Apart from the slowdown in global oil demand resulting from slowing economies and the U.S.-China trade war, another threat to oil demand may be lurking for oil markets over the next few months—China, the world’s top crude oil importer—could slow down strategic and commercial inventories stockpiling.
China—which singled-handedly has been responsible for more than two thirds of global oil demand growth this year—could start to scale back oil purchases for reserves—strategic or commercial—as it could be nearing its storage capacity, Reuters columnist Clyde Russell argues in a column on Monday.
On Friday, an official at China’s National Energy Administration (NEA) said that Beijing had enough oil in storage to cover 80 days of imports, including crude oil at its Strategic Petroleum Reserve (SPR), storage at oil firms, and commercial stocks.
Li Fulong, head of development and planning at NEA, released this information in the wake of the attacks on Saudi oil infrastructure that knocked 5.7 million bpd—or 5 percent of global oil supply—offline, and had oil market participants scramble to assess how oil importers could be affected.
China said on Friday that the attacks wouldn’t have an impact on its oil supply in the rare release of some details about its oil inventories.
The 80 days of oil coverage is close to the 90 days recommended by the International Energy Agency (IEA), of which China is not a member.
Based on Reuters calculations assuming China’s January-August crude oil imports, oil storage for 80 days to cover oil imports would mean that Beijing likely has around 788 million barrels of oil in all kinds of storage.
If one assumes that China would scale back oil stockpiling in the coming months when it reaches 90 days of oil imports cover or comes closer to filling up its storage, oil demand could take another hit, from none other than its single largest growth source, which would drag oil prices down, Reuters’ Russell argues.
By Tsvetana Paraskova for Oilprice.com
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