China is squirreling away crude at an “unprecedented” pace, according to a new International Energy Agency report. And, as the Telegraph reports, it looks like Beijing’s bolstering its rainy day supply of crude for strategic—not economic—reasons:
The International Energy Agency (IEA) said in its latest monthly report that China imported 6.81m barrels a day in April, an all-time high. This is raising eyebrows since China’s economy has been slowing for months, with slump conditions in the steel industry and a sharp downturn in new construction.
The agency estimates that 1.4m b/d was funnelled into China’s fast-expanding network of storage facilities, deeming it “an unprecedented build”. Shipments were heavily concentrated at Chinese ports nearest the new reserve basins at Tianjin and Huangdao. “We think this is a big deal,” said one official. […]The strategic buying could go on for a long time since China is rapidly expanding its reserve capacity from 160m barrels to 500m by 2020, with sites scattered across the country.
To put that in perspective, as of this past February the US had just under 696 million barrels of crude in its strategic petroleum reserve. But the fact that China is so quickly ramping up both its storage capacities and, more recently, the amount of crude it’s pumping underground isn’t a heartening sign. This is not the action of a country satisfied with its regional status quo or confident that conflicts elsewhere in the world are unlikely to disrupt its oil supply.