Nation builds oil stocks as looming war pushes up prices

Oil prices surged last month as China rushed to increase imports ahead of a likely US-led war on Iraq, according to figures released yesterday.

However, a top transport official said the country could diversify its sources of supply to cushion the impact of an invasion.

Figures published in the Shanghai Securities News showed that last month imports of crude oil rose 78 per cent to 8.36 million tonnes, with the average price up 51 per cent, resulting in a net increase in payments of US$1.11 billion (HK$8.6 billion) as buyers rushed to secure supplies before the start of any war.

Domestic crude prices in January rose 42.7 per cent from a year earlier, while those of oil products rose 25 per cent, the report showed.

But Cui Zhenchu, the deputy general manager of the transport division of China International Oil and Petrochemicals Company - a unit of Sinopec, which accounts for two thirds of China's crude imports - said that a war would not have a great impact on imports.

Last year, China imported nearly 70 million tonnes of oil, against domestic production of about 170 million tonnes, of which half came from the Middle East, including Saudi Arabia, Iran, Iraq, Kuwait, Oman and the United Arab Emirates.

'If supplies of oil from the Middle East were cut, it would be a huge disaster for the world economy,' said Mr Cui. 'The United States is the biggest buyer of Middle East oil and would certainly use its military might to keep the supply lines open.