China details oil price regime after rejecting hike

China's top economic planning body officially published details of the country's oil price regime for the first time on Friday, confirming key elements of its policy a day after rejecting an industry request to raise prices.

China's top two oil firms, CNPC and Sinopec, jointly submitted a proposal to the National Development and Reform Commission (NDRC) on Thursday to increase retail diesel and gasoline prices by 400-500 yuan per tonne or nearly 10 percent, a senior official from one of the companies told Reuters on Friday.

Speculation of a rise circulated widely in industry circles, but ultimately proved unfounded by night's end.

It was not clear why the government backed away from the increase at the eleventh hour, but analysts feared a return to the years of opaque decisions just months after Beijing brought in a policy meant to allow for more market-oriented prices.

"If China is serious about enforcing the domestic fuel pricing reform, I believe they should lift the guidance prices by about 10 percent to offset the recent crude oil price run-up," said Gordon Kwan, head of regional energy research at Mirae Asset Securities.

"I think the government is waiting for the release of the April oil imports stats (due out next week), which could confirm demand growth revival, a perfect excuse to lift domestic fuel prices without the political backlash."

In its statement on Friday, the NDRC said China would adjust fuel prices when global crude prices move more than 4 percent from their moving average over 22 working days. It said refiners would enjoy "normal" profits when crude was under $80 per barrel, with tighter margins when crude rose above $80.

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