$70 Oil Could Put The Brakes On China’s Crude Buying Spree

China's accelerated crude oil stockpiling could be coming to an end with oil at $70 and the possibility that strategic reserves are close to capacity, suggesting that the world's largest oil importer could slow down crude builds and crude imports.

In April, China is estimated to have tapped its crude reserves, according to calculations of Reuters columnist Clyde Russell based on official data. Refiners processed more crude oil last month than the sum of its imports and domestic oil production. This suggests that China used around 280,000 barrels per day (bpd) out of its reserves, according to Russell.

China's refinery throughput increased by 7.5 percent annually in April, according to data from the National Bureau of Statistics. Refinery throughputs averaged 14.09 million bpd, up from 13.1 million bpd in April 2020 and slightly up from 14.08 million bpd processed in March 2021.

But Russell's estimates point to imports plus domestic production at 13.81 million bpd, leaving 280,000 bpd that refineries used from reserves.

Since China does not report crude builds in strategic reserves or in industry stockpiles, analysts are trying to estimate whether reserves are now at capacity to predict what China's crude buying policy could be in the next few months.

In March, China was estimated to have sent as much as 1.63 million bpd of crude to either commercial or strategic storage. This rate of stockpiling compares with around 920,000 bpd of crude oil that has likely gone to storage during January and February this year, according to Russell's estimates.

But the likely draw from inventories in April has eased the stockpiling into reserves to around 670,000 bpd so far this year, which is half the rate of estimated crude builds for 2020.

If Chinese reserves are close to capacity, after the massive imports last summer at ultra-cheap crude prices, and if prices stay close to $70 a barrel for a few months, China's massive crude stockpiling could come to an end.

By Charles Kennedy for Oilprice.com

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