What China does on oil

What China does on oil

China has taken advantage of the period of negative oil prices between March and April to stockpile oil, so that now there is a real traffic jam of oil tankers waiting to unload their precious cargo off its northern shores. The CNN service

The record rise in the price of oil – which in a few weeks went from the negative peak of -40 dollars per barrel in the highlight of the Covid-19 emergency to the current price of 40 dollars – is due to some factors that are already partly known.

First of all, there is the cut in global production decided by the Opec + cartel, which by removing something like 10% of production from the market has made a fundamental contribution to that increase.

And then there is the waning of lockdowns all over the world, which has led to a partial recovery of economic and work activities and a consequent use of sufficient energy to restart the market dynamics.

But in the background you can also identify a third factor that has not been talked about much if it hadn't been for a CNN service yesterday that exposed its even decisive character for the rise in the price of oil.

China has taken advantage of the period of negative oil prices between March and April to stockpile oil, so that now there is a real traffic jam of oil tankers waiting to unload their precious cargo off its northern shores.

According to ClipperData, on June 29 there were 59 oil tankers with a load of 73 million barrels of oil – the equivalent of three quarters of the entire world demand.

Again according to ClipperData, floating oil deposits – understood as the quantity of oil that remains on board oil tankers for seven days or more – even quadrupled in May and reached a level that is seven times higher than the monthly average of the first four months 2020.

And the party is not over yet, given that according to data from S&P Global Platts Beijing in May imported the record figure of 11.3 million barrels per day, and continued to buy record quantities also in the following month.

But where does all this oil come from that waits off the Chinese sea to touch the mainland? Most of it arrived from Latin America and in this case from Brazil with a journey that lasted about a month and a half. The other part came mainly from countries like Iraq, Saudi Arabia and Nigeria.

It remains to be seen whether this trend will continue in the months ahead. Which is by no means improbable, considering that we are talking about an energy-intensive and highly dependent on import country. But much will depend on the dynamics of the crude market, at the moment exposed to a volatility that makes any forecast useless.


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/che-cosa-combina-la-cina-sul-petrolio/ on Sat, 04 Jul 2020 08:25:01 +0000.