Traders place higher bets by shipping large quantities of goods.
Refiners remain cautious about purchasing raw materials amid high prices
China to open 70 million barrels of new storage in 2021: Platts Analytics
China’s crude oil stocks will remain relatively high in 2021 and beyond as market participants supply additional barrels of oil to take advantage of fast-growing storage capacity, while Beijing seeks to encourage a build-up of reserves to ensure energy security, sources market and analysts. said.
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The increase in inventories is taking place despite the fact that refiners maintain their purchasing plans at a moderate level due to high world prices and refinery maintenance. But traders are shipping a lot and placing higher bets in a market that has seen sharp price swings since last year.
“It is unlikely that China’s crude oil inventories will return to pre-COVID levels due to increased storage capacity, while the government is encouraging a build-up for energy security,” said a spokesman for a storage company in southern China.
According to analyst firm Kpler on April 7, the country’s crude oil reserves stood at about 933.82 million barrels, which is 67% of its storage capacity. This is just 2.5% below the record level of 958.19 million barrels recorded in September 2020. and 9.2% higher than in the same month of 2020, when China’s inventories rose sharply on the back of low oil prices.
“Refiners slowed down purchases of oil for storage during the maintenance season due to higher oil prices compared to last year. But trading houses continue to bring barrels for storage in tanks and wait until their luck shows itself, ”said an analyst from Beijing.
Initially, ICE Brent crude, which closed at $ 19.15 a barrel in April 2020 following the spread of COVID-19, surged to nearly $ 70 a barrel earlier this year. On April 7, it traded at $ 62.41 per barrel.
China is seeking to intensify efforts to build and hold relatively large reserves of crude oil during the 14th Five-Year Plan (2021-2025) to bolster the country’s energy security. As a result, Chinese factories are expanding their storage capacity.
As of April, the country has at least 1.39 billion barrels of crude oil, according to Kpler.
S&P Global Platts Analytics expects about 70 million barrels of new commercial tanks to be commissioned in 2021, up from about 100 million barrels of known capacity commissioned last year.
Despite increased refining volumes in China and slower growth in crude oil imports, S&P Global Platts Analytics expects to see the anticipated build-up of crude oil reserves continue this year – oil will be available to actually fill storage capacity and for purposes other than refining operations. and oil refining. direct raw combustion.
The country’s estimated crude oil inventories at the end of February were up 51.63 million barrels from the end of December, Platts estimates based on the latest official data showed. But the projected growth in the first two months of 2021 was 62.6% below the projected 138 million barrels of growth seen in the same period a year earlier.
China does not publish official data on stocks or storage capacity. Platts calculates the net build-up or utilization of implied crude oil reserves by subtracting refinery throughput data from a country’s oil supply data.
The latter takes into account both net crude oil imports and domestic production, which rose 2.8% year on year to 889.03 million barrels in Jan-Feb, according to the General Administration of Customs.
Meanwhile, oil transshipment in the first two months rose 15.2% year on year to 837.39 million barrels per day. China also consumes crude oil for use in addition to refining.
Kpler data showed that oil inventories in China increased by 17.26 million barrels between January and February, less than the 26.6 million barrels increase in the first two months of last year.
Platts Analytics estimates that the projected increase in oil production in the first quarter increased by almost 55 million barrels, and is expected to grow by about 44 million barrels in the second quarter.
“Actual flows to and from storage locations will change over time, and both constant oil prices and changes in the structure of oil prices are important factors,” said Platt Analytics.
China Oil Data for January-February (million barrels)
Crude oil imports
Crude oil exports
Net imports of crude oil
Domestic oil production
Increase in crude oil reserves *
* S&P Global Platts calculations
Note: raw metric tonnes converted to barrels using a conversion factor of 7.33.
Sources: National Bureau of Statistics, General Directorate of Customs.