Chinese people rush to buy fuel before re-price hike

China's domestic official petroleum prices are forecasted to rise again in early September following the recent price hike on 10th August.
Chinese domestic official petroleum prices are set by the government based on international market prices.

The prices have reduced 3 times during May and July after being raised twice in early this year. The latest change in this month was the first time price hike in five months.
Then, Chinese petroleum industry participants are predicting another price increase in the near future due to the recent overseas market movements.

Some market participants are expected to rush buying fuels before the price rise.
Domestic shipments of petroleum products increased in July as official price hike in early August was also expected. Stocks of petroleum products as of the end of July fell 5.9% from a month ago despite production in the month rose 5% from the previous month, according to the China National Bureau of Statistics.

Especially, month-end gas oil stocks fell by 8.1% from a month ago since its production in July posted only 3.9% increase from the previous month.
Gas oil consumption for on-site power generation was not strong in July due to relatively sufficient electricity supply. Also off-season for fisheries traditionally keeps gas oil demand lower in the month. Therefore, steady shipments in July seemed to related to temporary demand for rushing buy.

Further more temporary demand is likely to be seen toward the next price hike in September. Fishery season is going to resume and gas oil demand for agricultural machines is also increasing towards the harvest season.

However, despite those seasonal temporary demand, whole industrial gas oil demand seems to continue sluggish growth.
The declining growth of demand is seen in the domestic gas oil production figures in China, of course. On the other hand, downward-trend in Japan's exports to China also suggests sluggish industrial activities in China.

Japanese exports to China represent supply of materials, parts and machineries to manufacturers in China. Its decrease is none other than those shown a decline of Chinese industrial activities if China has not developed its own ability to produce those needed supplies rapidly.
Chinese petroleum demand may decline sharply after the temporary buying on expectation of price hike consumes future demand.

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