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The End Of The Asian Oil Product Glut

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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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China Resumes Oil Hoarding Despite Higher Prices

Satellite imaging data suggests that China has started to build its crude oil inventories after two months of declines, Orbital Insight said. According to the company’s data, the first nine days of November saw an inventory increase of 37 million barrels, after a 120-million-barrel draw in September and October. Earlier Orbital data suggests that over the three years from 2014, China has built its inventories by 22 million barrels on average over the last two months of the year.

Orbital started offering its clients Chinese oil inventory data last year. The company uses a combination of satellite imagery and machine learning to calculate the levels of oil inventories by measuring the shadows cast by the floating roofs of the storage tanks. As the level of oil in the tanks changes, the roofs either sink or rise, which is reflected in the length of the shadows they cast.

China’s oil inventories are believed to be among the highest in the world, but the country does not provide official data on their levels. This is what has made Orbital and other satellite data analysis firms so popular: China is the world’s biggest crude oil importer, and demand trends there, as reflected in imports and storage levels, can swing prices sharply, just as EIA’s weekly inventory report can.

For the moment, demand news from China is bullish for oil. Last month, although imports fell, the International Energy Agency reported that China has been buying crude at a record rate since the start of the year and inventories could reach 1 billion barrels within months. The agency added, however, that purchases for the storage tanks could decline in the last months of 2017.

Since 2015, Reuters reports, China has splashed about US$24 billion on filling up its tanks, with the price averaging US$50 a barrel. To date, inventories are estimated at 850 million barrels of crude.

By Irina Slav for Oilprice.com

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