Tuesday, 6 September 2016

China Leaks Data on Crude Oil Inventory

China is bothering energy analysts and investors. It’s bothering them because it has been on a buying spree for crude in the last two years but nobody knows for sure how much of it the world’s second-largest consumer of oil has stashed away in strategic and commercial tanks.  
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At least, that was true up until this morning, when China graciously reported their oil strategic inventory  reserves as of the first of the year—31.97 million tons, or between 33 and 36 days’ worth of China imports. The figure, which is higher than analysts had expected, may not mean a whole lot, because we still don’t know anything about how much they have amassed since then, and it doesn’t include any information about what may be stashed away in commercial storage facilities.

Knowing how much oil China has put away could be vital for predicting the future moves of the oil market, from analysts’ perspective. Unfortunately, Beijing doesn’t feel that it has to share this vital information with the world. What the world-outside-China knows is that this year, crude oil imports there have reached historic highs, as the country takes advantage of the price rout and teapot refineries gain in prominence – and clients abroad. The world also knows that local production is falling, as E&Ps have to deal with maturing fields and low profitability.  

This falling local production is increasing China’s dependence on external sources of crude, which hardly sits well with Beijing and could provide an easy explanation for the inventory boost: buy it cheap while it lasts, have a nice big cushion when prices start climbing back up.

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