China Raises Threshold for Oil Tax

China has raised the threshold for a tax on crude oil charged to the nation's two biggest producers, PetroChina and the China Petroleum & Chemical Corp (Sinopec) in an effort to ease their financial burden and encourage output according to statements made by both state owned entities.

The Ministry of Finance raised the minimum level for the levy to $55 per barrel, up from $40.The move is retroactive to November 2011.

Some analysts believe the move would help the corporate earnings of the companies and encourage oil production. And in the short term the news may have a positive effect on their stock prices.

After the news was announced PetroChina was up 1.0 percent at 7.40 Yuan in Shanghai by midday. Sinopec initially gained nearly two percent, but was down 0.3 percent to 7.40 Yuan by midday.

In Hong Kong trading, PetroChina gained 2.5 percent to HK$10.64 by midday while Sinopec was up 1.9 percent at HK$8.81.

This means the Chinese oil producers would pay less tax for crude oil production. The new tax ranges from 20 to 40 percent of the price of a barrel of oil that costs more than $55.