Beijing fuel oil prices may rise 3% next year

Fuel oil prices in Beijing may rise 3%, from the current RMB 5, 000 per ton to RMB 5,190 in January next year, forecasted Wang Yongjian, president of Sinopec Beijing Yanshan Corp, a subsidiary of the nation's largest oil refiner, China Petroleum and Chemical Corp (Sinopec).

The price increase will take effect as Beijing introduces the Euro IV emission standard to cut pollutant emission before 2008 Olympic Games. It will help the company to counter rising crude oil costs in oil processing, as crude oil futures hit a record high of RMB 669 per barrel recently.

China controls prices of diesel and gasoline to minimize their impact on inflation, which rose to 6.5% in August, the highest in more than 10 years. If crude oil prices remain at RMB 600 a barrel, the company will lose over RMB 1 billion this year. Oil prices need to fall below RMB 450 for the company to make a profit from processing, as half of its oil demand is met by import.

The company is capable to process 10 million tons of crude oil annually and supplies 60% of Beijing's demand for oil products. PetroChina and other retailer suppliers occupy the rest of the market. After upgrade in June, the company is able to produce Euro IV-standard fuels.

Fuel demand in Beijing may increase 5%-6% annually in the coming years. The firm plans to source crude oil from PetroChina's Jidong Nanpu field, China's largest discovery in almost 50 years. Wang also added, the company's parent company Sinopec, has started building a pipeline to pump crude oil from the Caofeidian port near the field to Yanshan.