China Petroleum and Natural Gas Industry Research Report 2002Q2

PRICE FLUCTUATION

With the ascending trend of international market, the product oil market price steps out lower valley in the second quarter. However the product oil price drops in the end of second quarter, the crude oil price always keeps a rising trend, and swallows a part of gross profit of refineries. After three months continuous markup of product oil price since March, and processing volume regulation and joint pricing of the two biggest corporations, domestic refinery industries make up the deficits and get surpluses.
Product and crude oil
Due to the price mark-down of the international oil market in the first quarter, the two biggest corporations, whose profits mainly rely on their upstream branches, receive bad profits performance, and expect that product oil prices could be raised, so that the downstream industries of oil refining and sales make up the deficits and get surpluses as soon as possible. Because the average prices variations of Singapore, Rotterdam, and New York surpass 8%, State development and planning commission decides to raise gasoline and diesel retail benchmark prices 130yuan per ton since 4th,March. Hereafter, gasoline and diesel retail benchmark prices are respectively raised 260 and 240yuan in April, in May, up 240yuan.
After three price markup, domestic gasoline and diesel prices already rise to the level before “9.11 ”. the average retail price of 90# diesel in twenty key cities of our country has been raised from 2885 yuan per ton in February to3628 yuan, up 25.8%, the average retail price of 0# diesel is raised from 2543 yuan to 3241 yuan, up 27.4%. The endeavor of the two biggest corporation joint pricing and their production control makes the wholesale price growth even surpass that of retail prices. The prediction of price markup and the product oil stockpile decrease also contributes to the robustious market. From February to May the growths of gasoline and diesel respectively reach 35.7% and 30.6%. However, in June and July the prediction of relatively stable prices brings down market prices.
Crude oil price is in the rising trend.. In the second quarter, domestic typical crude oil, Daqing oil benchmark price rises from 1151yuan/ton in March to 1367 yuan/ton in April, 1585 yuan/ton in June. Because of the crude oil price markup in the international market, the trade agio between the two biggest corporation falls from the highest value 41yuan/ton in January, 12 yuan/ton in February, 16yuan/ton in March to zero. As a result, the pretax settlement price of Daqing oil, which SINOPEC buys from CNPC, holds the same level as the benchmark price that State development and planning commission releases. Daqing oil pricing refers to Minas oil in the Singapore market, The prices of Minas oil in March and April is $18.72 and $22.23, respectively rises to $25.63 and $25.76.
　

Figure 20 Wholesale price difference of gasoline, diesel and crude oil

Figure 21 Variation of domestic gasoline wholesale price from 1999 to 2002

Figure 22 Variation of domestic diesel wholesale price from 1999 to 2002

Figure23 Comparison of domestic diesel wholesale price and Singapore spot price

Figure 24 Comparison of domestic gasoline wholesale price and Singapore spot price

From the former month, 26th to this month, 25th

Figure 25 Daqing crude oil monthly pricing since the price reform in June,1998

Liquefied petroleum gas (LPG)

In the second quarter, the domestic LPG market price shows ascending trend, but the growth is markedly lower than that of gasoline etc, liquid petroleum fuel. Because over fourth ten domestic market demands rely on import, the open market early makes LPG prices follow the market fluctuation. The reference index of market prices is mainly Saudi Arabia LPG contract price. The Saudi Arabia contract price is not only the pointer of the Far East LPG market price trend, but also a rain glass of China’s domestic price variation, it dominates China’s import cost, also influences domestic market prices. In addition, the production volume changes of oversea refineries, overhaul, and accidents may affect LPG market.
In June, the factory prices of south refineries in China rise from 2223yuan in March to 2406yuan, up by 8.2%. Meanwhile, the CIF cost of imported LPG rise from $212 per ton to$235 per ton, up by 10.9%. In comparison, the growth of Saudi Arabia contract price is the least, only 4.7%. The increase of LPG price is much lower, compared with domestic gasoline price increase. In the second quarter the average factory prices of LPG only rise 9% compared with that of the first quarter, while the increase of gasoline is 24.4%. In the first half year the LPG factory price declines 23.6% down to 2221yuan/t, in comparison with the same period of last year.

　

Figure 26 Comparison of domestic LPG CIF cost and Saudi Arabia contract price

Figure 27 Comparison of domestic LPG and gasoline prices

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