Retail fuel prices will see a further reduction from Wednesday as global woes continue to drag crude rates and the glut in the market continues, the nation's top economic planner said on Tuesday.
The National Development and Reform Commission said that prices of gasoline for retail use will drop by 265 yuan ($42.7) a metric ton, or 0.2 yuan per liter. Diesel prices will also fall by 265 yuan a metric ton.
The adjustment is the sixth cut this year, while domestic retail fuel prices have also seen five hikes. Gasoline prices have gone up by 365 yuan a ton in total, while diesel prices have risen by 295 yuan a ton.
International crude prices fell this month amid fears of an escalating crisis in Greece and Iran's nuclear talks which could hit an already-glutted global oil market.
Crude oil prices at West Texas Intermediate, the US benchmark, which ultimately drives the prices at gas stations, hit $51.41 a barrel on Friday, which was the lowest level in the last three months, while the UK Brent crude oil price plummeted 8 percent to $57.5 per barrel.
China has a pricing regime that adjusts domestic fuel prices when international crude oil prices change by more than 50 yuan per ton within a period of 10 working days. Sun Xuejun, a senior analyst with market information supplier www.chem365.net, said that oil demand is still weak due to an economic slowdown and overcapacity in some industries.
"The recent rain throughout southern China has somewhat restrained the production in the mining and steel industries, and fishing moratorium has not come to an end in some coastal regions, so the overall demand for diesel is not very promising," Sun said.
At the same time, demand for trucks in the logistics industry has been falling due to a weak economy, indicating that diesel demand will keep falling.
But she expected an increasing demand for oil products in the second half of this year as the government has been rolling out measures to maintain stable growth and the number of vehicles has been rising, fueling demand for gasoline.
The average running capacity rate of China's refineries was 81.72 percent during the first half, a 1.39 percentage points decline compared with the same period last year, reflecting weak downstream demand, said the Shandong-based Longzhong Information Technology Co, an energy consultancy.
