IEA says China could experience more oil product shortages

The International Energy Agency (IEA) reported in a monthly oil market report that China may experience additional oil product shortages. “A re-emergence of oil product shortages, as seen periodically over the past several years, cannot be entirely discounted,” the agency reported. The report indicated that the risk of shortages could occur in the drought-stricken area of northern China. Local oil product prices have remained lower than international levels, even with a recent price increase in February when China raised the prices of gasoline by 4.1%, diesel by 4.5% and jet fuel by 5.8%. Reportedly, the government is concerned that if domestic margins are not attractive, refineries may be reluctant to supply the domestic market. Analysts indicate that after a drawdown in gasoline stocks last year, the local gas market experienced some tightness in supply. The drawdown was caused by the efforts of Chinese refiners to maximize diesel output at the expense of gasoline production. The IEA reports that oil demand for almost all products was 5.3% higher in January, than the same period a year ago. Economic growth and on-going subsidies continue to drive up demand for oil in the country. (March 15, 2011)