I also wonder what this says for worldwide demand for petrol - if China has been busy buying for no reason other than storage one could argue that demand is in fact weaker than it appears. But who really knows - there are so many moving parts I won't hazard a guess. What it does say is when people point to the huge surge in Chinese imports or the Baltic Dry Index popping - it doesn't necessarily mean a darn thing about a pickup in demand. It simply could be a government stockpiling resources at low prices.
- China has filled all four of its state-owned emergency oil reserve tanks to the brim and should now invest in oil tankers to add more to inventories while oil prices are low, a senior industry executive said on Monday in a rare acknowledgement of Beijing's secretive oil inventories.
- Coupled with data last week showing a one-third rise in commercial crude oil stockpiles last year, the admission suggests that a large share of of China's oil import growth last year was pumped directly into storage, and could be relied upon quickly to soften any demand recovery or if prices should rise.
- It also backs up speculation that the world's No. 2 energy user has been making good use of oil's $100 price fall to boost supplies while demand falters in an unfolding economic crisis.
- The first set of China's strategic oil reserves, which can hold about 100 million barrels, were built over the past two years, but data on their status is considered a state secret and information about their operations or tank levels is scarce. China plans to build a second-phase strategic reserve that will nearly triple the first batch to 280 million barrels by 2011, and industry executives have said the current storage capacity has already become a hurdle to bringing in more imports.
- China is taking the supply security issue more seriously than the market thought, says Yan Kefeng, Beijing-based senior oil analyst with Cambridge Energy Research Associates (CERA). "We expect China's oil stockpiling to reach a peak in 2009, and continue into the next year," Yan said, but did not give an estimate on the volume of stockbuild he expected.
- The remark is consistent with recent comments by government officials that China should better use its massive foreign exchange reserve to stock up key commodities from grain to metals to crude oil, and last week Beijing announced that it would boost its budget for stockpiling resources by $10 billion.
- China should act quicker to boost storage capacity as its import dependence is set to surge in the coming decade. "Floating storage bases are a good idea because China needs to do everything to boost reserves," Lin said.
- Together with record high stocks of gasoline and diesel accumulated ahead of last summer's Olympics, the stockbuild also meant Chinese oil demand may have slowed more than it appeared.
China is conquering Africa as it becomes the preferred trading partner of the continent's dictators. Beijing is buying up Africa's abundant natural resources and providing it with needed cash and cheaply produced consumer goods in return.
