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THE big rally in the oil price in recent weeks is down to Chinese stockpiling, a leading energy industry analyst has claimed.
Oil industry experts Bernstein Research say they have been spying on the world's third-largest economy and have concluded China is actively hoarding supplies.
After the spectacular crash in the crude price last year following an all-time high of $147 a barrel, oil has soared again this year, up 70% since mid-January. In the past four weeks, the oil price has jumped 25% to trade around the $60-a-barrel level again.
Energy analysts have been scratching their heads for a reason, other than the recent dollar weakness which always pushes up the value of crude.
Analysts have argued that global demand remains weak, the Saudi-led cartel of major oil producers Opec has not cut production as deeply as it might and output from non-Opec countries is robust.
But according to Bernstein's Neil McMahon: "If the supply/demand balance is not driving higher oil prices, then what is?
"We believe that increased imports into China could be part of the explanation.
McMahon says Chinese imports spiked in March and April and the country's storage levels have reached a new peak.
"We believe [the rise in the oil price] reflects not strengthening demand, but rather China's efforts to boost its strategic petroleum reserve," he said. "To verify this we have utilised satellite tracking of tanker movements, as well as time-lapse satellite images to observe the amount of storage expansion.
"Our analysis confirms that tanker capacity arrivals into China have spiked up in recent months, in line with imports, but more importantly, tanker arrivals into the ports [holding strategic reserves] have increased materially.
"Satellite images confirm a significant increase in storage construction in the last few years. This suggests that China is stockpiling crude oil.
"This recent drive by the Chinese to fill their reserves should have offered some support to crude prices and will continue to do so going forward."
Reader views (8)
"output from non-Opec countries is robust"
I assume your not counting UK, Norway, Mexico, Russia, China or Nigeria in that since production from all those countries has failed to grow or declined in recent years.
Mexican and North Sea production is down about a third from its peak (2005 Mexico & 2000 North Sea)
- P. Coyle, London, UK, 27/05/2009 16:37
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If the Chinese have extra oil, its HOARDING, if the Americans have extra oil, its a STRATEGIC RESERVE. The Chinese have to buy something with all their billions of US Dollars (before they are totally worthless) so why not oil?
- Mike, Sydney, Australia, 27/05/2009 00:17
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Any excuse to put the price up eh !!!
Who's the genius who said ' i know lets blame the Chinese'.
- Mr S.Port, London, 26/05/2009 23:48
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Charles: Buying on the cheap, that's what smart people do, whereas people like bankers, Madoff etc... steal money while lying low, that's really low.
"Those sneaky CHinese, buying more of a product when it's on special offer! You'd never catch upstanding westerners doing that.
- Mdj E10, london uk
- James Ellis, Montreal, 26/05/2009 20:41
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You are right Mdj, upstanding Westerners would just go to war to get the oil they wanted, they wouldnt wait for any special offers. Upstanding westerners do it the dirty way.
- Sky, London, UK, 26/05/2009 20:04
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The premise that China has been hoarding oil may not be false. The idea that this could have any impact on the price is preposterous. The Oil market is so suspect; normal rules of supply and demand seem to be suspended. The futures market has much more of a say in the oil price than anything China can do.
- Steven, Acton, London, 26/05/2009 17:55
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I thought it was due to this dreadful Government putting up the petrol tax yet again and the greedy petrol companies. The dearest petrol I saw recently was in a garage in Shropshire - £103.9 per. litre and oil is down to $60 a barrel!!
Just doesn`t make sense to me.
Of course the higher the price the more the Government take in tax to waste.
- Charles, Stanmore. London, 26/05/2009 16:13
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Those sneaky CHinese, buying more of a product when it's on special offer! You'd never catch upstanding westerners doing that.
- Mdj E10, london uk, 26/05/2009 15:00
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