China's oil giants to aid private firms on price cut

Sinopec<600028><386> and China National Petroleum Corp ( CNPC) will sell fuel to private firms at 5.5% to 7% below the state-set retail benchmark, according to sources.

The move came after the Chinese government urged the oil giants to guarantee oil supply and profit margins to independent fuel wholesellers.

Sinopec and CNPC have inked the long-term supply contracts with some independent dealers. Under the terms, the oil giants have to open fuel taps to independent dealers. Meanwhile, they can cut supplies to wholesalers that sell fuel to petrol stations that they don't either own nor have a contract with.

Many private fuel firms have been forced to shut down or be taken over by the state firms, as their margins have been squeezed by state giants. As a result, the Chinese government has asked the oil giants to make further efforts to help the reshuffle of the private sector through acquisition or joint operations.