WRAPUP 1-China auto fuel imports to fall in Olympics month

By Chua Baizhen

SINGAPORE, Aug 4 (Reuters) - China will import less
transport fuel in the month of the Olympics as domestic
refiners raise output to ensure stable supply and as
stockpiling slows amid a drop in crude oil prices, a Reuters
survey showed.

The country will import 530,000 tonnes of diesel for
August, almost 40 percent below last month's 860,000 tonnes,
trade estimates showed, and off the 962,000-tonne peak seen for
June.

Gasoline imports for this month are seen at 210,000 tonnes
against 300,000 tonnes for July and the record of 339,000
tonnes for May, when the country turned a net petrol importer
for the first time ever.

Kerosene inflows will drop to 430,000 tonnes from 506,000
tonnes last month.

Industry sources said import needs for the month would ease
as China's top refineries were set to run crude at near-record.

A Reuters poll showed China's top 12 refineries, accounting
for over a third of domestic capacity, would process 2.53
million barrels per day (bpd) of crude this month, the highest
since February and near the record of 2.56 million bpd in June
last year. [ID:nSP344668]

Some independent or "teapot" refiners, which meet 15
percent of Chinese oil demand, are also running on crude
supplied by top state refiners Sinopec (0386.HK: Quote, Profile, Research) and PetroChina
(0857.HK: Quote, Profile, Research), said a China-based source familiar with teapot
operations.

Most of these private refiners had been forced out of
action in earlier months by costly crude feedstocks.

Apart from obligations to keep the market well-supplied --
at a time the Olympics host comes under international spotlight
-- the fuel price hike in June has helped cushion some refining
losses and encourage production rate hikes.

Beijing raised retail gasoline and diesel prices by 17-18
percent, the first in eight months and the sharpest hike ever.

"The fuel price hike will have some impact, mainly on
domestic production. At the same time, crude prices came down
so stockpiling will slow down," said Yan Kefeng, a senior China
oil and gas analyst at Cambridge Energy Research Associates
(CERA).

"When crude goes down and if the government adjusts prices
downwards, wholesalers will not want to buy and hold and make a
loss when prices really drop. That's how the market works,"
said Yan, who is based in the capital, Beijing.

Recent falls in crude oil CLc1, by more than $20 a barrel
from the record $147.27 hit on July 11, have led to a decline
in wholesale prices in China.

Wholesale diesel prices in the booming Guangdong province
fell to 7,700 yuan a tonne, versus around 7,800 yuan last
month, an industry source said.

Traders said profits have returned to focus as oil product
inventories in China have reached a level secure enough for
August to pass smoothly, after months of binge-buying this
year.

China's heavy diesel appetite in the last two quarters had
tightened the global supply pool already strained by growing
demand, while the flip into net importer by Asia's former top
gasoline supplier had helped pick up the slack in the regional
market left by dismal U.S. demand this year.

TAX BREAKS

Beijing had granted tax rebates to Sinopec (600028.SS: Quote, Profile, Research) and
PetroChina (601857.SS: Quote, Profile, Research) for some gasoline, diesel and crude
imports in past months, up till the second quarter, to offset
some losses made by buying at international prices.

The government also dished out subsidies to help balance
the refiners' books, which have been under pressure from
crude's run above $100 a barrel this year.

"These subsidies and tax breaks do affect imports quite a
bit," said a trader familiar with Chinese oil product trades.

While a newsletter run by the official Xinhua news agency
said China plans to extend the tax incentive for the motor
fuels and subsidise crude purchases through the third quarter,
no official word has come from the government.

Sinopec received a roughly 30 billion yuan ($4.4 billion)
subsidy in the first half, industry sources told Reuters last
week, but it was unclear if the grant would continue.
[ID:nPEK141533]

PetroChina said last week the firm had not been notified if
a tax rebate on crude imports would be extended past the second
quarter.

While uncertainty remained over the incentive schemes,
motor fuel demand is expected to dip as the government attempts
to clean up Beijing's air for the world's top sporting
extravaganza.

The government has cleared half the capital's 3.3 million
cars from the streets by limiting vehicles with odd or even
licence plate numbers on alternate days and shut dozens of
factories.

If the city's chronic air pollution persists by the time
the Games starts four days later, the government may pull more
cars off Beijing roads, extend the odd-even number system to
nearby Tianjin and four urban areas in Hebei province, and shut
over 200 more factories.

The table below shows China's oil product flows (in 1,000
tonnes; refinery figures in million barrels per day)
=============================================================

AUG JULY JUNE MAY
Diesel imports 530 860 962 701
Diesel exports NA NA 35 42
Gasoline imports 210 300 283 339
Gasoline exports 90 100 154 157
Naphtha exports NA NA 131 145
Naphtha imports NA NA 39 39
Kerosene imports 430 506 569 553
Fuel oil imports NA 1,900 1,660 2,859
Top refinery runs* 2,530 2,510 2,380 2,410
Total refinery runs** NA NA 7,210 6,540
=============================================================
NOTE: Data for June and May are based on customs. Figures for
August and July are from trade estimates.
* Refinery processing rates of the top 12 refiners, as polled
by Reuters. ** Refinery crude throughput as reported by the
National Bureau of Statistics.
(Editing by Ramthan Hussain)