China is hoarding crude at the fastest pace in at least a decade, shielding itself from supply disruptions and helping keep prices above $100 a barrel.
The country imported a record volume in April as it emulates steps taken by the U.S. in the 1970s to create a strategic petroleum reserve, government data show. Chinese President Xi Jinping is building stockpiles as his nation clashes with Vietnam over resources in the South China Sea and faces potential risks to oil sales from Russia, Africa and the Middle East because of sanctions and violence.
The purchases are helping drive oil prices higher, according to Barclays Plc, Citigroup Inc. and Nomura Holdings Inc. As China’s thirst for crude grows with the expansion of its emergency stockpiles and refining, the International Energy Agency estimates that the Asian nation is poised to surpass the U.S. as the world’s largest oil consumer by 2030.
“This panicked stockpiling is one of the ways that geopolitical tensions can actually tighten physical oil markets,” Seth Kleinman, a London-based analyst at Citigroup, said yesterday by e-mail. “This buying spree is partly driven by the infrastructure needs of China’s ongoing refinery expansion, but also reflects the rise in geopolitical tensions.”
West Texas Intermediate crude (NYMEX:CLN14), the U.S. benchmark, gained about 9 percent over the past year to $104.36 a barrel on the New York Mercantile Exchange as of today. Brent (NYMEX:SCN14), the marker for more than half the world’s oil, climbed about 7 percent on the London-based ICE Futures Europe exchange over the same period and was at $110.04 at 9:41 a.m. New York time today.
China bought more than 600,000 barrels a day of surplus crude from January to April, a record for that time of the year based on data compiled by Bloomberg from Chinese statistics tracked since 2004. The surplus supplies are calculated by subtracting refinery runs from the combined total of net imports and domestic production.
The imports suggest a “significant” rise in commercial and emergency stockpiles, according to the IEA, an adviser to 29 of the most industrialized nations on energy policy.
The buying “would benefit energy security not just in China but globally and crude imports of that scale might also support oil markets and keep commercial stocks from rising further elsewhere,” the Paris-based agency said in its monthly market report released May 15.
China doesn’t announce when it fills the emergency reserve and stockpile totals are not made public.