China's domestic oil products market remains under pressure, even as the WTI (West Texas Intermediate) crude oil contract saw its biggest daily surge in 16 months on Friday following positive economic news out of the European Union.

Oil for August delivery closed up 9.4 percent at $84.96 per barrel on the New York Mercantile Exchange.

"However, the skyrocketing WTI price is just a temporary phenomenon, and it's hard to see big growth in the long term based on its fundamentals," industry analyst Dong Lizhu told Interfax on Monday. "Global oil supply still surpasses demand despite the ban on purchases from Iran effective July 1."

"Furthermore, the change to domestic retail prices is based on the movement of the average prices of Cinta, Brent and Dubai crude, according to China's current oil products pricing mechanism, instead of WTI," Dong added.

China's current oil products pricing mechanism allows the National Development and Reform Commission, the top economic planner, to adjust domestic gasoline and diesel prices when the average price of a basket of crude oil moves more than four percent over 22 consecutive working days.

As of June 29, the average price of Brent, Cinta and Dubai crude oil had fallen 9.1 percent, according to China's official Xinhua News Agency. A third reduction in China's retail gasoline and diesel prices this year, expected to occur on July 11, is still foreseeable, Dong said, adding that the scale of the cuts depends on the movement of the average prices of the basket.

China has adjusted domestic fuel prices four times this year, the most recent occurring June 9 when retail gasoline and diesel prices were cut by RMB 530 ($83.25) and RMB 510 ($80.11) per ton, respectively. "The average price of the basket had fallen by around nine percent at that time," Dong added.

Trading in wholesale oil products markets has been thin recently on expectations of a cut in retail prices, resulting in lower prices and relatively high stockpiles at refineries.

Gasoline and diesel prices "were more than RMB 200 ($31.5) per ton lower last week, and there has been no change till today," a source with China National Petroleum Corp. (CNPC) in Shandong Province told Interfax on Monday. "Diesel and gasoline wholesale prices at Sinopec are RMB 7,500 ($1,181) per ton and RMB 8,220 ($1,295) per ton, respectively, in Ji'nan, while prices at CNPC are RMB 7,600 ($1,197) and RMB 9,200 ($1,449), respectively."

Speaking on the condition of anonymity, the source noted that "CNPC prices are higher than those of Sinopec due to higher costs. Sinopec usually makes more purchases of crude from the international market, while CNPC sources more from its own domestic refineries."

"Private oil filling stations here (in Shandong) are also offering promotions to attract customers. Prices per ton of gasoline and diesel were RMB 7,400 ($1,165) and RMB 7,800 ($1,228), respectively, lower than those of the two giant government companies, especially for gasoline," according to the source. Private oil filling stations usually buy from local refineries because they are cheaper.

To reduce stockpiles and stabilize prices, some local refineries in Shandong, which sits on China's industrialized east coast, have been operating at very low rates. As of the week ended June 27, the operating rate of 28 local refineries in Shandong was 25 percent , down one percent from the week prior, industry analyst Dong Minzhu said.

In South China, where stockpiles are also growing, some refineries have brought forward maintenance plans in order to reduce gasoline and diesel supplies.

"Usually, the busy season for refinery maintenance is March to April, but they do it now mainly because they want to reduce stockpiles of gasoline and diesel," said Li Peng, an LPG trader from the Guangxi Zhuang Autonomous Region.