BEIJING (AP) – China, the world’s most energy-consuming country, is accumulating oil amid the coronavirus outbreak that sparked a crisis in the energy industry.
Imports rose 4.5% in March from a year ago despite the fact that its economy was paralyzed by the pandemic and demand decreased. Imports for the first quarter increased 5%.
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The fall in prices is wreaking havoc in the producing countries and probably affecting plans to develop the national industry, but they are a bonanza for factories and drivers in China. It allows Beijing to increase its strategic oil reserve, which would be carried out in the event of a supply interruption.
âIn the midst of all this, China’s oil imports continue. Low prices allow you to accumulate it, âsaid Peter Lee, analyst at Fitch Solutions.
Chinese importers shipped 84 tankers to Saudi Arabia in mid-March, capable of carrying 2 million barrels of crude oil each, according to reports cited by the China Shipping Industry Association.
Low oil prices “had a positive impact on China,” the Chinese Communist Party’s Political and Legal Commission said on social media.
The acquisitions, however, may affect China’s plans to become more self-sufficient in the energy field should expenses to develop domestic production have to be reduced, analyst Max Petrov of Wood Mackenzie said.
State-owned company PetroChina Ltd., Asia’s largest producer, “is likely to run out of significant sums of money,” Petrov said. He added that PetroChina will have to decide whether to imitate Western producers and reduce investments in new wells.
“If they decrease investment, due to the nature of the Chinese oil fields, it will take a long time to return to the same level of production,” Petrov said. “It will take years and even more money.”
Beijing appears to be increasing its strategic reserve, although little is known about it.
The energy ministry reported in September that China had reserves for 80 days of consumption.
Officially, 385 million barrels of reserve are allowed, according to Lee of Fitch Solutions. He added that the objective would be to reach 500 or 600 million barrels.
If storage capacity is increased, the government could import 500,000 to 900,000 barrels a day for the strategic reserve, which would represent 5% to 9% of total purchases abroad, according to Lee.
The energy ministry referred any questions to the National Development and Reform Commission, which did not respond to questions on Wednesday.
The PC commission said the price drop gives Beijing a unique opportunity to strengthen its reserves but did not confirm whether it is or not.
“This is an opportunity that occurs once in a century!”
This, however, may not be easy, as China, like other countries, is running out of storage capacity, according to Wood Mackenzie’s Lei Sun.
The strategic reserve and private providers had covered 85% of Chinese capacity in February and added more oil in March, according to Lei. The remaining space can be filled with oil that China bought before the price drop and has to accept even if it has no customers for it.
“I don’t think there is much room left,” Lei said.
Cheap crude is one of the few positive news China had in the midst of the pandemic.
The economy suffered its worst contraction since the mid-1960s, shrinking 6.8% from last year after closing factories and leaving some 800 million people home.
Experts forecast zero growth this year. That of 2019 had been 6.1%, already in itself the lowest in decades.
China imports about half of the oil it consumes. Half come from the Middle East and the rest from Russia, Southeast Asia and Africa.
The PC wants to reduce this dependency, which it considers a security risk. Therefore, the country is investing heavily in hydroelectric, wind and solar energy.
