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Ugly and Alarming
China Stockpiles Record Amounts of Crude

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. 

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  • Jacksonian_Libertarian

    If China makes a move to occupy the South China Sea, shipments of oil coming through the Straits of Malacca would likely be cut off by the angry nations there. It’s highly possible China would face an embargo, and be cut off from all shipping. They may prefer that to what is swiftly approaching their economy, an ugly deflationary depression much worse than what the US has suffered for the last 6 years, or Japan has suffered for the last 26 years.

    • Felix Keverich

      Or they could just buy oil in Russia ;]

      • f1b0nacc1

        And just how would they transport it? Rail lines are thin on the ground between those two benighted states, and given the extremely poor maintenance done on the ones that do exist, extremely vulnerable to significant failure.
        It isn’t the oil, it is ACCESSIBLE oil…a blockade would (at the present time, and for at least the next decade or so) be quite effective.

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