INTERNATIONAL. The number of private oil companies from southern China that are seeking fuel from sources in the north of the country due to local supply shortfalls has fallen and prices have eased slightly after the National Development and Reform Commission (NDRC) ordered the country's major refiners last month to ensure stable fuel supplies. Lower international crude oil prices have also led to a drop in fuel hoarding, state media reported today.

Oil product prices have dipped by around RMB40 (US$5.28) per ton in Shandong Province, eastern China's main refining base, which is also home to a score of local small refineries or "teapots", as they are referred to sometimes. The ex-factory price of diesel from the province's independent Shouguang refinery has also dropped, falling by RMB100(US$13.21) to RMB5,230 (US$690.9) earlier this week, according to the Beijing Times.

Lower fuel prices and the drop in the number of private companies seeking supplies from elsewhere suggests that the supply situation in the country's southern regions is improving, Li Yu, a fuel analyst with the oil product information portal oilboss.cn, said. Fuel output in southern regions struggled to keep up with robust energy demand recently.

"At the same time, falling international crude oil prices have made a domestic fuel price rise in the near future unlikely, and this has helped release some inventory that was being hoarded and intended for profiteering," Li added.

Earlier this month, PetroChina, China National Petroleum Corp.'s listed arm, and the China Petroleum & Chemical Corp. (Sinopec) were accused of withholding oil supplies from private gas stations in order to give supply priority to their own gas (petrol) stations in the face of refining losses caused by record international crude oil prices. Such oil firms have kept their wholesale prices at high levels, despite few transactions, in order to dampen purchase demand.

As a result, private gas stations, which account for around 56% of the country's total, have had to rely on supplies from small refineries in the northern provinces of Shandong and Shaanxi to keep their pumps running. Such refineries have survived by filling occasional supply shortages in the country, and by creating low-quality oil products from fuel oil, a product on which the country does not impose an import quota.

Sinopec and PetroChina have reportedly slashed fuel exports for this month in order to make up for domestic shortages.

The gasoline output of the two companies for last month was also higher than the previous month, reaching 5.11 million tons.

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