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NDRC: State-owned companies must not stop oil supplies

The National Development and Reform Commission (NDRC) issued a notice on Aug. 4, ordering Sinopec and PetroChina, which operate half the country¡¯s retail filling stations, to refrain from withholding oil supplies to distributors.


It called on the two major oil companies to use all possible means to boost their oil-refining output to ensure the China market has sufficient oil. Also, it urged them not to stop or hold back supplies to any private distributors in the country.


The notice came hard on the heels of reports that the two companies halted supplies to private distributors to cut costs in the face of rising global oil prices. The largest state-owned oil and gas firms reportedly have suffered huge losses in oil processing since June.


A recent spike in oil prices is eating into the margins of oil and gas companies in China. Crude oil prices have climbed to a historic high of $78.21 per barrel on world markets in August. So in early July a few major oil producers appealed for permission to raise gasoline and diesel prices, but it came to nothing.


It has been speculated that the move by Sinopec and PetroChina to hold back supplies of oil products was a reaction to the government decision. Also operations at a number of refineries under the two oil companies have been suspended for maintenance, straining supplies around the country.


Summer months are usually peak periods for oil demand. However, it was reported that more than 40 cities in China are experiencing a major shortage of oil supplies, including Guangdong, Hunan, Shandong and Shanghai.


Therefore, the notice warned that any firm that halts or restrains oil supplies or raises factory, wholesale or retail prices will be contravening state regulations, and anyone who ¡°spreads false information on price hikes or hoards will be dealt with severely.¡±

According to industrial experts, NDRC policy-makers would currently ensure an adequate oil supply on the market rather than protect the company profits. Domestic oil prices will not go up in the foreseeable future.


It is expected that the oil shortage will be eased gradually in the coming months at the earliest.

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