, we will receive notice for a price cut Friday,” she said.
Under China’s fuel pricing formula introduced in 2009, the NDRC, the country’s top economic planner, will consider a fuel price change if the moving average price for a basket of internationally traded crudes changes more than 4 percent over 22 working days.
The weighted moving average price of Brent, Dubai and Cinta crudes, which the government uses as a reference for setting fuel prices, was down by 7.65 percent Monday from May 9, according to data compiled by JYD Online Co.
The NDRC last reduced fuel prices on May 10 for the first time since October 2011, after a decline in international prices since late March. The gasoline price dropped by 330 yuan ($52) to 8,850 yuan per ton and diesel by 310 yuan to 8,020 yuan per ton.
“The possible Friday cut will be much bigger than last time, probably by 600 yuan per ton for both gasoline and diesel, which would be the largest fall since 2009,” Dong said.
Zhong Jian, chief analyst with Shanghai-based C1 Energy, a fuel consulting firm, told the Global Times that there are no reasons for not making the cut, noting that Brent crude had slumped again Monday.
Brent slid to a 16-month low of $95.63 a barrel briefly Monday before recovering slightly to end the day at $97.03 a barrel.
“International fuel prices will rebound slightly and stabilize over the next two weeks. Even if there is a cut in domestic fuel prices, it will not generate much demand for fuel due to the slowing economy,” Zhong said. “The slowing economy helps balance the supply and demand of fuel, especially diesel. So there won’t be a shortage of diesel, as has occurred in previous years.”
By Song Shengxia