March 30, 2015 [Reuters] - China's commercial and strategic oil storage is almost full, a Sinopec trading executive said on Wednesday, leaving little room for Asia's top oil consumer to keep up its soaring import growth and adding downward pressure to an already oversupplied market.
China’s purchases to fill its strategic petroleum reserves (SPR) was one of the main drivers of Asian demand since August of last year, with the nation’s importers buying cheap crude to fill oil tanks despite slowing economic growth.
But with storage capacities approaching their limits, China’s crude imports will likely stay flat or rise only slightly this year, said the executive, who requested not to be named despite speaking to reporters at an industry event.
China’s crude oil imports grew 4.5 percent in the first two months of the year compared to the same period a year ago, according to official customs data.
But daily crude imports in February of 6.7 million barrels per day (bpd) were down nearly 7 percent from a record 7.15 million bpd in December, the data showed.
“We see a stop in stocking up of Chinese SPR as a drop in needed demand for oil markets,” said Daniel Ang, investment analyst at Singapore’s Phillip Futures. “Now that it has happened the markets are just factoring this in,” he said.
Other analysts said China’s current economic growth rate – at its slowest in 25 years at around 7 percent a year – would still be high enough to create Chinese oil demand.
“Demand will grow, and domestic production will be flat to declining,” said Simon Powell, head of Asia oil and gas research at CLSA in Hong Kong. “Imports are what meets that incremental demand in some ways.”
“I’m not convinced that every tank in China is full,” Powell also said, adding that China would continue to take advantage of low crude prices to import crude.
Brent crude dropped as much as 41 cents to $54.70 a barrel on Wednesday, although it had gained to $55.48 by 0918 GMT. The European benchmark is still down more than 50 percent from its 2014 peak in mid-June.
New commercial storage is being added in China, but it is mostly privately funded and not available for use yet, said the Sinopec trading executive.
Storage companies in China are set to boost commercial oil tank capacity by more than a tenth this year. Additional tanks for holding SPR supplies are not expected to be available until later this year.
