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Last Updated: Sunday, 14 January 2007, 12:24 GMT
China cuts domestic petrol prices
A Sinopec petrol tanker
Petrol is mainly used in urban areas, with farmers relying on diesel
China has surprisingly cut the retail price of petrol and aviation fuel for the first time in 19 months.

Petrol prices have been cut by 3.8% but the prices in the much larger diesel market have been left unchanged.

Oil refiners China National Petroleum Corporation and China Petroleum and Chemical Corporation (Sinopec) have been told to lower prices from Sunday.

Refiners have been processing at a loss for over a year and had been hoping to return to profit as crude prices fall.

There are close to three million private cars in China and parts of the country have been hit by petrol shortages.

Sharp falls

The price of petrol was cut by 220 yuan ($28.22) a tonne, the energy policy-making National Development and Reform Commission said on its website.

The cut, only the second in five years, will also see the ex-refinery price of jet fuel cut by 90 yuan a tonne.

US crude oil prices have fallen sharply since China last adjusted domestic fuel prices - upwards - on 24 May, 2006.

Crude oil for February delivery closed at $52.99 a barrel on Friday, down 13% since the start of the year and down a third from the record peak of $78.40 hit in July 2006.

Urban wealthy

Last May, China raised petrol prices by one-tenth, but a price cap meant Chinese prices did not soar alongside last summer's rising global crude markets.

Consumers had been calling for a price cut as global markets fell.

The benefits will mostly be felt by the urban wealthy who use petrol-driven cars, rather than rural farmers, who use diesel.

David Hurd, a Beijing-based energy analyst at Deutsche Bank said the authorities had been concerned that if crude markets went up again they would not be able to raise prices, having never made cuts as crude prices fell.

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