Instant View: China to raise gasoline, diesel prices

NEW YORK (Reuters) - China, the world's second largest oil consumer, will increase retail gasoline and diesel prices by 1,000 yuan ($145.50) per tonne from Friday, according to industry sources.

Fuel subsidies have helped propel China's demand and supported a six year rally in crude oil rally that has sent prices up nearly seven-fold.

Oil prices tumbled $3 following the news.

ANALYST COMMENTS:

TIM EVANS, CITI FUTURES PERSPECTIVE IN NEW YORK.

"Even with the $18.60 (per barrel) increase in price (Chinese fuel prices) are still well below the global market and the subsidy amounts to something on the order of $56 per barrel."

"This increase amounts to approximately $18.60 per barrel and will raise fuel costs from an approximate $60 per barrel to

$78.60."

KEVIN NORRISH AT BARCLAYS CAPITAL, LONDON, UK

"At the margin it may help to support demand growth for diesel and gasoline as it alleviates shortages. Hence it's potentially mildly bullish for crude oil and/or product imports. I suppose ... perhaps somewhat counter-intuitively, it's not bearish."

"It's a pretty modest increase. If anything, it will help to reduce shortages in the domestic market."

DAVID COX, MANAGING DIRECTOR OF POYRY CONSULTING IN OXFORD, UK

"It's already been happening (in India) and this is just a continuation of what we would expect. You can only subsidies to a certain extent, around the margin, but you can't subsidize oil prices if they are double what your prices are based on. It is too expensive for the treasury."

JOHN KEMP, COMMODITIES ECONOMIST AT RBS SEMPRA IN LONDON

"This is very significant, a watershed move which suggests the Chinese government is prepared to risk unpopularity to curb the growth in domestic fuel demand. We've already seen other Asian economies cut subsidies and the one big hold out, until now, was China."

MIKE FITZPATRICK, VICE PRESIDENT, MF GLOBAL IN NEW YORK