China diesel imports, now rivaling U.S., may persist

By Felicia Loo - Analysis

SINGAPORE (Reuters) - A surge in China's diesel imports to new records, which has put additional strain on global markets toward the peak of winter demand, could last through next summer unless idled "teapot" refiners rev up again.

Chinese oil majors Sinopec Corp (0386.HK: Quote, Profile, Research) and PetroChina (0857.HK: Quote, Profile, Research) have heeded Beijing's call to maximize output to end a months-long fuel shortage, analysts say. But even running full throttle, they won't be able to fully meet China's demand until two big new refineries come onstream in the second half of 2008.

In the short-term, only the army of small-scale independent refiners on China's eastern coast can fill the gap -- an unlikely prospect so long as Beijing keeps domestic prices low and global crude costs stay high, keeping their margins deep in the red.

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