Cheaper fuel will aid logistics firms, car owners

China's top economic planning agency announced on Monday reductions in the retail prices of gasoline by 245 yuan ($39.46) a metric ton and diesel by 235 yuan, effective Tuesday-the largest cuts so far this year.

Retail gasoline prices will drop 0.18 yuan a liter and diesel prices will decline 0.2 yuan a liter, the National Development and Reform Commission said.

International crude oil prices have been declining this month because of reduced global geopolitical tensions.

Liang Dan, senior analyst with Shanghai-based energy consultancy ICIS-C1 Energy, said crude exports from Iraq, one of the world's top 10 oil exporters, have remained stable.

Leading from the front lines

Gasoline, diesel prices hiked

And although the situation in Libya is still worsening, one of the largest oilfields in the country-the Sharara field-has restarted production, which has helped increase supplies in the international market, Liang said.

China adopted a new fuel pricing mechanism last March that more closely reflects global levels by allowing for more frequent adjustments.

So far this year, the authorities have adjusted prices nine times, with four rises and five cuts.

Expectations of retail price cuts have recently been undermining the domestic refined oil products market, said Xu Ying, an analyst with domestic petrochemical consultancy Shandong Longzhong Information Technology Co.

On Monday, the average wholesale price of gasoline was 9,090 yuan a ton, down 40 yuan from the beginning of the month. The wholesale price of diesel dropped 135 yuan to 7,744 yuan a ton during the same period, according to the consultancy.

She said the Malaysia Airlines Flight MH17 crash lifted world crude prices last Thursday, but there hasn't been any actual influence on market supply and demand.

She forecast that global crude oil prices would remain low in the short term.

Downstream refining companies will maintain low inventory levels in the coming two months, she said.

Xue Qun, an analyst with Shandong Longzhong, said the fuel price cuts will benefit industries including logistics, vehicle production, transportation and plastics.

Retail fuel prices are scheduled for adjustment again on Aug 4.