China’s got the world puzzling over its oil hoard.
From underground caverns by the Yellow Sea to a scattering of islands in the Yangtze River delta, the government has been stockpiling crude for emergencies in a network of storage sites dotted around the country. Record purchases this year by the world’s biggest energy consumer have helped oil prices recover from the worst crash in a generation. What the country plans to do next could determine where they go from here.
The difficulty is that nobody outside China really knows for certain. The government won’t say how much it’s holding or when the tanks will be full. Energy Aspects Ltd. says the country will probably keep buying and fill up commercial tanks if it has to, while the likes of JPMorgan Chase & Co. say the purchases may soon stop. The difference in opinion is equivalent to about 1.1 million barrels a day, or more than the Asian country buys from Saudi Arabia.
“China seems to feel no obligation to report on its strategic stocks, and that might confer a genuine advantage in its favor,” said John Driscoll, the chief strategist at JTD Energy Services Pte, who has spent more than 30 years trading crude and petroleum in Singapore. “The scope of their purchases can dramatically affect fundamentals and prices. However, since they will likely be shrouded in secrecy, it will remain challenging to quantify the impact.”
