China’s oil reserves to be boosted amid global crude price rout, Beijing researcher says

Current low prices mean China is likely to top up its oil reserves, but purchases may be limited due to weaker demand and a lack of storage capacity

China, which imported more than 70 per cent of its crude oil requirements in 2019, could take advantage of a price war between Saudi Arabia and Russia

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On Friday, Saudi Arabia, China’s top supplier, launched a price war with Russia, its second largest supplier, after the two countries failed to agree on production cuts to support prices. Photo: Reuters

Published: 6:45pm, 10 Mar 2020Updated: 3:27pm, 11 Mar 2020

China should use the crash in crude oil prices to top up critical national emergency reserves, a top government researcher said on Tuesday.

Regardless of the current oil market situation, China will not curb its efforts to secure stable and reliable oil supply, including continuing to increase domestic production, as energy security remains one of the government’s top economic policy priorities in the trade war era, said Wang Yongzhong.

“Neither a rally [in oil prices] nor a plunge is good for China. The Chinese government is concerned more about energy security, i.e., how to find multiple sources of stable supply,” said Wang, who heads global energy research at the Chinese Academy of Social Sciences, a key governmental think tank based in Beijing.

China may buy additional oil at cheaper prices for its strategic stockpile, but those purchases may be limited, Wang indicated.

It is a good opportunity. [However] you may not be able to buy a larger amount at the current price, even if you want to buy more

Wang Yongzhong

“It is a good opportunity. China’s reserves are far below the 90-day usage amount, the standard in the United States. It has room to increase,” Wang added.

“[However] you may not be able to buy a larger amount at the current price, even if you want to buy more. It will depend on the cost and market conditions.”

China imported more than 70 per cent of its crude oil requirements in 2019, with foreign purchases rising to a record 506 million metric tonnes (3.7 billion barrels), equivalent to 10.1 million barrels per day. It marked the 17th straight year that China’s oil imports had increased, with more than a third coming from the Middle East.