China is auctioning off state oil reserves to help refiners

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Chambroad Petrochemical Refinery Plants can be seen in Boxing, Shandong Province, China on May 10, 2016. REUTERS / Meng Meng / File Photo

  • China will sell state crude oil reserves in phases through a public auction
  • Inflation of the price to the producer of the first importer of oil, maximum of 13 years in August
  • Auctions could sell 10-15 million bbl of oil at a time – analyst
  • Brent falls to 1.9% after the announcement before the rebound
  • China has released other commodity stocks in 2021 to cool prices

BEIJING, Sept. 9 (Reuters) – China’s state reserves administration said on Thursday it would release crude oil reserves to the market through a public auction to ease pressure from high raw material costs at domestic refiners.

The launch, described as the first, will be carried out in phases and is aimed primarily at integrated chemical refining plants, the National Administration of Strategic and Food Reserves said in a statement. This may rule out the involvement of some smaller independent refiners, known as “teapots”.

The measure “will better stabilize the supply and demand of the domestic market and effectively ensure the country’s energy security,” the administration added, without specifying the volume of crude oil it would sell or when.

China, the world’s largest importer of crude oil, is secretly famous for its Strategic Oil Reserve (SPR).

On several occasions, it has taken steps to cool the rise in the price of key commodities this year, even auctioning off state metal reserves for the first time in more than a decade to try to cut manufacturers ’costs.

However, factory inflation peaked at 13 years in August, according to data released on Thursday. Read more

The out-of-point announcement by the reserves administration comes with Brent crude oil reference prices at around 40% this year, amid a rise in energy demand after a collapse led by the coronavirus in 2020.

Brent fell to 1.9% after the announcement before recovering to operate 0.4%, to $ 72.89 a barrel, as of 1502 GMT.

Consulting Energy Aspects, in early July, estimated that China’s SPR centers contain 220 million barrels of crude oil, equivalent to 15 days of demand. Read more

“SPR news comes at a time when the disruption to Shell’s Mars platform is forcing Chinese majors to look for alternatives because many of the 10-12 million barrels of Mars cargoes purchased for the September and October cargoes have been canceled, “said Liu, an Energy Aspects analyst. Yuntao said.

Royal Dutch Shell Plc (RDSa.L) closed the Mars platform in the Gulf of Mexico late last month as Hurricane Ida approached.

Liu predicts that auction releases would sell for 10 to 15 million barrels at a time, at most.

The latest public figures for China’s SPR came in 2017, when the National Statistics Office said the country had built nine storage bases with a total reserve capacity of 37.73 million cubic meters, or 237.66 million barrels, crude.

Reports by Muyu Xu and Tom Daly Additional reports by Beijing Newsroom Edited by David Goodman, Mark Potter and Pravin Char

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