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Wood Mackenzie’s latest analysis reveals that China’s crude stock (including strategic and commercial petroleum reserves) could reach 1.15 billion barrels in 2020, equivalent to 83 days of oil demand.
Wood Mackenzie senior consultant Lei Sun said: “Major crude oil importers such as China have been known to build their strategic reserves when prices are low, as seen in previous oil price routs. This could help support prices on top of a sluggish recovery in global demand.
“Since the last oil price crash in 2014, China has been accelerating its crude imports for strategic and commercial storage from about 200 million barrels in 2014 to 900 million barrels in 2019. This is equivalent to about 70 days of its 2019 oil demand and 70% of its 2019 total storage capacity.
“China is expected to continue importing crude to fill its reserves taking advantage of lower oil prices. But this time, China could build its crude reserves by up to 300,000 barrels per day (b/d) from March 2020 to the end of 2020, due to limitations in storage capacity, as storage capacity utilisation reaches 90% this year. This fill rate is also less than half of what we have seen in the last two years, hence providing less support to oil prices than usual this time.”
Crude imports for refining are also expected to decline. With the expectation of tepid oil demand, Chinese crude runs are expected to be lower in 2020 than in 2019, resulting in less crude imports for refining. Weak demand and disruption caused by COVID-19 have caused China's crude runs to drop by 3.1 million b/d in February this year, leading to storage inventory build-up.
Sun said: “Our crude balance shows the crude stocks increased by about 155 million barrels between January and February 2020, equivalent to about 2.5 million b/d, which provided some support to oil prices during this time.”
Overall, crude imports for refining and storage are expected to be around 9.5 million b/d in 2020, down 5.0%, compared to about 10.0 million b/d in 2019.