China National Petroleum officials said soaring oil prices and a refinery-imposed supply crunch led to a shortage in the consumer market. China's growing energy consumption is also a factor.

"Asia's largest oil refiner Sinopec relies on imports for much of its crude for refining, so the surging crude prices on the world market have greatly hurt the oil giant's refining business, when the central government still controls the price of domestic refined oil to stabilize the market," a CNPC official was quoted by the China Daily.

Other cities in the Pearl River Delta region also saw fuel supply shortages, with the city of Dongguan in need of an extra 2,400 barrels per day of oil products.

"I don't think the situation is that severe," an analyst in Beijing said. "Perhaps the smaller, independent retail gasoline stations may have some problems in getting a stable supply of diesel and gasoline. Car owners, therefore, might have restrictions on the amount of fuel they can pump each time."

Shanghai does not have plans to ration fuel any time soon.

"Our supply of fuel and oil products can meet the demand in Shanghai," a Sinopec official said.

By the end of 2005, China plans to implement a fuel tax policy, which could prompt vehicle owners to reduce fuel consumption or buy more energy-efficient cars.

-0-

Iran asks for one-fifth of Caspian

Iran looks to obtain one-fifth of the Caspian in its dispute with other littoral states, Iranian Ambassador to Russia Gholamreza Ansari said Monday.

The Caspian's legal status is based on Iranian-Soviet agreements until a new agreement is reached, Ansari said, adding, "All Caspian states should adhere to them."

Iran advocates a peaceful settlement of the situation by reaching an agreement on a consensus and the use of international norms. The ambassador said Tehran "has passed to the partners new proposals for determining zones of the oil and gas output."

Under Iran's plan, exclusive zones for the extraction of hydrocarbons are to be established for each of the five littoral states - Russia, Iran, Azerbaijan, Kazakhstan and Turkmenistan -- with consideration for their special conditions.

Based on geographic features of the Caspian, Ansari said Iran should be 20 percent, and other countries are to get lesser or larger proportions.

-0-

ConocoPhillips wins Indonesian concession

Indonesia awarded ConocoPhillips the right to explore the Amborip VI block off the coast of the eastern-most province of Papua.

The concession was one of nine awarded by the government to foreign and local companies, Novian Thayib, exploration director of the Indonesian Energy and Mineral Resources Ministry, said last Friday.

Eight companies won exploration rights while Benuo Taka subsidiary Penajam regency in East Kalimantan won production rights for the province's Wailawi block.

The nine companies are expected to invest approximately $102.50 million in exploration and production activities over the next three years.

Indonesia aims to find new oil and gas reserves in an effort to replace aging fields and increase production. The government has scrapped taxes on equipment imported for exploration; new contracts in the areas offered on last Thursday will be exempted from import duty and value-added taxes.

Indonesia earns 70 percent of the revenue from gas fields while companies such as Unocal, Exxon Mobil and Total get 30 percent; the government earns an 85 percent share of the revenue from oil fields and 60 percent from fields in remote areas. -0-

UPI market update: Oil prices hit new record

Oil prices hit a new record Monday, nearly hitting $64 per barrel after warnings of militant attacks in Saudi Arabia and worries over U.S. refinery outages.

U.S. crude settled at $63.80 per barrel, up $1.49, after peaking at $63.99. In London, on the International Petroleum Exchange Brent crude ended at $62.56 per barrel, up $1.49, after reaching $62.70.

The United States shut its diplomatic missions in Saudi Arabia following threats while Britain warned militants were in the final stages of planning strikes in the country.

"The latest security threats in Saudi Arabia, even though they're not directed at oil installations per se, and the continuing refinery issues are having a supportive role," Marshall Steeves, an analyst at Refco Group in New York, said.

The news over Saudi security coincided with concerns that that another U.S. refinery ran into output problems, adding to pressure on gasoline supplies in the world's largest consumer during peak summer demand.

Closing oil prices, August 9, 3 p.m. London
Brent crude oil: $62.47
West Texas intermediate crude oil: $63.68

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