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NEW YORK (Reuters) - The increasingly tense standoff between the West and Iran must undoubtedly have big Asian oil consumers looking anxiously at their meagre strategic oil stocks.
China, in particular, must feel dangerously exposed to the vagaries of the oil market with Iran threatening to close the Strait of Hormuz, a critical transit point for much of its oil imports.
With Beijing's strategic oil storage facilities only partially constructed, the world's second-largest oil importer has a lot less emergency oil on hand than Western nations do when measured in terms of days of supply.
China completed and filled the first 102-million-barrel phase of its strategic oil stockpiling program in early 2009 and has since added another 76 million barrels of capacity, according to a report by the research unit of state-run China National Petroleum Corp.
Some of these new tanks, which were completed toward the end of 2011, are already being filled.
To be sure, this is a very fast build-up of strategic stocks and China's state-controlled oil industry has blurred the line between its own commercial inventories and the country's strategic stocks.
But once these new tanks are at capacity, China will only be able to call upon supplies equivalent to just over 32 days of crude imports, a far cry from the 90-day buffer held by developed nations.
Indeed, if any of these tanks are unfilled, the latest round of sabre-rattling may well have persuaded the Chinese authorities to build stocks at a faster pace.
China's implied oil demand has remained strong, with crude imports jumping 7.4 percent in January to their third-highest level ever even as other data suggested a weakening economy.
Given the limitations of Chinese data, it is not possible to say whether this demand was entirely due to commercial consumption or if added stockpiling played a role.
But certainly an added urgency to China's strategic stockbuilding would help explain at least some of the strength in oil demand implied by the current structure of the Brent market.
Although Brent has once again been plagued by production problems at the Forties field, Dubai swaps have kept pace with the North Sea benchmark, implying that strong Asian oil demand is driving the Brent market more than supply problems.
(See graphic: r.reuters.com/jes66s)
It is, of course, extremely difficult to say with any certainty whether this demand is completely commercial or whether it has to do with strategic stockpiling given the paucity of Chinese oil data.
But given the Chinese Communist Party's concern for continued economic stability, particularly as it enters a leadership transition, it seems reasonable to speculate that the pace of strategic stockpiling may have accelerated.
This in turn helps to explain some of the steep backwardation in the Brent curve.
A strongly backwardated market, particularly in an environment of rising prices, suggests day-to-day supplies are falling short, forcing inventory holders to release stocks to meet demand.
For the most part, this conclusion is an inference. Demand is not strong in the West, the most visible part of the oil market. The conclusion is that Asian demand must be strong.
Moreover, it must be Asian stocks that are tight, although data limitations make this an educated guess at best. This conclusion arises mainly because the suggestion that inventories in the developed world are tight does not seem correct.
Although low in absolute terms, Western commercial stockpiles seem comfortable when viewed as a function of days of forward demand cover, particularly in an environment of seemingly rapid demand destruction.
Moreover, if Asian countries are adding to strategic rather than commercial inventories, the effect on the market is different.
After all, the strategic stockpiling of oil is in effect "new" demand. The oil is bought and put into tanks with the intention of not using it except in an emergency.
In a "normal" market, this crude has effectively been "used" as it is no longer commercially available. A similar effect would also occur if refiners were ordered to hold back more of their inventories for strategic reasons, something that may well be going on in China.
Of course, once the stockpiles are filled this "demand" will vanish, leading either to lower imports or a switch to commercial stockpiling.
But given China's ambitions to build strategic stocks to levels comparable with Western holdings, as well as other fast-growing nations' stockpiling plans, hoarding for a rainy day is likely to be a facet of Asian oil demand for some time to come.
(Editing by Dale Hudson)
Robert Campbell is a Reuters market analyst. The views expressed are his own