BEIJING: China plans its first public auction of state crude oil reserves to a select group of domestic refiners, the reserves administration announced, as Beijing looks to cool high raw material costs for manufacturers.
The releases will take place in phases and are intended for integrated refining and chemical plants, the National Food and Strategic Reserves Administration said in a statement late on Thursday.
The sales will “better stabilise domestic market supply and demand, and effectively guarantee the country’s energy security,” the agency said, adding that it plans to regularly release and replenish China’s oil reserves.
Benchmark Brent crude oil prices are up by around 40 per cent this year as demand rebounds from its coronavirus-led collapse in 2020. Brent fell 2 per cent on Thursday but was trading higher on Friday.
China’s international crude futures are up 50 per cent this year, and up 80 per cent from a year ago.
In its four-sentence statement, the agency did not specify the volume or the timeframe for the auctions. The vague wording and the lack of detail created some confusion among market trackers over whether the auctions had already taken place, or would happen in the future, traders and analysts said.
The agency did not respond to Reuters’ request for further comment.
There has also been talk in the market of unconfirmed oil reserve sales in July and August which sources familiar with China’s strategic reserves system would neither confirm nor deny to Reuters.
Analysts at Goldman Sachs estimated the sale at 22 million barrels and said it most likely took place in August and contributed to a slowdown in Chinese crude purchases this summer.
China’s January-August crude imports fell by 5.7 per cent year on year although August volumes were up 8 per cent from July.
ING analysts said the announcement appears to confirm previous sales, but also points to further auctions in future.
Officials at state-run refiners said on Friday that the auction could be more of an experiment to demonstrate that Beijing has the tools to stabilise the oil supply, rather than reflecting any real supply shortages among refiners.
“Refiners don’t really see tight supplies in the global oil market. Instead, some are anticipating prices to fall further to even below $60,” said an official with a refiner based in south China.
China has closely guarded its strategic reserve information. The last public figures for China’s SPR were given in 2017, when the government said it had built nine crude oil storage bases with a total reserve capacity of around 238 million barrels. — Reuters
Oman Observer is now on the WhatsApp channel. Click here
