Petrotahlil --China must take advantage of current low oil prices to import more volumes, with members of its parliament urging the government to boost storage capacity.
Members of the country’s National People’s Congress (NPC), whose sessions this year run from 22-28 May, have called on the government to make use of all facilities, including strategic reserve, commercial reserve, big tankers or refiner’s tanks to stockpile as much as possible to secure supply at low cost.
Latest official data on China’s strategic petroleum reserve capacity stood at 31.1m cubic metres as of mid-2016, while data on available commercial storage capacity is not available.
The strategic reserves in 2015 was at around 10% of net imports, according to the National Development and Reform Commission (NDRC).
An official from the National Energy Bureau was quoted in local media reports as saying that China's total crude storage in September 2019 was around 80 days of net imports; and that the target for 2020 is 90 days; and 180 days, long term.
China is a major oil consumer with daily crude consumption last year pegged at 12,858 bbl/day.
ICIS principal energy analyst Li Li said that it is an opportune time to stockpile for China, whose crude storage at present is below target.
Crude imports in the country are projected to grow at a slower rate of 7.6% in 2020 from a 9.5% pace recorded last year, Li said.
In the first quarter of the year, monthly imports averaged 42.4m tonnes, based on official data.
China – the world’s second-biggest economy – has a 71% reliance on imported crude based on 2019 data.
Total crude imports last year totaled 505.7m tonnes, but the pace of growth has slowed down from double-digit levels in the previous years, in line with a slowing pace of economic expansion.
The NPC members called on market participants to increase imports in both the futures and spot markets, with Brent crude futures now down by more than 40% from the start of the year and is prone to weakness following a demand collapse amid the coronavirus pandemic.
At midday on Thursday, Brent crude futures for July delivery were down $1.04 at $33.70/bbl.
With Shanghai crude futures trading at a premium over Brent crude since March, market players have taken to stockpiling oil as deliveries to Shanghai contracts, a source from petrochemical giant Sinopec said.
On 27 May, Shanghai crude was higher than Brent by $1.88/bbl.
Meanwhile, the NPC delegates also recommended the government to invest more on infrastructure of storage capacity, including offshore floating tanks and pipelines.
The proposals were made at the biggest annual biggest political gathering in Beijing, which will run up to 28 May.
The annual meetings by NPC and the Chinese People’s Political Consultative Conference (CPPCC) are usually done in March but had to be postponed this year due to the coronavirus pandemic.
Chinese refiners have been ramping up operating rates recently as demand for gasoline and diesel have rebounded, with the easing of the coronavirus pandemic in the country.
However, the domestic market still in oversupply of oil products, gasoline in particular, a source from petrochemical major Sinopec said.
Given the oversupply, major Chinese refiners have not raised their oil storage.