China Stockpiling Oil to Guard Against Price Rises, Supply Disruptions

The Financial Post reported today that China is bringing in massive amounts of oil to increase stocks at its strategic reserves. According to the Post, China makes up 40 percent of global demand for oil, so an increase in purchases from the country significantly affect the markets.

As quoted in the publication:

The International Energy Agency (IEA) said in its latest monthly report that China imported 6.81m barrels per day (bpd) in April, an all-time high. This is raising eyebrows since China’s economy has been slowing for months, with slump conditions in the steel industry and a sharp downturn in new construction. The agency estimates that 1.4m bpd was funnelled into China’s fast-expanding network of storage facilities, deeming it “an unprecedented build.” Shipments were heavily concentrated at Chinese ports nearest the new reserve basins at Tianjin and Huangdao. “We think this is a big deal,” said one official.

Michael Lewis, head of commodities at Deutsche Bank, told the Post:

It’s very similar to what they have been doing with copper. Whenever it drops below $7,000 [a tonne], they see it as a buying opportunity. They do the same with agricultural commodities.

Click here to read the full Financial Post article.