China to auction state oil reserves to help refiners

BEIJING, Sept. 9 (Reuters) – China’s state reserves administration announced on Thursday that it will release crude oil reserves into the market through public auctions to ease the pressure of high commodity costs on national refiners.

The release, described as a first, will be phased and primarily affects integrated refining and chemicals plants, the National Food and Strategic Reserves Administration said in a statement. This potentially excludes the participation of some smaller independent refiners called “teapots”.

This decision “will better stabilize the supply and demand of the domestic market and effectively guarantee the energy security of the country,” added the administration, without specifying the volume of crude it would sell or when.

China, the world’s largest importer of crude oil, is notoriously secretive about its Strategic Petroleum Reserve (SPR).

It has repeatedly taken steps to slow a rally in the prices of major commodities this year, even going so far as to auction off the state’s metal reserves for the first time in more than a decade to try reduce costs for manufacturers.

Despite this, factory exit inflation hit a 13-year high in August, according to data released earlier Thursday. Read more

The Reserve Administration’s unexpected announcement comes with benchmark Brent crude oil price hikes of around 40% this year amid rebounding energy demand after triggered collapse by coronavirus in 2020.

Brent fell 1.9% after the announcement before recovering to trade up 0.4% to $ 72.89 per barrel at 1502 GMT.

In early July, consulting firm Energy Aspects estimated that Chinese SPR sites held 220 million barrels of crude oil, the equivalent of 15 days of demand. Read more

The news from SPR comes at a time when Shell’s Mars platform outage is forcing Chinese majors to seek alternatives, as many of the 10 to 12 million barrels of Mars cargo purchased for September shipments and October were canceled, ”said Liu, an analyst at Energy Aspects. Yuntao said.

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

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

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

Reporting by Muyu Xu and Tom Daly Additional reporting from the Beijing press room Editing by David Goodman, Mark Potter and Pravin Char

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