China's December diesel imports at 300,000T

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SINGAPORE, Nov 22 (Reuters) China bought 300,000 tonnes of diesel for December, a second successive month of robust buying as state refiners rushed to ease a fuel supply crisis, sources at Sinopec and PetroChina said on Thursday.

Downstream heavyweight Sinopec Corp <0386.HK> purchased 200,000 tonnes of diesel for December to replenish razor-thin stocks, confirming an earlier Reuters report of its buying, versus November purchases at 250,000 tonnes, one source said.

''We are basically covered for December,'' said the Sinopec source.

Rival PetroChina <0857.HK> bought 100,000 tonnes of diesel for next month, steady to November imports as fuel shortages persist.

The imports from Taiwan and South Korea were a mix of 0.05 and 0.005 percent sulphur grades.

''We bought the cargoes from Taiwan and South Korea. Domestic supply is still very thin and we may brace for another pump price increase,'' the PetroChina source said. Chinese Premier Wen Jiabao said on Wednesday he saw scope for more domestic price rises.

The December imports were mainly for the booming southern and eastern China. November purchases at 350,000 tonnes were the highest since December 2004, customs data showed.

China has been facing its worst fuel crisis in four years that led to rationing in the booming coastal provinces, and a 10 percent increase in state fuel prices this month aimed to boost supplies by encouraging loss-making refiners to bolster output.

But this may not be enough as the government tries to balance the risk of social unrest with inflation at near 11-year highs.

Wen said on Wednesday China would increase the capacity of crude oil production and increase the supply of oil products, particularly diesel.

Higher crude or fuel imports by China, the world's second-largest oil consumer that relies on imports for about half its oil needs, could tighten regional markets and spur global oil futures that are already near 0 a barrel.

''China is facing a very critical problem. It comes to a point when Beijing must embark on price reforms,'' said a former government official from Beijing.

Pump prices in China lag global levels, forcing Chinese refiners to stomach import losses at 1,000 yuan (5) per tonne.

The supply crisis partly resulted from scores of independent local refiners -- supplying up to 15 percent of the market -- that had cut throughput much more drastically or even shut in completely under the pressure of plunging margins.

Scheduled maintenance works by the state refiners also reduced supply in the market, where oil demand continued to be strong due to a robust economy. Chinese oil consumption rose 2.4 percent last month, customs data showed.

Sinopec and PetroChina, which supply almost 90 percent of the Chinese market, pledged to raise production by deferring routine maintenance works at their refineries.

REUTERS SR RS1240

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