China hit by diesel shortages as crude soars

By Chen Aizhu and Jim Bai

BEIJING, May 21 (Reuters) - Petrol stations in at least five Chinese provinces are limiting sales of diesel, as oil firms divert supply from the price-capped retail sector to avoid losses in the face of soaring crude prices.

A resurfacing of the sort of diesel shortage that had caused widespread rationing last autumn will spook the government, keen to avoid a return to lengthy petrol station queues ahead of the Olympic games in August.

It also comes despite a jump in China's diesel imports since November that has tightened global supplies and pushed the diesel crack spread in Asia to a record high.

Oil firms' are suffering increasingly severe refining losses as crude prices CLc1 climbed by more than a third this year to above $130 a barrel, while Beijing has kept pump prices frozen since November to battle near 12-year-high inflation.

Lorry drivers in the port city of Ningbo, eastern Zhejiang province, had to queue from dawn for nearly 9 hours to get their vehicles refilled, while many gas stations in the city put out signs of "no diesel" by the early afternoon, drivers said.

At least three stations operated by Sinopec Corp (0386.HK: Quote, Profile, Research) in downtown Shijiazhang, capital of Hebei province near Beijing, have not received any diesel supplies for more than a week.

"We have no idea when the next diesel tanker truck will arrive," one staff worker said.

State refiners have to accept government-mandated retail fuel prices, but can trim supply to limit losses.