Amid rising crude oil prices, China has kept the market stable by using its huge reserves. According to analyst June Goh, China has prevented a big surge in prices by halting purchases, but it will soon have to return to the market to replenish its reserves.
Singapore, July 25 (ANI): As Brent crude crossed the $100 per barrel mark amid new geopolitical tensions in West Asia, a decision by China helped prevent an even sharper rise in global prices, according to June Goh, senior oil market analyst at Sparta Commodities. China decided to rely on its vast strategic oil reserves instead of aggressively purchasing crude oil.
China controlled the market with its huge reserves
Speaking to ANI, Goh said China entered this crisis with an exceptionally strong Strategic Petroleum Reserve (SPR) position, allowing it to run its economy without increasing purchases from the spot market. “China started the crisis in the best position, it had huge strategic petroleum reserves. I think there were about 1.17 billion barrels of reserves at the beginning of the crisis. And that’s just crude oil. We don’t know how much the reserves of products are,” Goh said.
According to Goh, China’s preparations have given it an opportunity to demonstrate the effectiveness of its long-term energy security strategy, while also relieving pressure on already strained global oil supplies. “They have managed to show that they do not even need to import a lot to run their industries,” he said. He also added that China has accelerated electric vehicle adoption and replaced some oil demand through coal-to-olefins technology and adjustments in petrochemical feedstocks.
Goh said China’s restraint in the international crude oil market has had a cascading effect on global energy markets.
When will China return to the market?
However, Goh believes that China will eventually have to return to the market to replenish its dwindling reserves, but only in favorable market conditions. He said, “They can still import. And in truth, they should come back to some imports. I believe they cannot stay like this forever.”
Goh said China briefly started buying crude when oil prices softened before geopolitical tensions escalated. “They started showing these signs… probably towards the end of June… they came into the market to buy some crude… However, then things started going up… and they stopped buying again,” he said.
‘Sweet spot’ of $70 per barrel
Asked at what price level China could start buying sustainably, Goh said, “It looks like it’s around $70 a barrel. That’s what it looks like. And they were basically in the accumulation phase for the last few years, when oil prices were between $60 and $70. So that could be a ‘sweet spot’.”
With Brent crude surpassing $100 a barrel, it will be closely watched to see whether any softening of prices encourages China to return to the spot market, a move that could significantly impact global oil demand dynamics. (ANI)
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