China to keep 200 MMbbl crude hoard even if oil rallies
BEIJING (Bloomberg) -- China is poised to maintain its commercial hoard of more than 200 MMbbl of crude within three years even if oil rallies toward $130/bbl.
Refiners have been asked to hold inventories equal to at least 15 days of the volumes they can process, according to the National Development and Reform Commission. Stockpiles shouldn’t fall below 10 days’ equivalent even if international crude prices rise above $130/bbl, it said in a document published on its website on Jan. 28. Brent futures, a global benchmark grade, last traded at that price in July 2008.
China, the world’s second-largest oil consumer, has benefited from crude’s slide to below $50/bbl, the weakest in almost six years. It already has 33.37 million metric tons of commercial crude stockpiles at the end of last year, or about 244.6 MMbbl, according to Bloomberg calculations using data published by Xinhua News Agency’s China Oil, Gas & Petrochemicals newsletter.
“The low oil price provides a good timing for the government to officially encourage refineries to boost stockpiles,” Amy Sun, an analyst at ICIS-C1 Energy, a consultant, said by phone from Guangzhou. “The slow progress in constructing China’s second-phase strategic reserve facilities may also have raised incentive to ramp up commercial stockpiles.”
$130 Oil
Based on data from China National Petroleum Corp., the nation had 702 million tons of refining capacity at the end of 2014, or 14.1 MMbopd. That means NDRC’s requirement will be about 211.5 MMbbl with oil below $130, or 141 MMbbl above that price, Bloomberg calculations show.
The government can use oil in commercial inventories in times of shortages such as during natural disasters and a sudden supply disruption, the NDRC document showed. Newly built refineries should meet the requirement within a year of starting operations, it said.
In terms of capacity, China can store 307 MMbbl of commercial oil inventory as of last year, CNPC said in its annual research report also published on Jan. 28. Strategic oil storage tanks, spread over six bases nationwide, can take a further 141 MMbbl, the company said.
