The country’s top price regulator recently announced cuts in the retail price of gasoline and diesel, in which some consider the largest drop as global crude oil prices stayed low. Gasoline prices dropped 220 yuan per metric ton and diesel dropped down by 215 per ton starting Friday. This will be the third consecutive decrease this year in China based on the reports of the National Development and Reform Commission.
The top regulator stated in a notice that they are closely watching the pricing mechanism and continues to do so in hopes to further improve prices base on market changes. Under the pricing mechanism, prices are being adjusted every ten days in line with the movements in global crude oil prices. Last July, China slashed retail prices of gasoline by 115 yuan and diesel by 150 yuan per metric ton. The slide in retail prices boosts the logistics and ride hailing service sectors by lowering transportation costs, but squeezes further profits from oil majors in the country.
A crude oil analyst working at the Sublime China Information Co. stated that domestic oil producers will continue to face a downward pressure on their profits as prices hits upstream earnings and falling retail prices under the bulk of refineries that are under pressure. Chinese refineries continues to feel the pressure from low retail prices, although compared to 2014, crude oil prices started falling and the impact is hardly felt as they can still process oil at a lower price.
Crude prices are not expected to do a short term rebound at the level of oil stocks is still high, but will see an increase to around $70 per barrel by 2020. The largest offshore oil and gas producer China National Offshore Oil Corporation reported that it will have their first half year loss of 8 billion yuan because of thee prolonged slump in oil prices.