OREANDA-NEWS. May 31, 2011. Despite the recent strong demand for diesel, diesel shortages are unlikely to occur again in China, said the China International Capital Corp. (CICC) in a report released.

China's diesel stocks stood at 9.94 million metric tons (tonnes) at the end of April, enough to meet demand for 20 days and 60 percent higher than the stocks during the last diesel shortage in October to November, 2010, according to estimation by CICC, based on oil inventory data released by ChinaOGP, a Xinhua-run bi-weekly newsletter.

Refineries affiliated to China's two largest oil producers the China National Petroleum Corp. (CNPC), the parent of PetroChina, and the China Petrochemical Corp., or the Sinopec Group, are running at almost full capacity. Meanwhile, the operating rate of local refineries has recovered from 37 percent at the end of April to 48 percent thanks to the fall in global crude oil prices.

Besides these factors, the Ministry of Commerce (MOC) in early May allocated 500,000 to 700,000 tonnes of diesel import quota for Q2, while the National Development and Reform Commission (NDRC), the top economic planner, in mid May ordered a halt to diesel exports. According to the MOC, the CNPC and the Sinopec Group each has 200,000 to 300,000 tonnes of import quota, and the China National Offshore Oil Corp. (CNOOC), China's largest offshore oil producer, has about 100,000 tonnes of quota.

Currently, the average spread between wholesale and retail diesel prices stands above 300 yuan/tonne, which is unlike the situation during the diesel shortage at the end of last year, when diesel's retail price exceeded the government-set ceiling price.