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A number of Chinese refineries have delayed fuel oil imports following unconfirmed news that China is about to cut the import duty on fuel oil, Shanghai Securities News reports.

Although the Chinese Ministry of Finance is yet to make an official announcement regarding the issue, the local paper reports that China may reduce the import duty of fuel oil from 3 percent to 1 percent.

News of the possible reduction in tariffs has lead to private refineries in eastern China's Shandong province delaying some fuel oil imports for June to this month in an effort to reduce import costs.

The recent surge in oil prices has had a negative effect on fuel oil demand from power companies in China. Fuel oil imports into the country rose only slightly to 2.2 million tonnes in May, up 70,000 tonnes on the previous month.

The rise in crude prices lead market sources to forecast last month that demand will decrease by 15-20 percent.

Between the months of January and May, China imported a total of 8.59 million tonnes of fuel oil, putting its monthly average at approximately 1.72 million tonnes. The figure was still around 1 per cent lower than average monthly import volumes in 2007 as high import costs have stifled demand from local power plants and refineries.

Despite government subsidies to about 30 power plants in the southern province of Guangdong, China's manufacturing hub, demand for fuel oil from southern China dropped in May after an initial buying spree by utilities in March and April. Power plants in Guangdong purchased around 1 million tonnes of fuel oil in May versus 1.2-1.4 million tonnes the previous month.

Demand is reported to be so poor at present, that a fuel oil cargo purchased from Venezuela's PDVSA was said to have been diverted by Petrochina last month. The Very Large Crude Carrier (VLCC) carrying 270,000 tonnes of fuel oil was scheduled to discharge in Huangpu in early June, but was instead sent to Singapore.