A rally in China's diesel prices has pushed the fuel to a rare premium over gasoline as dealers scramble to scoop up supplies amid fears of shortages due to the Chinese government's war on smog and possible tax changes, Reuters reported on Thursday.
Led by a spike in benchmark crude prices, wholesale diesel prices have jumped 11 percent since October to 6,700 yuan ($1,011) per ton on Tuesday in East China's Shandong Province, a 320 yuan premium to gasoline, according to consultancy Longzhong Information Group.
Diesel, which normally trades at a discount to gasoline, touched a 500 yuan premium earlier this month, the widest premium in at least two years, even though the market remains well supplied.
"Diesel prices have been rising madly... almost every day... buyers were worried that if they don't buy today prices will go up more tomorrow," said Li Yan of Longzhong Information.
Analysts said there had been a steady drawdown in diesel inventories over the last couple of years as refiners favored gasoline production at the expense of diesel and as growth in diesel demand eased alongside a moderating economy.
But refiners are still exporting the fuel and the market remains in surplus, illustrating the strength of market jitters about the potential impact of the Chinese government's battle to clear the nation's skies of pollution and potential changes in tax policy.
This year, curbing diesel truck use has been a key part of the government's war on smog.
Catching the market by surprise, China last month also banned high-sulfur diesel fuel burned by tractors and trawlers from November 1, two months earlier than expected, with some smaller refineries not yet ready to produce the low-sulfur fuel.
"Only seven to eight independent plants out of dozens are capable of producing the National Five general-purpose diesel... that tightened the diesel pool," said a dealer from a State-run firm based in East China's Jiangsu Province, referring to the 10-ppm sulfur non-automotive diesel.
Buyers were also spooked by extra export quotas awarded to State oil refiners in late October for the final months of the year, fearing that increased overseas shipments would thin domestic supply.
