Trade tensions could boost pace of China’s strategic crude storage

China will likely increase the pace of its strategic oil purchases by nearly 30 percent this year compared with 2017, the International Energy Agency said on Friday, and its eagerness to build stocks could get a boost from trade tensions with the United States.

The world’s top oil importer has spent the past 15 years creating what the IEA called “the world’s most ambitious strategic crude reserves programme” since the 1970s.

But its purchasing pace slid by half last year, the IEA said, slowed by technical problems and “reduced urgency in an era of plentiful supply”.

In 2018, the IEA said it expects the amount of oil flowing to these sites to rise by 34.5 million barrels, or 95,000 barrels per day (bpd), up by roughly 28 percent from 2017’s fill of 27 million barrels.

The urgency to build and fill sites after this year could get a fillip, the IEA said, from the growing rift between China and the United States – a newly important oil exporter whose President Donald Trump has angered China by threatening to impose billions of dollars in trade tariffs.

“If current trade tensions between the U.S. and China were to escalate, and given that the U.S. is a growing supplier of crude to Chinese refiners, it is possible that the SPR (Strategic Petroleum Reserve) programme will benefit from renewed impetus,” the IEA said.

China’s oil buying plans, and the level of crude stored in strategic sites dotted across the nation, are closely watched by the oil industry as a signal of how much more the key consumer is likely to absorb.

But the information is also shrouded in secrecy, with government reports on the fill level coming only with several months’ lag, and the IEA said the latest report did not include all the sites that are part of the programme.

IEA estimates showed China’s strategic reserves at 287 million barrels at the end of 2017, putting them at 57 percent of the government’s 500 million barrel target for the first three phases of purchasing set in 2004. It added that stocks at two sites, Dushanzi and Tianjin Phase 2, drew stocks last year.

The Chinese government’s reporting put strategic reserves at 274 million barrels by mid-2017, 33 million barrels higher than the middle of 2016.
Source: Reuters (Reporting By Libby George, editing by David Evans)

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