China Considers Boosting State Oil Reserves After Crash
China Considers Boosting State Oil Reserves After Price Crash
(Bloomberg) -- Oil’s historic price crash is prompting the Chinese government to consider buying more crude for state reserves, according to people with knowledge of the matter.
Top planning officials are consulting with Chinese government agencies and state-owned energy companies about the possibility of bolstering the nation’s strategic stockpiles with cheap oil, the people said, asking not to be identified because the matter is confidential. Beijing is yet to decide whether to proceed, they said.
A bout of opportunistic buying by China could help ease the deluge of crude that’s about to hit the global market as the world’s biggest producers embark on a price war, and potentially draw a line under oil’s collapse. Beijing’s deliberations will also resonate in Washington, where some oil industry lobbyists are urging the Trump administration to bolster state stockpiles and help the nation’s ailing oil drillers.
Nobody answered faxed inquiries to China’s National Development and Reform Commission or the National Energy Administration.
Unlike the U.S., where data about the nation’s strategic petroleum reserve is updated publicly and regularly, China’s state stockpiles are shrouded in mystery. The government generally keeps silent over the size of its hoard, meaning traders have to scrabble for any clues about how much it’s got and when it plans to buy.
They got one such insight in December, when state-owned China National Petroleum Corp. said in a note on its website that the government intends to boost the capacity of its strategic petroleum reserves to 503 million barrels by the end of this year, an indicator of the maximum amount the government can store. The U.S. currently holds about 635 million barrels in its SPR, according to government data.
In September, the head of China’s development and planning at the National Energy Administration said the country had total oil reserves, including strategic stockpiles, for about 80 days of use.
Wild Prices
Some traders questioned whether the volatility in oil prices, near the highest level on record according to one measure, will complicate plans to add to reserves. Brent crude tumbled 24% on Monday, the biggest drop since 1991, but has since clawed back about 7% of those losses. Futures were 0.6% lower at $36.99 a barrel at 7:52 a.m. in London.
Prices are swinging wildly as Saudi Arabia and Russia engage in an intensifying fight for market share after the collapse of the OPEC+ coalition last week prompted a supply free-for-all.
The Saudis have slashed their official prices and pledged to supply a record 12.3 million barrels a day next month, more than 25% higher than last month’s production. Moscow has responded by saying it has the ability to boost production by 500,000 barrels a day.
--With assistance from Sarah Chen.
To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net;Alfred Cang in Singapore at acang@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net, Alexander Kwiatkowski, Serene Cheong
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