China diesel rationing may spread on sales glitch

China's oil majors are rationing diesel in parts of the country to ensure supply to all vehicles due to shortages at private stations, causing a repeat of the long queues seen in November, sources and media said on Wednesday.

Some sales units of PetroChina and Sinopec were reported to have halted sales to independent dealers since last week in some parts of China, despite Beijing's order that they open the taps to the private sector, as refiners again struggled with surging crude costs.

Rationing emerged in southern Guangdong province, the suburb of Shanghai -- China's financial hub -- and some regions of the landlocked southwestern province of Yunnan, sources said.

With many private stations out of service in Guangdong, China's leading exporter by province, more drivers had to seek supply from stations owned by Sinopec and PetroChina, the Southern Metropolis Daily said.

But Li Xiangming, deputy chief of Guangdong Economic and Trade Commission said there were no problems with fuel stocks in Guangdong, and it was premature to start any emergency plan.

"All vehicles piled up at fuel stations in the cities as private stations in peripheral regions were short of supply," Li was quoted by the Information Times, as saying.

"And diesel supplies on the highways are guaranteed by Chinese oil majors," Li added.

Limited fuel storage and transport capacity has forced Sinopec to occasionally ration fuel at some stations to make sure all vehicles get minimum supplies, the Southern Metropolis said.

"Each fill of diesel is not allowed to surpass volumes worth 100 yuan (or less than 20 litres) if paid in cash, though the volumes can be bigger for prepaid customers," said a staff at a Sinopec station in the east of Guangzhou, capital of Guangdong.

SNAKING QUEUES

Trucks and cars queuing for diesel had been reported snaking nearly a kilometre near a station in the southwestern part of the city earlier this week.

"We are alloted around 10,000 litres of diesel each day, only a third of past levels," said a staff at another Sinopec station near a major road in Guangzhou. "We only serve buses and some prepaid customers now."

The Information Times reported that fuel stocks in Guangdong were currently at 600,000 tonnes, enough to meet 15 days of consumption even without any shipments from other regions.

However an official with a local trade group, who declined to be named, said: "Supplies to independent fuel wholesalers and retailers were further cut from their already low levels by oil majors, which in turn left the majors' retail outlets facing more difficulty to meet overall demand."

Rationing and queues were widespread late last year when refiners slowed production and sales due to escalating losses caused by rising crude costs and state-regulated fuel prices.

The crisis eased after the government raised fuel prices, cut import taxes and promised to compensate state-owned oil majors for their refining losses.

But with international oil prices hitting new records above $110 a barrel, analysts had cautioned about renewed shortages as refiners could curb production to try to limit soaring losses after Beijing ruled further price hikes in the near term on inflation fears.

"Someone has to pay if the shortage worsens, the government, the refiner or the people," said one analyst with a securities firm in Shanghai who declined to be named due to company policy.

"Of course, the people will eventually pay for it, no matter in the form of shortages or higher prices."