China lowers fuel price caps
Beijing is increasingly confident in its approach to weathering the Strait of Hormuz oil shock.
The macro planner (NDRC) cut domestic refined fuel price ceilings in its June 4 update.
- Gasoline price caps were cut by RMB 525 to RMB 9,640 per metric ton
- Diesel price ceilings were cut by RMB 505 to RMB 8,580 per ton
ICYDK: The NDRC recalculates China’s state-set fuel price ceilings every 10 working days, typically based on a weighted average of international crude prices.
Since the Iran war began, prices have risen aggressively.
- Even after the June 4 cuts, retail gasoline and diesel price ceilings remain more than RMB 1500 per metric ton higher than prior to the conflict (Reuters).
The cuts aren't a game changer.
- The average car owner will save around RMB 20.5 (USD 3) per tank at the pump over the next ten days (NBD).
Still, the move is an additional sign that Beijing believes China's economy is managing global energy disruptions relatively smoothly. Other recent signals include:
- NDRC's move to allow some independent 'teapot' refiners to reduce run rates to 80% of last year’s levels amid elevated crude costs (Reuters 2).
- Relaxing May’s export ban of refined fuels, allowing trade partners to secure limited shipments of gasoline, diesel, and jet fuel.
The upshot: For now, Beijing appears confident that refiners can live with these price ceilings, and that supply is adequate to support limited exports.
- We're optimistic this pattern will hold as long as the US and Iran keep making progress toward a deal.