January 7, 2015 / 10:59 AM / 4 years ago

Exclusive: China crude imports seen at record as it fills strategic reserves

BEIJING (Reuters) - Tumbling world oil prices sparked a buying spree by China that led to record crude imports in December, according to Reuters estimates that suggest the top energy consumer doubled the oil put aside for strategic reserves in 2014 compared with 2013.

A ship loaded with containers is seen at a port in Lianyungang, Jiangsu province, September 7, 2013. REUTERS/China Daily/Files

    The figures indicate that thanks to the doubling of surplus oil in its system last year, China is much further along in filling up its strategic oil reserves than previously thought.

Yet analysts played down suggestions that Chinese buying could prop up global oil markets, where prices have dropped by more than half since the middle of last year.

Economic growth is slowing, and Daniel Ang, an analyst at Phillip Futures in Singapore, reckons China could be close to filling its currently available space for its strategic petroleum reserve (SPR).

    “As to China stocking up on their SPR, we believe that it was definitely a surprise. Judging from their economic figures, we expected that crude imports would not increase,” Ang said. “We do not expect this level of crude import into China to continue in the longer term.”

    Estimates by Thomson Reuters Oil Research and Forecasts indicate that China’s total crude imports surpassed 31 million tonnes, or more than 7 million barrels per day (bpd), for the first time last month. That’s more than 10 percent above the previous record monthly amount.

    Using data on domestic output, imports and commercial storage versus demand from refineries, that raised the excess oil available for China’s SPR last year to as much as 124 million barrels, separate Reuters calculations show, more than twice the 61 million barrels available for stock-building the previous year.

    U.S. bank Citi said in a note it expects China’s crude imports to slow and that “anyone hoping for China to drive a rebound in oil prices is likely to be disappointed”.    

    Little is known about China’s strategic reserves, besides the locations of the storage facilities and their capacities. China also seldom issues any data on commercial crude and product stocks other than percentage changes in volumes released through official news agency Xinhua.

    China has been filling the second stage of its strategic reserves since completing the first phase in 2009.

    SPR stocks are currently estimated at more than 30 days’ worth of crude imports. China plans to build reserves of around 600 million barrels, or about 90 days of imports.

    “As global crude prices slump, China is apparently exploiting the opportunity to add low cost crude to its

SPRs,” said Tom Hilboldt of HSBC.

    He cautioned, though, that SPR-builds could be overestimated as some of the barrels could be lost in the system or used up by refineries against initial plans to put it into storage.

    MIDDLE EAST OIL

    China’s crude imports touched record or near-record levels in several months last year, despite a slowing economy and weak oil demand growth. Imports have particularly picked up from September, largely fuelled by oil from the Middle East.

    Ship broker data obtained by Reuters shows that the number of super-tanker charters from that region to China surged over the last four months of the year.

    Unipec, the trading and chartering arm of state-owned Sinopec Corp (0386.HK), has loaded at least 40 super-tankers every month since September with Middle East and West Africa crude, the data shows.

    Chinaoil, the trading arm of state-owned PetroChina (0857.HK), took in a record haul of Oman crude in October, buying 47 cargoes of Upper Zakum, Oman and Dubai in deals done as part of the Platts price assessment process.

    In November, President Xi Jinping pledged to start regularly releasing data on China’s oil inventories, although giving no timeline on when that might begin.

    The National Bureau of Statistics (NBS) made its first announcement about the first phase last November, saying it contained about 91 million barrels, or 9 days’ worth of crude.

(1 tonne=7.3 barrels)

Additional Reporting by Keith Wallis in SINGAPORE; Editing by Henning Gloystein and Tom Hogue

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