February 28, 2021 [Word Oil] China’s oil stockpiles have risen to around 100 days worth of net imports, making it increasingly challenging to find extra storage tanks and facilities to hold supplies, two people with knowledge of supply levels said.

The build-up follows a push by Beijing to buy up crude for its reserves last year when prices crashed due to the coronavirus pandemic. The figure represents government and commercial inventories, said the people who asked not to be identified because the information isn’t public. The reserves fluctuate but have consistently been at or above 100 days worth of imports and rose as high as 120 days recently, one of the people said.

Beijing set a goal of increasing government stockpiles to hold at least 90 days of net imports, Bloomberg reported in April last year. That target didn’t include commercial inventories. China’s National Energy Administration didn’t respond to a fax seeking comment.

As the world’s largest oil importer, a sufficient level of reserves is critical for economic resilience to supply shocks such as a war in the Middle East. The International Energy Agency, which China isn’t part of, recommends that countries have enough crude to cover at least 90 days of net imports.

“In terms of crude stockpiling, we believe China’s goal will not stop at 100 or 120 days of reserves,” said Mia Geng, an analyst at industry consultancy FGE. “National security is among the priorities for the coming years and this will sustain continuous stockbuilds.”

Unlike the U.S., where data about the nation’s strategic petroleum reserves are updated publicly and regularly, the size of China’s crude stockpiles are shrouded in mystery. There’s also less of a distinction between government reserves and commercial stockpiles, with many of the country’s biggest energy companies being state-owned.

China was moving forward with plans to buy up oil for its emergency reserves in April of last year, people familiar the plans said at the time. The initial target was to hold government stockpiles equivalent to 90 days of net imports, which could eventually be expanded to as much as 180 days when including commercial reserves, they said.

Last year’s crash in oil prices and China’s rapid rebound from the first wave of the Covid-19 pandemic set the stage for a flurry of crude purchases. However, stockpiling has leveled off as oil prices rebounded and storage space runs out, Capital Economics Ltd. said in a note this month. Fuel demand has also fallen this year amid a resurgence of the coronavirus in some parts of China.

This year’s crude purchases will be driven by refinery operations and new plant start-ups rather than filling the nation’s reserves that the market witnessed in 2020, according to Michal Meidan, director of China Energy Research Programme at the Oxford Institute for Energy Studies.

Emergency reserves, including commercial storage, exceeded 100 days worth of net imports in the third quarter of last year, according to Yuntao Liu, a London-based analyst with Energy Aspects Ltd. “Going forward, as crude prices rise and plants launch seasonal maintenance from April, the need for re-stockpiling is not that urgent.”

China’s crude imports averaged 10.9 million barrels a day last year, according to import data compiled by Bloomberg, suggesting current stockpile levels of around 1.09 billion barrel. That aligns with an estimate from market intelligence firm Kayrros that the nation’s oil inventories rose to 1.01 billion barrels in the week through Feb. 14. Stockpiles reached a record of around 1.04 billion barrels in September last year, according to Kayrros.

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