China has filled its first 100 million barrels of onshore emergency crude oil tanks and the government should use some of its foreign exchange reserves on floating storage, an industry executive said.
The rare acknowledgement of China's strategic oil reserve levels indicated that the world's No. 2 energy user has been making good use of oil's $100 price fall to boost supplies while demand falters in an unfolding economic crisis.
Beijing is also making good on its pledge to better use its massive foreign exchange reserves to stock up key commodities from grain and metals to crude oil.
China Shipping (Group) Co President Li Shaode told Reuters on Monday that he had proposed that the government use some of its foreign exchange reserves on floating oil storage because the onshore tanks were full.
“The four onshore reserve bases have been fully filled, so we need to invest urgently in floating storage,” Li said on the sidelines of the country's annual parliament.
Analysts believe China's crude stockbuild was much bigger than the 100 million barrels - about one month's imports - the four coastal sites can accommodate, and expected stockpiling to continue in the next 20 months or so as new tanks come on line.
“We expect China's oil stockpiling to reach a peak in 2009, and continue into the next year,” said Yan Kefeng, Beijing-based senior oil analyst with Cambridge Energy Research Associates.
“Apart from reasons of supply security, China also wants to contain the investment risk of its foreign exchange reserves.” said Yan, adding China did not stop replenishing crude reserves last year when global crude topped $147 a barrel in July.
Yan said the oil fill at the reserve bases matches a separate set of data released by China OGP, a publication run by the official Xinhua News Agency, which showed China's crude inventories surged by nearly a third last year to about 34 days of forward demand. (Reuters)