At the bottom of the price of crude oil earlier this year, the world's oil storage facilities were full. In the United States, finding enough storage of crude oil has become such a problem that West Texas Intermediate's benchmark oil supply fell below zero on April 20, ending the day at $ 37.63 a barrel, which means you will essentially be paid 40 dollars per barrel, just so you take the oil.
However, soon China began to buy cheap oil. Beijing has played a key role in rebuilding the global oil market, helping to buy back a significant portion of the serious global oil surplus. This does not mean that the Chinese government was the only one who used historically low oil prices or bought oil in an attempt to save its own energy sector.
Back in March, the United States government pledged to support domestic oil producers by purchasing 30 million barrels of oil for the National strategic reserve. “But analysts say that China’s stockpile surpasses what other countries have done in response to low prices,” CNN writes . Matt Smith, director of raw materials strategy at ClipperData, told CNN reporters that “China is the only country that buys like crazy. In fact, China came out and bought up cheap oil in such a dizzying amount that now they have their own critical problem with oil storage. Over the course of several weeks, international news reported China-filled waterways filled with tankers. On July 1, CNN reported that “in the spring, China bought so much foreign oil at cheap prices that a huge traffic jam formed on the sea for tankers awaiting oil unloading,” when purchases begin to flow into the country. “The so-called floating storage facility in China, defined as barrels of oil on ships waiting to be unloaded for seven days or longer, has nearly quadrupled since late May, according to ClipperData. The volume has grown seven-fold compared with the monthly average for the first quarter of 2020. ”
The vast majority of oil supplied to China in recent weeks was purchased in April and May, when low prices stimulated a recovery in purchases. “The accumulation of oil at sea is a reflection of the hunt for China's deals during a period of severe stress in the energy market,” writes CNN. According to the report, the problem of oil tankers filling the seas of China, however, is not related to the fact that the mainland storage is already full, but simply because they cannot get it there quickly enough. Smith of ClipperData said that onshore storage could still be free, and that the current problem “is simply related to terminal congestion. They have so many things that they can't get him ashore fast enough. ”
How much storage space is left?
However, this week, a Chinese news outlet tells a different story. Although Chinese ground storage may not be complete, they say, it is getting dangerously close. Just this week, Beijing media group Caixin reported that “China has almost no place to store oil, which local traders bought at bargain prices earlier this year, when the Covid-19 pandemic crushed global oil demand.”
Caixin's reporting is based on data provided by Oilchem China, which shows that as of Wednesday, China’s crude oil storage was 69 percent, “with the 33.4 million tons that it accumulated, which is 24% more than in the previous year. ” It is dangerously close to overflow. “This is just 1 percentage point of the 70% threshold, which experts consider the country's limited potential,” Caixin reports.
And this stock is likely to continue to grow, even surpassing mass consumption in May. “The situation, which is also exacerbated by low turnover, is most noticeable in the Shandong province of East China, which is one of the country's oil refining centers. Oil tankers have to wait 15 to 20 days there before they can unload their cargo, “Caixin says.
The amount of oil stored in the storage can reach a maximum at the end of this month, as the country's demand for fuel continues slowly recovering, but if not, it can create big problems for the storage sector in China.
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