Weaker price shows further slump of China oil demand

Petroleum products demand in China seems to be worse.
Media report that wholesale prices of diesel oil in fifteen provinces and major cities are slipped from the official limit level.

In China, domestic retail petroleum products prices are decided by the government based on international market prices. Wholesale prices and refiners' sales prices are set on the basis of the official retail prices.

Previously, supply of petroleum products could not catch up with the rapid growth of demand, thus wholesale prices were usually stayed at the high limit level. Even higher prices were accepted among buyers in the black market.
Diesel oil is the most popular petroleum product in China. The fuel is used for agriculture, fishery, transportation and on-site electricity generation. A lack of diesel oil supply caused turmoil in the market during 2010.

However, the petroleum demand in China are weaker since the beginning of this year due to the lower rate of economic growth and the strict regulations over the real estate market. China's diesel oil production in March was at 14.1 million tons, only 2.0% increase from a year ago, according to the National Bureau of Statistics. The year-on-year growth was 9.3% in March last year and annual growth rate in 2011 was 5.4%.

China's domestic diesel oil sales in the first quarter 2012 was flat from a year ago, according to the National Development and Reform Commission.

Chinese refineries have suffered losses because local petroleum products official sales prices could not catch up with higher international crude oil prices since early 2011. They were hesitant to increase production but any significant shortage of petroleum products have not been reported. It also suggests sluggish demand.

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