China is estimated to send around 760,000 barrels per day (bpd) of crude oil to its strategic and commercial reserves in August, as throughput at the refineries of the world’s largest oil importer fell to the lowest in 15 months.
China last month canceled four months of estimated drawdowns on its inventories, mainly due to low refinery volumes, according to estimates by Reuters columnist Clyde Russell based on official Chinese data.
Refinery cycles in China fell to 13.74 million bpd in August – the lowest in 15 months, following a significant reduction in fuel export quotas and the latest wave of Covid-19. The decline in refinery production rates came as part of a government crackdown on independent refiners, the so-called teapots. These teapots now account for a considerable share of petroleum imports and fuel exports, which has contributed to a regional fuel glut that has depressed refiner margins.
China is unwilling to declare strategic reserves of anything, including crude oil. So, in most cases, analysts play a game of estimates, calculations, and conclusions from past behavior to try to measure China’s stocks of strategic commodities.
Russell of Reuters estimated that since the average crude availability in China was 14.5 million b / d in August, including imports of 10.49 million b / d and domestic crude production of 4, 01 million b / d, and the refinery cycles were 13.74 million b / d, that left 760,000 b / d which was probably in storage, strategic or commercial.
The estimated increase in Chinese inventories in August comes just as the world’s largest crude importer announces that it will auction crude oil from its strategic reserves, in a bid to reduce oil prices and inflationary pressures . China will hold the first crude oil auction from its strategic reserves on September 24, launching the unprecedented sale of oil from domestic stocks it announced last week in an attempt to “ease pressures on commodity prices “.
By Tsvetana Paraskova for OilUSD
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