Why is Oil Building Up Along China’s Coast?

Crude oil floating storage in China’s Shandong province surged by 20 million barrels from late February to early April as an armada of supertankers queued up near the province’s coastal refineries to unload their cargoes, satellite images analyzed by Kayrros reveal.

A fast-growing energy consumer, China is the world’s top importer of crude oil. China’s state-owned trading companies, including the trading arms of its two leading state-owned oil companies, Sinopec and PetroChina, had long dominated crude imports — until Beijing in 2016 started granting crude oil import licenses (and quotas) to a group of about 120 independent refineries, dubbed “teapots”, most of whom are located in Shandong.

A 20-million-barrel floating stock increase over 6 weeks comes to a daily average of about 475,000 barrels — enough, in a tightening oil market, to give prices a boost. China’s teapots have already accumulated enough market share — and are sufficiently unpredictable in their trading patterns — to move markets. Whether their latest buying spree reflects underlying, sustainable consumption growth or, on the contrary, only a one-off, opportunistic buying spike by crude traders remains unclear…

 

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