At a time of increasing volatility in international oil markets, China is stockpiling record amounts of crude. The country has been ramping up imports at a record pace in recent months, despite a decrease in demand caused by contractions in the steel and construction industries. So where is all that oil going? Almost certainly into strategic reserves, as Bloomberg reports:
Crude inventories rose 4 percent from April, China Oil, Gas & Petrochemicals, published by the official Xinhua News Agency, said in an e-mailed report today. That’s about 33.59 million metric tons, or 246.2 million barrels, the most in records going back to January 2010. Gasoline supplies also swelled to a record, climbing 0.9 percent to an estimated 7.6 million tons. […]“We believe high commercial stocks may indicate refiners are potentially stocking feedstock for the government,” [Amy Sun, an oil analyst at ICIS-C1] said by phone from Guangzhou today. “China may be taking this opportunity to start filling strategic storage.”
The U.S. still holds the world’s largest strategic petroleum reserves by far, having set aside nearly 700 million barrels. Still, China’s move to beef up its own reserves is worrying. Tensions are high in Asia, with China recently squaring off with the Philippines over oil rigs in the South China Sea, and Beijing must also be concerned about supply disruptions in the Middle East as ISIS advances in Iraq. As geopolitical tensions rise, destabilizing regions both nearby and abroad, China is battening down the hatches.