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China: Window for downward adjustment to oil product prices may open late Jul

https://www.chemnet.com   Jul 23,2010
The window for downward adjustment to domestic oil product retail ceiling prices may open if the price of Brent crude hovers below US$74/bbl in the coming week, C1 estimated.


As of Jul 21, the 22-working-day moving average price of Brent, Dubai and Cinta was 3.96% lower than the average closing price of the crude basket on May 28, which was the reference for latest price adjustment, C1's data shows.
Compared with the average price on May 31, which might also be the reference for last adjustment, the 22-working-day average of Brent, Dubai and Cinta would be down 3.3% on Jul 21.


International crude market has been soft since June and the average price of the crude basket on Jun 16 dropped as much as 6.08% from May 28, and it declined 4.08% between May 28 and Jul 7, the data indicates. It is not expected to climb in the next few days, as stockpiles in U.S.A are abundant and the economic outlook is not clear.


If the window opens, China may cut the retail ceilings of oil products by about Yuan 250/mt.


Possible markdowns in retail ceilings will not impact wholesale prices much as they have been expected and absorbed by the market, a market player noted. But markdowns will help to spur PetroChina's and Sinopec's sales, as buyers will step out of the sideline and replenish stockpiles, the player said.
Lower oil product prices would be conducive to economy when inflation is serious, market sources remarked.
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