China Pads Oil Reserves Even as Price Rises

China has been adding oil to its emergency or commercial reserves even as prices remain near the highest level in nine months, if the rising supply of unprocessed crude is any guide.

The CHART OF THE DAY shows China had 2.7 million metric tons of surplus crude last month, the most in 17 months, after deducting refining volumes from domestic output and net imports,
according to Bloomberg calculations from government data.

"China is shying away from its usual price-sensitive buying habits as supply-security fears begin to gain the upper hand," Vienna-based JBC Energy GmbH said in a March 12 research
report. "This data will provide comfort for global crude-market bulls worried about the pace of Chinese growth."

China, which relies on imports for more than half its crude demand, has started filling tanks at Lanzhou in the northwest to boost emergency reserves, Yu Baocai, a vice president at China
National Petroleum Corp., which built and operates the base, told reporters in Beijing last week. The facility is among eight sites designed to store 169 million barrels of oil in the second of a three-phase stockpiling plan. China is the second-biggest
oil consumer after the U.S.

China imported a record 23.64 million tons of crude last month at an average $112.39 a barrel, or 3.6 percent more than January’s mean price, Bloomberg calculations from customs data show. Futures in New York rose 8.3 percent in the first two months as the U.S. and Europe agreed on sanctions against Iran, which has threatened to close the Strait of Hormuz, the transit point for about 20 percent of globally traded oil.

"Many refiners worldwide are stashing away," said Brynjar Eirik Bustnes, a Hong Kong-based analyst at JPMorgan Chase & Co. "There’s risk of less supply in the event Iran goes off line, or when European sanctions become effective July 1."