A worker fills up a car with fuel at a gas station in Rizhao city, East China's Shandong province, March 27, 2015. [Photo/IC]

Continued crude levels put pressure on refiners

China's top price regulator announced cuts in retail gasoline and diesel prices on Thursday, the largest drop this year, as global crude prices stayed low.

Gasoline prices will drop by 220 yuan ($33) per metric ton, while diesel prices will go down by 215 yuan per ton. Effective Friday, this is the third consecutive decrease this year in China, according to the National Development and Reform Commission.

The top regulator said in a notice that it is closely watching the current pricing mechanism and will continue to improve it based on market changes.

Under the oil pricing mechanism, the prices are adjusted every 10 working days in line with movements in global crude prices.

In July, China cut the retail prices of gasoline and diesel by 155 yuan and 150 yuan per ton, respectively.

The slide in retail prices will boost the logistics and ride-hailing service sectors by lowering their transportation costs, analysts said, but it will further squeeze profits of China's oil majors.

Gao Jian, a crude oil analyst at commodities consultancy Sublime China Information Co Ltd, said that domestic oil producers continue to face downward pressure on profits as crude prices hit upstream earnings and falling retail prices have the bulk of refineries under pressure.

"I think Chinese refineries will continue to feel the pressure from low retail prices. But, compared with 2014, when the crude prices started plummeting, the impact is not like a death blow to their business because they can process the crude oil at lower prices," he said, adding oil majors have been suffering more from the falling crude prices.

The benchmark Brent crude has fallen about 20 percent since June to $41 per barrel on Thursday.

Gao forecast that crude prices are not expected to see a rebound in the short term as the level of global oil stocks is still high, but it will see a big rise to about $70 per barrel by 2020.

China National Offshore Oil Corporation, the country's largest offshore oil and gas producer, warned on Saturday it will have its first half-year loss of 8 billion yuan, due to the prolonged slump in oil prices and a write-down on its Canadian oil sands assets.