China's major oil suppliers denied rumors about oil price rises, and blamed the rumors for the worsening fuel supply shortfall that is spreading northward across the country.

High international oil prices have fuelled price rise prospects in domestic market. Some producers and dealers started to hoard oil amid the rumors, worsening the situation, China National Petroleum Corporation (CNPC) and China Petroleum and Chemical Corporation (Sinopec) jointly announced.

The shortage, first reported in southern China, now appears to be spreading to the northern parts of the country.

Shanghai, the country's economic center, is now being affected, with rationing, long queues and power-off filling machines becoming common at filling stations.

The Shanghai Economic Commission said on its website that the city has enough diesel to last more than 10 days.

CNPC and Sinopec emphasized that China had enough oil to ensure a stable supply and the fuel-supply crises of the second half of last year would not re-emerge.

According to the National Development and Reform Commission (NDRC), China's top economy planner, refined oil output, mainly produced by the two oil giants, surged 10.5 percent in the first two months of this year. The stockpile rose 28 percent, compared with the beginning of this year.

The two giants said the continuing reconstruction after the snow havoc, and spring ploughing have also added more pressure on the supply tension.

However, industry experts said that government-controlled oil prices in domestic market has led to the shortfall, as refineries cut back production to avoid losses while producers and dealers hoard oil to gain more profits in the case of possible price rises.

The CNPC and Sinopec said they would double efforts to increase market supply and distribute more oil to the shortage-affected regions.

They also suggested the authorities should punish those who spread the rumors or hoarded oil.

China's consumer price index, the main inflation indicator, rose 8.7 percent in February over the same time last year, a 12-year high.

The NDRC raised the prices of gasoline, diesel oil and aviation kerosene by 500 yuan (US$70.91) per tonne in November, almost a 10 percent rise, to narrow the gap between steep international crude prices and state-set domestic oil prices.

(Xinhua News Agency March 26, 2008)