News and Analysis 20110111

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This post was last edited by fireasha on January 13, 2011, at 17:52.
· Shell and CNOOC are in talks regarding Shell’s potential investment in CNOOC’s Huizhou refining project.
· Due to declining demand, the volume of smuggled diesel entering Guangdong region has decreased recently.
· Construction on the main phase of Sinochem Quanzhou’s 12 million-ton/year oil refinery project began earlier this year.
· In 2010, China imported a total of 239.31 million tons of crude oil, setting a new record high.
· PetroChina announced it will invest in two refineries owned by Ineos in the UK.
· Gasoline prices rose in Guangzhou and Shenzhen; Foshan did not follow suit, with the maximum price for 93-octane gasoline being 7 yuan per liter.
· An overview of China’s imports and exports of crude oil and refined petroleum products in December 2010.
· Private gas stations in Dongguan are engaged in a price war; this is likely due to an oversupply of gasoline.
· A strategic framework agreement regarding the operation of the crude oil terminal along the China-Myanmar oil pipeline was signed in Beijing.
· After being exempted from consumption tax, the cost of biodiesel has dropped by 900 yuan per ton.
· In 2010, China imported 239 million tons of crude oil, representing a 17.5% increase compared to the previous year.
· Wholesale gasoline prices in Guangzhou have been steadily falling, while retail prices have been raised repeatedly.
· CNPC Fuel Oil Company is planning to add another asphalt processing plant; this move could make it the largest asphalt production base in China.
· The EIA’s short-term energy outlook report predicts that global oil demand growth will slow down in 2012.
· OPEC: Even if oil prices exceed $100 per barrel, OPEC sees no need to hold an emergency meeting.
· Morgan Stanley: Oil prices are expected to surpass $100 per barrel this year.
· Demand for fuel oil shipping has weakened; domestic freight rates for fuel oil shipments dropped sharply in January.
· In January 2011, South Korea’s major refineries saw a month-on-month increase in the volume of fuel oil supplied via ship to 700,000 tons.
· In 2010, Sinopec CNOOC Bonded Ship Bunkering’s sales volume of fuel oil increased significantly year-on-year, reaching 200,000–300,000 tons.
· While production growth accelerated, export growth slowed down; as a result, China’s apparent consumption of fuel oil saw only a slight rise in 2010.
· On Tuesday, Taiwan’s CPC Corporation raised the contract price for heavy fuel oil shipped by sea by $2 per barrel.
· The Asian fuel oil market strengthened on Monday; trading activity regarding February’s viscosity differentials for fuel oil remained robust.
· News and Analysis
· Shell and CNOOC are in talks regarding Shell’s potential investment in CNOOC’s Huizhou refining project. According to a report on January 11 by China Daily’s English website, citing sources within CNOOC, Royal Dutch Shell is currently negotiating with CNOOC to participate in Phase II of the Huizhou refining project. This project involves investments exceeding 50 billion yuan ($7.5 billion) and is scheduled to become operational in 2014. The report cites Zhu Mingcai, a senior executive at the joint venture between the two companies, CSPC, as saying that Shell has a strong interest in participating in CNOOC’s refining operations. He added that several other international petrochemical companies also have similar interest. Reports, citing several other CNPC employees, state that Shell will acquire a 30% stake in the Huizhou refining and chemical project in exchange for its 20% ownership stake in CNPC Shell. Currently, Shell holds 50% of the shares in CNOOC Shell. Reportedly, the second phase of the Huizhou project is expected to be **approved in the first half of 2011; its annual refining capacity will reach 10 million tons of crude oil and 1 million tons of ethylene. ·Demand has declined, and the amount of smuggled diesel that reaches the shore in Guangdong has decreased recently. According to industry insiders in the Pearl River Delta region of Guangdong, although the profits from smuggling diesel remain attractive, the volume of smuggled diesel arriving on shore there has dropped compared to December and the beginning of this month. This is mainly because the weather in South China has remained cold recently, and with the Spring Festival approaching, many construction sites have either halted operations or gone on holiday. This has led to a decrease in end-demand for smuggled diesel, thereby reducing smuggling activities. However, due to the consistently high international oil prices since early January and the relatively strong market prices of 0# diesel in South China, the selling prices of smuggled diesel have remained stable for the most part. Among them, the price of smuggled diesel in Dongguan and Zhongshan areas was reported to be around 7,000–7,100 yuan per ton, roughly on par with the level at the end of December. Previously, due to domestic oil prices being relatively higher than international prices, coupled with high tax rates and a persistent shortage of domestic diesel in the fourth quarter of 2010, smuggling of diesel surged rapidly after the Asian Games ended at the end of November. The low price and abundant supply of smuggled diesel have had a certain impact on the market for national standard 0# diesel over the past month. ·The main construction work for Sinochem Quanzhou’s 12 million tons per year oil refining project will begin at the beginning of this year. According to information from the refinery, the main construction phase of this 12 million tons per year oil refining project built by Sinochem Group in Quanzhou, Fujian, will start in early 2011, with completion and operation expected by 2013. People from the refinery said that with the backfilling work for Sinochem Quanzhou Petrochemical’s new plant complex, which began on May 1, 2009, the first phase of backfilling was completed in October 2010. The second phase of backfilling is currently in progress and is expected to be finished by early 2011 (the entire project will be completed by the end of April 2011). The site is scheduled to be handed over to Sinochem on January 15, 2011, so that the main construction work can begin. To date, 18 refining units of Sinochem have been gradually installed. Sinochem Quanzhou Petrochemical plans to build a vacuum distillation unit with an annual capacity of 12 million tons; this will be the second facility in China with such a capacity, after CNOOC’s Huizhou refinery. In addition, the supporting secondary processing facilities include 1.6 million tons per year of coking, 2.4 million tons per year of catalytic cracking, 2.6 million tons per year of hydrocracking, as well as hydrogenation of gasoline and diesel, hydrogenation of diesel, hydrogenation of kerosene, and hydrogenation of residue – totaling 7.4 million tons per year. Sinochem Quanzhou Petrochemical is a new refinery under construction, located on the southern shore of Meizhou Bay in Fujian Province. A 300,000-ton crude oil terminal of Sinochem is planned to be built at Douwei in Meizhou Bay, for the import of crude oil from the Middle East. ·In 2010, China’s total crude oil imports reached 239.31 million tons, a record high. Preliminary data released by the General Administration of Customs on January 10 shows that in December 2010, China imported 20.83 million tons of crude oil, a decrease of 0.24% month-on-month and 1.8% year-on-year. However, this level remains high, as crude oil processing volumes in December and January 2011 continued to reach record highs. As reported earlier, in November 2010 China imported 20.91 million tons of crude oil, a 27.5% increase on a month-on-month basis and a 22.1% increase year-on-year, reaching the fourth-highest level on record (lower than the 21.2632 million tons in December 2009, 22.27 million tons in June 2010, and 23.29 million tons in September 2010). In October 2010, China imported 16.39 million tons of crude oil, a significant decrease of 29.63% month-on-month and 15.2% year-on-year. This figure represented the lowest level in nearly 19 months. Customs data also show that from January to December, China imported a total of 239.31 million tons of crude oil, a 17.5% increase on a year-on-year basis, setting a new record for annual crude oil imports. With strong growth in China’s oil demand, domestic crude oil imports have reached new highs for the tenth consecutive year. In particular, with the increase in domestic refining capacity and the growing demand for refined oil products, China’s crude oil processing volume has remained at a high level since early 2010. Consequently, the demand for imported crude oil has risen further compared to last year. In 2009, several refineries in China put newly built atmospheric and vacuum distillation units into operation. Coupled with the completion and commissioning of the PetroChina Qinzhou Refinery in August 2010, this led to a significant increase in the demand for imported crude oil. Furthermore, with the full operation of the first phase of China’s strategic crude oil reserve facilities in 2009, the demand for imported crude oil for strategic reserves within the country increased in 2010, which also contributed to a further significant rise in China’s imports of crude oil that year. ·PetroChina announced it will invest in two refineries owned by the British company INEOS. On Monday night, PetroChina said it had reached framework agreements with two subsidiaries of the INEOS Group to invest in their refining operations, thereby expanding its business presence in Europe. In a statement released on the Hong Kong Stock Exchange, PetroChina said the two parties would work together to establish a joint venture that would be involved in crude oil refining activities using the facilities at the Grangemouth refinery in Scotland and the Laveraie refinery in France. PetroChina stated that it would inject capital into INEOS, and that the proposed joint venture is crucial for its plans to build a broader business footprint in Europe. The statement also mentioned that both Grangemouth and Laveraie refineries have a processing capacity of around 210,000 barrels of crude oil per day. The joint venture is expected to be established in the first half of this year. ·Fuel prices rise in Guangzhou and Shenzhen, but Foshan does not follow; the highest price for 93-octane fuel is 7 yuan (Southern Metropolis Daily, January 11). On January 8, the **Development and Reform Commission approved Guangzhou and Shenzhen to adopt the Yue IV standard for gasoline pricing, imposing an additional 200 yuan per ton on top of the current maximum retail price for National III standard gasoline. Following this adjustment, the maximum selling prices of Guangdong Standard IV No. 90, No. 93, and No. 97 gasoline sold in Guangzhou are 6.69 yuan per liter, 7.21 yuan per liter, and 7.81 yuan per liter respectively. Compared with the current National Standard III gasoline, these prices have increased by 0.15 yuan, 0.16 yuan, and 0.18 yuan respectively. Many car owners called our newspaper to ask whether fuel prices in Foshan had also risen. From Sinopec and CNPC’s branches in Foshan, we learned that the city is still using National III fuel price standards; as for when these prices will be brought in line with those in Guangzhou and Shenzhen, there is no definite timeline yet. In Foshan, the price of gasoline with grade 93 is as high as 7.05 yuan. Reports indicate that in an effort to improve air quality, in accordance with the **reply from the Ministry of Environmental Protection regarding the early implementation of the fourth-phase standards for emissions of air pollutants from motor vehicles in the Pearl River Delta region**, Guangzhou began using gasoline meeting the Yue IV standard starting from August 1 last year. Foshan also started using Yue IV standard gasoline in September last year; however, both Guangzhou and Foshan still apply the price structure for gasoline meeting the National III standard. On January 8th of this year, Guangzhou began to implement the gasoline pricing policy based on the Yue IV standard. Many car owners are worried whether the fuel prices in Foshan, which is adjacent to Guangzhou, are the same as well On January 9, reporters visited various gas stations in Foshan and learned that the fuel prices there are still based on the National III standard for gasoline. The reporter saw at the Shell gas station on South Sea Avenue that the price of 93-octane gasoline was 6.8 yuan. Mr. Chen, who was filling up his car there, said he had been using this gas station to refuel, and that there had been no changes in fuel prices recently. The price of 93-octane gasoline at the Sinopec gas station on Foshan Avenue is 7.05 yuan. The staff said that since December 22 last year, the price has remained at 7.05 yuan with no changes to date. Regarding the implementation of the Guangdong IV standard pricing policy for fuel prices in Guangzhou, they have not yet received any notice of a adjustment to the prices of refined petroleum products. Therefore, it is still unknown when the price will be adjusted. Car owners are worried about rising fuel prices in Foshan. “Fuel prices really stress us car owners; the problem is that they keep going up and never drop.” ”Mr. Cruz, the car owner, said that his car is still in the breaking-in phase, so it is quite sensitive to fuel prices. When online, I check from time to time whether the fuel prices in Foshan have risen. When going to fill up my car, I want to fill it to the top, but I’ve heard that doing so makes the vehicle heavier and increases fuel consumption; therefore, when filling up on the 9th, I only spent 100 yuan on fuel. 　　The reporter learned that at present, our province only uses Guangdong IV standard gasoline in Guangzhou and Shenzhen. The Provincial Price Bureau requires the price authorities and relevant departments in Guangzhou and Shenzhen to strictly implement the **petroleum product pricing policy. 　　A responsible person from the Foshan branch of Sinopec stated that currently, Foshan still implements the National III oil price policy. As for when prices will rise to match those in Guangzhou, it remains unclear at this point. Tips: Can National III vehicles use National IV fuel? 　　Some car owners have asked whether it’s okay to use Grade IV fuel in vehicles designed for Grade III standards Wang Yongbin, after-sales manager at Lite Group Dongfang Nissan, replied that it is fine to use Guangdong IV gasoline in vehicles equipped with National III or National II standards (and lower). The octane rating of the gasoline only makes a difference in terms of emissions; for example, using Guangdong IV gasoline can reduce pollutant emissions by 15%. Guoyi IV vehicle fuel with Guangdong IV specifications is the most effective; using it in vehicles of Guoyi III or lower standards will also have no adverse effects. ·Overview of China’s total imports and exports of crude oil and refined products in December 2010: Data released by the General Administration of Customs of China on January 10 showed that in December 2010, China imported 20.86 million tons of crude oil, a 0.2% decrease on a month-on-month basis and an 1.8% decline on a year-on-year basis. Meanwhile, from January to December 2010, China imported a total of 239.31 million tons of crude oil, representing a year-on-year increase of 17.5%. Furthermore, in December 2010, China exported 240,000 tons of crude oil, a decrease of 58.6% on a month-on-month basis and a 33.2% drop on a year-on-year basis. From January to December 2010, China exported a total of 3.03 million tons of crude oil, a year-on-year decrease of 40.2%. In terms of refined oil products, China’s imports of such products in December amounted to 3.96 million tons, representing a 12.5% increase month-on-month and a 20% rise year-on-year. From January to December 2010, China imported a total of 36.88 million tons of refined oil, a 0.1% decline on a year-on-year basis. Meanwhile, in December, China’s exports of refined oil products amounted to 1.89 million tons, a decrease of 9.1% month-on-month and 48.5% year-on-year. From January to December 2010, China’s total exports of refined oil reached 26.88 million tons, a year-on-year increase of 7.5%. ·Private gas stations in Dongguan engage in a covert price war; suspected cause is an oversupply of gasoline (Dongguan Daily, January 11). 30 cents, 40 cents, 60 cents... Private gas stations in Dongguan have launched a wave of promotions and price cuts for refined oil products. 　　The latest data on January 10 shows that at privately-owned gas stations in Dongguan, the discounts on refined oil products—which had been recently price-hiked—are particularly substantial; some even offer a reduction of 0.6 yuan per liter. In contrast, the discount on diesel is very limited. 　　Industry insiders say this wave of promotional price cuts may be related to multiple factors, such as recent rises in oil prices, colder weather, and the increased supply of gasoline due to wholesale diesel being sold alongside gasoline, all of which have led to an oversupply of gasoline. Gasoline prices have dropped by up to 60 cents. A price promotion war for refined oil products has officially begun. 　　Yuan Jianhua, manager of Liangxin Transportation Co., Ltd., which operates the Liangping Gas Station, told reporters that the price cut for No. 93 and No. 97 gasoline is approximately 30 cents per liter. However, there are currently no plans to offer price cuts for diesel. 　　This wave of promotional price cuts is expanding on a larger scale. Yesterday, reporters observed along Guanchang Road in Dongguan, where there are the most gas stations, and found that almost all of these stations had large signs offering discounts on fuels in an effort to attract passing vehicles to refuel, with the discounts on gasoline being the most noticeable. In contrast, the discount on diesel is very limited. 　　At the Yuemeite Dalingshan gas station, the price of 93-octane gasoline is 7.05 yuan per liter; from 7 p.m. to 11 a.m. the next day, it is discounted to 6.60 yuan per liter ； The price of 97-octane gasoline, which was 7.63 yuan per liter, has been adjusted to 7 yuan per liter ； There is a slight discount on diesel; it is 10 cents lower than the adjusted price of 6.87 yuan per liter. “At a gas station in Chang’an, the discount on No. 93 gasoline is as much as 60 cents! ”Liao Sheng, the person in charge of the gas station, said. 　　However, a representative from a state-owned oil company said that the prices of gasoline and diesel at its stations remain relatively stable, with no significant discounts. It is likely to be an effort to raise funds at the end of the year; Liao Sheng is not surprised by these price cuts on gasoline at gas stations. 　　According to him, recently there was a shortage of diesel supply; diesel at many oil depots supplying petroleum was quickly snapped up by downstream gas stations, while the stockpile of gasoline continued to grow. To reduce gasoline inventory, some oil suppliers have adopted the approach of selling diesel wholesale along with gasoline. “For example, when purchasing one ton of diesel, one ton of gasoline also needs to be bought. Our stock of gasoline is also increasing. ”This undoubtedly **increases the gasoline stock at gas stations, especially those owned by private entities**. 　　Some owners of private gas stations also agree with Liao Sheng’s views. Yuan Jianhua said that this year’s cold air has had a significant impact on Dongguan, with low temperatures leading to car owners reducing both the frequency of using fuel and the amount of fuel consumed. 　　An increase in gasoline stockpiles and a decrease in demand are likely the key reasons behind this round of gasoline promotions. 　　Of course, the fierce competition among private gas stations in Dongguan has also intensified promotional efforts. Data shows that there are 44 gas stations along the 107 National Highway, which stretches 48.3 kilometers within our city’s jurisdiction alone. 　　A representative from a state-owned oil company said that heavy discounts offered by private gas stations remain one of their strategies to maximize sales with low profits. Pre-holiday promotions are related to factors such as meeting year-end targets and recovering funds. ·A strategic framework agreement on the operation of the crude oil terminal for the China-Myanmar crude oil pipeline was signed in Beijing. It is understood that on the afternoon of January 7, China Petroleum Southeast Pipeline Co., Ltd. and Qingdao Port (Group) Co., Ltd. signed such an agreement in Beijing. Liao Yongyuan, vice president and member of the Party group of China National Petroleum Corporation, said during the signing ceremony that the signing of the agreement will facilitate and promote the construction and management of the ports, as well as the smooth commissioning and safe, stable operation of the China-Myanmar pipeline. It holds great significance for both sides to expand their cooperation models and projects and to foster development in their respective fields. The China-Myanmar oil and gas pipeline is another important channel for energy imports, following the China-Kazakhstan crude oil pipeline, the Central Asia gas pipeline, and the China-Russia crude oil pipeline. It serves as a \"golden bridge\" for friendship between China and Myanmar. Starting from the west coast of Myanmar, it runs in two parallel lines, passing through Rakhine State, Magwe Region, Mandalay Region, and Shan State, before entering China via Ruili in Yunnan Province. The design capacity of the crude oil pipeline is 22 million tons per year, while the gas transmission capacity of the natural gas pipeline is 12 billion cubic meters per year. The overseas and domestic sections of the China-Myanmar oil and gas pipeline officially commenced construction on June 3 and September 10, 2010, respectively. On November 6 of that year, the main structure of the workboat dock for the auxiliary facilities of the China-Myanmar crude oil pipeline was successfully completed, providing support for the transportation of materials needed for the construction of the crude oil dock, storage areas, and oil and gas pipelines. ·Biodiesel: Cost drops by 900 yuan per ton after tax exemption (Guangzhou Daily, January 11) For the biodiesel industry, 2011 was a turning point. The Ministry of Finance and the **State Taxation Administration recently issued a joint notice titled \"Notice on Exempting Pure Biodiesel Produced from Waste Animal and Plant Oils from Consumption Tax,\" stipulating that pure biodiesel manufactured from such waste oils is exempt from consumption tax. It is estimated that by exempting biodiesel from consumption tax, the production cost per ton of biodiesel will decrease by about 900 yuan. Experts say that if the reduction or exemption of consumption tax is implemented, the biodiesel industry will experience rapid growth, which can help alleviate the pressure caused by the shortage of oil resources in our country and is also beneficial for environmental protection. Appendix: Notice from the Ministry of Finance and the **State Taxation Administration regarding the exemption from consumption tax on pure biodiesel produced from used animal and vegetable oils – Document No. Cai Shui 118. To the finance departments (bureaus) of all provinces, autonomous regions, municipalities directly under the Central Government, and cities designated as separate planning units, as well as to the **Tax Bureaus, and the Finance Bureau of the Xinjiang Production and Construction Corps: With the approval of the State Council, consumption tax is exempted for pure biodiesel produced using used animal and vegetable oils as raw materials. The relevant policies are hereby notified as follows: 1. Starting from January 1, 2009, pure biodiesel that meets the following conditions shall be exempt from consumption tax: (1) The proportion of waste animal oil and vegetable oil used as raw materials in its production shall be no less than 70%. 　　(II) The pure biodiesel produced meets the **\"Biodiesel for Diesel Engine Fuels (BD100)\” standard. 　　II. Consumption tax shall be levied in accordance with regulations on biodiesel that does not meet the requirements specified in Article 1 of this notice, or on biodiesel produced by blending diesel or diesel components. 　　III. The consumption tax already paid by biodiesel producers from January 1, 2009, up to the date of issuance of this notice shall be refunded, provided that it meets the exemption requirements specified in Article 1 of this notice. 　　 Ministry of Finance **State Taxation Administration December 17, 2010 CC: Financial Supervision Offices of the Ministry of Finance in various provinces, autonomous regions, municipalities directly under the Central Government, and cities designated as separate planning units. ·China imported 239 million tons of crude oil in 2010, a 17.5% increase on a year-on-year basis, according to a report by NetEase Finance on January 10. The General Administration of Customs released national foreign trade figures for 2010 on January 10. Data shows that in 2010, China imported 239 million tons of crude oil, a 17.5% increase compared to 209 million tons the previous year. The annual import value was 135.1 billion US dollars, representing a 51.4% increase compared to 89.283 billion US dollars in 2009. The average annual import price was 565.27 US dollars per ton, representing a 29% increase compared to 2009. Although the **General Statistics Bureau has not yet released figures on crude oil production for the entire year of 2010, based on the reported figure of 185.6 million tons of domestic crude oil production in the first 11 months, it is certain that the country’s reliance on imported crude oil for the whole year will exceed the 50% threshold. In 2004, China’s crude oil imports reached 122.7 million tons, a year-on-year increase of 34.8%, marking the first time that the figure exceeded 100 million tons. In 2006, China’s crude oil imports reached 145.2 million tons, an increase of 14.2% compared to the previous year. In 2007, China imported a total of 163 million tons of crude oil, an increase of 12.4% compared to the previous year. At the same time, China is also significantly reducing its crude oil exports. In 2007, China exported 3.89 million tons of crude oil, a decrease of 38.7% compared to the previous year. In 2009, China imported 203.79 million tons of crude oil throughout the year, surpassing the 200-million-ton mark for the first time; its dependence on imported crude oil exceeded 50% for the first time as well. Tong Xiaoguang, an academician of the Chinese Academy of Engineering, predicted that \"China’s dependence on imported oil will reach 60% in 2015 and 65% by 2020.\" ” Since China’s oil production cannot increase significantly, almost all future increases in oil demand will have to be met through imports. Against this backdrop, a significant increase in China’s oil imports will be an inevitable trend. Meanwhile, the degree of external dependence will continue to rise, and exceeding the 60% threshold is by no means the end. In the near future, the dependence on oil will exceed 60%, 70%, or even more. ·The wholesale price of gasoline in Guangzhou has been declining, while the retail price has been raised several times (Guangzhou Daily, January 10). Starting in the early hours of January 8, fuel prices in Guangzhou rose again, marking the second increase in the price of refined oil there within half a month. However, reporters learned from the refined oil wholesale market yesterday that the wholesale price of gasoline has remained weak since December last year; last week, the wholesale price of Guangdong IV 93 gasoline dropped to 8,300–8,500 yuan per ton, marking another 0.9% decline on a weekly basis. Oil prices have risen twice within half a month. On the 22nd of last month, the National Development and Reform Commission announced an increase in domestic refined oil prices. In Guangdong, the retail price of 93-octane gasoline exceeded 7 yuan, reaching 7.05 yuan per liter. On the 8th of this month, Guangdong raised the prices of gasoline meeting the Yue IV standard once again. Following this adjustment, the maximum selling prices for Yue IV standard 90-octane, 93-octane, and 97-octane gasoline in Guangzhou and Shenzhen are 6.69 yuan per liter, 7.21 yuan per liter, and 7.81 yuan per liter respectively. Compared with the current National III standard gasoline, these prices have increased by 0.15 yuan, 0.16 yuan, and 0.18 yuan respectively. During the interviews, the reporter learned that gasoline meeting the Guangdong IV standard has been in use for some time now, but the price applied is still that of gasoline meeting the National III standard. It was not until recently that the **Development and Reform Commission approved Guangzhou and Shenzhen to implement the Guangdong IV standard for gasoline prices, raising the price by 200 yuan per ton on top of the current maximum retail price for National III standard gasoline. The wholesale price of gasoline has been on a downward trend. Last week, the wholesale price of 93-octane gasoline meeting National III standards was 8,000–8,400 yuan per ton, with the price index dropping by another 0.6% compared to the week before that ； The wholesale price of No. 93 gasoline meeting the Guangdong IV standard is 8,300–8,500 yuan, representing a 0.9% decline compared to last week ； National III No. 97 gasoline costs 8,400–8,800 yuan per ton, a 0.6% decline on a month-on-month basis. ”said Yao Daming from the Oil Products Department of the Guangdong Oil & Gas Chamber of Commerce. “In fact, since last December, the wholesale price of gasoline has not increased in line with rises in retail prices. For example, from December 27 to December 31, the price of National III 93# gasoline in the Guangdong market was between 8,000 and 8,500 yuan per ton, representing a 0.7% decline on a month-on-month basis ； National III 97# gasoline: 8,400–8,900 yuan per ton, a 0.7% decline on a month-on-month basis ； The price of National III 0# diesel is 7,708 yuan per ton, remaining unchanged on a month-on-month basis,” said Yao Daming. “Apart from the few days when the wholesale price stopped falling following the price increase by the National Development and Reform Commission, it has been on a downward trend the rest of the time.” ” According to the maximum wholesale price limits set by the National Development and Reform Commission, the current maximum wholesale price for 93-octane gasoline meeting the Guangdong IV standard is 9,204 yuan, while the maximum retail price is 9,504 yuan ； The maximum wholesale price for gasoline No. 97 is 9,713 yuan, while the maximum retail price is 10,013 yuan ； Currently, the wholesale price of No. 93 gasoline in the market is 1,200 yuan per ton below the maximum wholesale price set by the National Development and Reform Commission, while for No. 97 gasoline the difference is 1,300 yuan per ton. Yet, most gas stations still charge the maximum retail prices established by the Commission. This means that gas stations can now earn 1,500–1,600 yuan per ton of gasoline, which is far higher than the 300 yuan per ton profit margin initially set by the National Development and Reform Commission. The refined oil market shows fluctuations in demand. Yao Daming explained that there are two reasons for the continuous decline in wholesale gasoline prices: first, during the Asian Games, Guangzhou implemented a odd-even license plate system, which suppressed market demand; and even after the games ended, demand did not recover significantly, resulting in high inventory pressures for gasoline among refineries ； Secondly, diesel remains in short supply to this day, forcing refineries to increase the processing of crude oil. As diesel supply increases, gasoline supply will also rise. It is understood that following the diesel shortage, several major oil giants increased their diesel production. However, when refining one ton of crude oil to produce diesel, a certain amount of gasoline is also generated, resulting in a large volume of gasoline being released into the market. An oversupply of gasoline prevents prices from rising, while diesel is currently at a level that is just sufficient. Therefore, the tight supply of diesel in the country has not yet been resolved ； Meanwhile, the supply of gasoline exceeds demand, resulting in an oversupply in the market. “If things continue as they are, oil refining companies will inevitably reduce their gasoline production if it becomes unprofitable; once demand increases, this could even lead to a shortage of gasoline. ”An industry insider warned. Reason: The pricing mechanism has diverged from market realities. “The purpose of raising refined oil prices is to offset the cost pressures on refineries caused by rising international crude oil prices,” said an industry commentator who wished to remain anonymous. “Currently, while refined oil prices are being raised consecutively, the prices at which refineries sell their products continue to decline.” This means that oil refiners failed to benefit from the hike in refined oil prices, while consumers ended up ‘paying’ for this price increase. ” “We can’t say that this happens every time there is a price adjustment, but it does occur quite often,” said Yao Daming from the Oil Products Department of the Guangdong Oil and Gas Chamber of Commerce. “The fundamental reason for this is that China’s refined oil pricing mechanism is closely linked to the crude oil market, but it isn’t as closely tied to the domestic sales situation of refined oils; sometimes there even is a discrepancy, as is the case in the current gasoline market.” ”·CNPC Fuel Oil Company is adding another asphalt processing plant, with the potential to become the largest asphalt production base in the country. According to CNPC Fuel Oil, at the beginning of 2011, the company entered into a crude oil processing agreement with the Liaobin Branch of Panjin North Asphalt & Fuel Co., Ltd. (hereinafter referred to as “Panjin North Asphalt Liaobin Branch”). Since then, CNPC Fuel Oil has been supplying crude oil to Panjin North Asphalt Liaobin Branch; in return, the rights to sell products such as asphalt have been officially transferred to CNPC Fuel Oil’s Northeast Sales Company. It is reported that since 2011, the Northeast Sales Company has been responsible for the unified distribution of products such as asphalt, fuel oil, distillate oil, and petroleum coke produced by the Panjin Beiran Liaobin Branch. The production raw materials are allocated uniformly by CNPC Fuel Oil Headquarters; however, the composition of these raw materials and the shareholding structure remain unclear at present. This is the second local refinery to cooperate with CNPC Fuel Oil since Jiangyin Alpha. With a stable supply of oil, the Northeast region is expected to become CNPC Fuel Oil’s largest asphalt production base in the country, with an overall asphalt production capacity of 2.35 million tons per year. According to statistics, with the addition of this newly integrated refinery, the asphalt production capacity of CNPC’s refineries has risen to 7.35 million tons per year, an increase of 11% compared to 2010. This makes it the largest oil refining group in terms of asphalt production capacity in the country. At the same time, its position as a leading supplier of asphalt in the northern region will be further strengthened. Sinopec Fuel Oil Co., Ltd. was established in January 1997 as a wholly-owned subsidiary of China National Petroleum Corporation. Since January 1, 2009, it has been responsible for the unified distribution of its refinery products such as asphalt, fuel oil, solvent oil, and distillates. The company currently owns 3 oil depots, 3 docks, 8 asphalt production plants, and 6 sales companies. ·The EIA’s short-term energy outlook report predicts a slowdown in global oil demand in 2012 (Reuters, Washington, January 10). The United States will release its first forecast for global oil demand in 2012 on Tuesday. Analysts say the report may indicate a slowdown in crude oil demand next year, especially if fuel consumption in China declines. The EIA’s report is the first of three important forecasts on oil supply and demand to be released this month. OPEC will publish its monthly outlook report on January 17, followed by a report from the International Energy Agency on January 18. The EIA’s report will provide traders with the agency’s preliminary estimates for 2012. The EIA expects global daily oil demand to reach 87.78 million barrels in 2011, up from 86.35 million barrels in 2010. It forecasts an oil demand growth rate of 1.7% this year, down from 2.4% in 2009. Demand grew more sharply last year because 2009 was the peak of the global economic recession, during which oil demand dropped significantly. Matt Smith, an energy analyst at Summit Energy, said that although overall global oil demand will increase in 2012, the growth rate could decline if China’s measures to curb inflation cause its economy to slow down. OPEC: No emergency meeting needed even if oil prices exceed $100 per barrel, says Iranian minister According to Shana news agency, the Iranian Minister of Oil and current head of the Organization of the Petroleum Exporting Countries (OPEC), Masoud Mirkazemi, said that OPEC does not need to hold an emergency meeting even if oil prices rise above $100 per barrel. Mirkazemi said that if oil prices rise to $100 or higher, it would not be a cause for concern, and it should not be used as a reason to hold an emergency meeting. ·Morgan Stanley: Oil prices will exceed $100 this year. According to a report by Bloomberg News on January 10, Morgan Stanley stated in a research report today that due to the decreasing spare production capacity of the Organization of Petroleum Exporting Countries (OPEC), crude oil prices will remain high this year and surpass the $100 per barrel mark. Morgan Stanley said in a research report: “As spare capacity will decline from its current high to 4.1 million barrels per day by the end of this year, we expect the oil market to tighten this year, which will support rising oil prices.” Morgan Stanley also stated in its research report that, in the long term, refining profits for refineries could increase by around 20%. ·Demand for fuel oil shipping has declined, with domestic freight rates for fuel oil shipments falling sharply in January. According to market reports, the weakening demand in the fuel oil shipping market led to a rapid drop in domestic freight rates for fuel oil shipments in the latter part of January, from their record highs at the end of December. Currently, the freight cost for 3,000-ton class fuel oil ships from Dalian to Huangpu is 180–190 yuan per ton, down by 15 yuan per ton compared to late December ； The freight cost from Dalian to Zhoushan is 140–145 yuan per ton, which has also dropped by 20 yuan per ton compared to the end of December. The freight cost from Dalian to Shanghai also dropped rapidly by 20 yuan per ton, reaching 130–140 yuan per ton. According to industry insiders, since January, the overall demand for fuel oil in the East China and South China regions has been weak, which has reduced traders’ enthusiasm for purchasing. As a result, this has contributed to a decline in the prices of domestic fuel oil shipping costs. In the later market, it is expected that in January, domestic shipping freight rates for fuel oil will continue to decline; however, the overall rate of decrease will slow down. On the one hand, traders in East China and South China are likely to have the need to stock up goods before the festival, thereby supporting the shipping market. On the other hand, high costs in the ship supply market also offer potential support for domestic fuel oil freight rates. ·In the first month of 2011, the amount of oil supplied by ships to South Korea’s major refineries increased on a month-on-month basis to 700,000 tons. According to sources in Singapore, the supply plans for oil delivered by ships to South Korea’s refineries for January have been finalized, with a total amount of around 700,000 tons – a 9% increase compared to the 640,000 tons supplied in December 2010. Ship bunkers traders revealed that the volume of imported shipments ordered by SK Energy is expected to increase by 50,000 tons, or 33%, month-on-month in January, bringing the total supply to 200,000 tons. According to the information on shipping schedules in East Asia, SK Energi has currently placed orders for two Aframax vessels; one is expected to arrive in January, while the other will be loaded in Singapore on December 30. Both vessels are set to arrive at Ulsan Port in the first half of the month. In addition, Modern Oil will supply 150,000 tons of ship fuel to the market in January. Its December supply volume was 140,000 tons, lower than the usual 150,000 tons planned at the beginning of December. Relevant officials explained that this was mainly due to weather conditions, which caused disruptions in transportation from the Daisan refinery to Busan Port. The supply volumes of marine fuel from the two refineries, Ssangyong and GS-Caltex, are expected to remain stable on a month-on-month basis in January, at 150,000 tons and 200,000 tons respectively. ·In 2010, the sales volume of fuel oil supplied to bonded ships by Sinopec Zhonghai increased significantly year-on-year, reaching 200,000–300,000 tons. According to Sinopec Zhonghai, since 2010, the sales volume of fuel oil for these bonded ships has been around 200,000–300,000 tons, representing a further significant increase of 66.67% compared to the 150,000 tons sold in 2009. Since 2010, as Sinopec Zhonghai Marine Fuel Co., Ltd. has further expanded its bonded business, sales to the bonded ship fuel market have continued to rise rapidly in those years. According to our information, to date, Sinopec has established a total of 7 subsidiaries to handle the bonded marine fuel supply business, located in Jiangsu, Shanghai, Zhoushan, Tianjin, Xiamen, Qingdao, and Guangzhou. The first three of them have already started operating, while the preparation work for the remaining three has also been completed. It is expected that the order in which they will commence operations will be Xiamen, Guangzhou, and Qingdao. Among them, supply has been provided in Shanghai, Ningbo, Zhanjiang, and Haikou since 2007, and in Shenzhen since August 2009 ； Supply began in Dalian in July 2010, and at Yingkou Port in August. However, since 2010, the relatively slower growth in the bonded business volume developed by Sinopec and CNOOC has resulted in a more modest pace of increase in the total supply and sales volume of bonded ships for this company. This is largely due to the impact of two major companies, China National Ship Fuel Oil Corporation and Guanghui Petroleum Corporation, which has resulted in relatively weak bonded business operations for COSCO Corporation. 　 However, according to industry insiders, in order to capture market share as quickly as possible, Sinopec and CNOOC’s presence in the field of bonded ship supply will extend far beyond 7 locations; it is expected that such facilities will be found in major ports across the country. This will intensify competition in China’s bonded ship supply market, while also enhancing the competitiveness of domestic prices in this sector compared to international prices. Sinopec Zhonghai Fuel Supply is a joint venture established at the end of 2003 through joint investment by Sinopec and China Shipping Group. Currently, there are 18 branch (subsidiary) companies and 37 business outlets in the major port cities along the domestic coast. In July 2006, the company obtained the qualification to supply duty-free oil to ships sailing on international routes. ·The growth rate of production accelerated while that of exports slowed down; as a result, China’s apparent consumption of fuel oil saw a slight increase in 2010. After reaching their peak in 2006, both domestic consumption and imports of fuel oil declined, as policies aimed at energy conservation and emission reduction, along with the use of alternative energy sources, reduced the domestic market’s capacity to absorb fuel oil. In particular, the apparent domestic consumption of fuel oil dropped by as much as 10% in the first 7 months. However, as demand for imported fuel oil in China picked up in the second half of the year, coupled with an acceleration in production growth and a slowdown in export growth, the downward trend in overall apparent fuel oil sales continued to ease. In particular, apparent consumption in the first 11 months reversed its previous downward trend and showed a slight increase. Based on the statistics from the **Statistics Bureau for the first 11 months, along with this site’s estimates for December, China’s apparent consumption of fuel oil for the whole of 2010 was 34.58 million tons, representing a slight increase of 1.85% compared to the 33.95 million tons reported by the **Statistics Bureau in 2009. Among them, domestic fuel oil production from January to December is expected to increase by 15.67% on a year-on-year basis, reaching around 21.48 million tons ； In contrast, imports saw a slight year-on-year decline, totaling 24 million tons, a decrease of 4.18% compared to the same period last year ； During the same period, export volumes continued to rise, though at a slower pace; cumulative exports from January to December amounted to 9.9 million tons, representing a year-on-year increase of 14.85%. However, with stable domestic demand for fuel oil, there is an inverse relationship between fuel oil imports and domestic production of fuel oil. The addition of new production capacity in the country led to a 15.67% increase in domestic fuel oil production on a year-on-year basis, which reduced the demand for imported fuel oil to some extent; as a result, China’s dependence on imported fuel oil decreased by 4.18 percentage points in 2010. Among these factors, the decline in fuel oil imports was mainly driven by a reduction in the amount of oil used by local refineries and power plants in South China. However, the increased demand for refined oil from local refineries in Shandong and for oil for use under duty-free conditions in East China largely compensated for this decrease in fuel oil imports, resulting in a actual decline that was much smaller than expected. As for exports, since 2010, the significant increase in fuel oil exports has been attributed to the competitive advantages in prices offered by bonded ships at the major ports in East China, which has greatly stimulated the demand for ship fuel in the foreign trade market and increased the volume of fuel oil exports. However, the growth pace of overall exports slowed down compared to the first half of the year, primarily due to a preliminary softening in the shipping market during that period. Table of China’s apparent consumption of fuel oil from January to December 2010 (unit: 10,000 tons)
Production, Imports, Exports, Apparent Consumption, Production/Apparent Consumption %, Imports/Apparent Consumption %
January–December 2010: 2,148, 2,300, 990, 3,458; 62.12%, 66.51%
January–December 2009: 1,857, 2,400, 862, 3,395; 54.7%, 70.69%
Percentage changes: 15.67%, -4.18%, 14.85%, 1.86%, 7.42%, -4.18%
Note: * indicates that the data comes from China’s National Bureau of Statistics. ** The contract price for heavy fuel oil shipped by Taiwan’s CPC Corporation increased by $2 on Tuesday. According to the latest information provided by CPC Corporation, the contract price for heavy fuel oil shipped by this company increased by $2 on Tuesday, January 11th. Currently, the contract prices per ton for grades 180 and 380 fuel oil shipped by CNPC in Su’ao and Hualien are $568 ； The contract prices for Fuel Oil No. 180 and No. 380 loaded in Taichung, Keelung, and Kaohsiung are $568 per ton and $563 per ton, respectively. Meanwhile, the contract prices for marine light diesel oil and marine heavy diesel oil by CPC Corporation, Taiwan remain unchanged at $845 per ton and $830 per ton respectively in Hualien, Su’ao, Kaohsiung, Taichung, and Keelung. On Tuesday, the contract price for CPC Corporation’s shipped heavy fuel oil increased by $2. According to the latest announcement by CPC Corporation: On Tuesday (January 11), the spot price for CPC Corporation’s shipped heavy fuel oil rose by $2. Currently, the spot price per ton for grades 180 and 380 fuel oil, shipped by CNPC in Su’ao and Hualien, is $571 ； The spot prices for Fuel Oil No. 180 and No. 380 loaded in Taichung, Kaohsiung, and Keelung were $571 per ton and $566 per ton, respectively. Meanwhile, the spot prices of marine low-sulfur diesel and marine heavy diesel for Taiwan Petroleum Corporation remained unchanged at $848 per ton and $833 per ton, respectively, in Hualien, Su’ao, Kaohsiung, Taichung, and Keelung. ·The Asian fuel oil market strengthened on Monday, with active trading in the February fuel oil viscosity spreads. The price of 180CST fuel oil rose slightly by 0.07 dollars to $523.95 per ton, while the price of 380CST fuel oil increased by 0.20 dollars to $518.45 per ton. The spot spread for 380CST fuel oil remained at a level near its highest in over a year for the second consecutive day. 435,000 tons of fuel oil were sold in February, at a price range of $8.25–$8.50 per ton. German company RWE held the largest share, purchasing 40% or 165,000 tons. Western trader Hess is another major buyer, having purchased 65,000 tons. The remaining 205,000 tons of fuel oil contracts were traded on the Intercontinental Exchange, with the buyer remaining anonymous. Less than 3 million tons of Western arbitrage cargo is expected to arrive in January, while two very large crude carriers will be delayed until February. The Pluto Glory, chartered by Russian Gunvor, and the Hampstead, chartered by RWE, are expected to arrive in Singapore on February 9 and 13 respectively, with the original arrival dates set for late January. Official data shows that during the week ending January 5, Singapore’s onshore fuel oil inventory dropped to a seven-week low, reflecting tight supply conditions. At 0830 GMT, the spot January/February swap spread rose by $0.12 to $0.38 per ton. The fuel oil cracking spread widened slightly by 0.06 dollars in February, to a discount of $9.70 per barrel, while the cracking spread declined by 0.02 dollars in March, to a discount of $9.81 per barrel.