UPDATE 2-Sinopec to cut runs, imports as China demand falters

(Adds quotes, details)

By Jim Bai

BEIJING, Sept 19 (Reuters) - Asia's biggest refiner, Sinopec Corp, will cut refining runs and slash crude oil imports by up to 10 percent to draw down its hefty stocks, one of the starkest signs yet of weakening oil demand in the world's No. 2 consumer.

The company will import around 1 million tonnes less than it originally planned each month from September to December, a company official who declined to be named said on Friday. That equates to more than 235,000 barrels per day (bpd), or around 3 percent of China's implied daily oil consumption.

"There are very high volumes of fuel stocks in the market, so plants can moderately reduce operation rates or conduct maintenance plans as required," said the official.

China's thirst for fuel had already visibly dimmed after a record surge in pre-Olympic gasoline and diesel imports, but news that Sinopec would be cutting domestic production in addition to halting its import spree suggested an even sharper slow-down.

"China's implied oil demand surged fast in the first half, so full-year growth would not fall below around 5 percent even if there is no growth for the rest of the year," the official added.

Beijing leaned hard on its oil firms to increase inventories ahead of the August Olympic Games, to prevent shortages that could mar an event it hoped would showcase China's progress.

Spurred on by tax breaks and patriotism, Sinopec (SNP.N) and rival PetroChina (PTR.N)(0857.HK) bought unprecedented amounts of motor fuel, turning China briefly into a net gasoline importer for the first time.

The shipments sent China's apparent demand soaring as well, because the government does not report inventory levels, so oil piped into storage tanks shows up in implied consumption figures.

But Sinopec and PetroChina halted fuel imports in September as traders said that companies had overstocked their tanks, which were brimming even after the Olympics.

IMPORTS HALT

Now real demand appears to be flagging as the financial crisis weighs on exporters, and local supplies have risen as independent domestic traders who had hoarded fuel over the summer begin releasing stocks as prices fall, the Sinopec official said.

"Sinopec's decision to cut crude imports may reflect that oil products consumption growth in China could have slowed down after Beijing raised fuel prices in late June," said Lawrence Lau, analyst at Bank of China International.

Beijing shocked traders with an unexpected 17-18 percent rise in state-set pump prices in late June. Car sales have slumped since then, further eroding consumption already undermined by weakening manufacturing and export growth.

The firm might also be feeling the pinch of the global economic crisis, and want to untie some of the cash currently languishing in liquid form in oil storage tanks, Lay added.