China's Strategic Fill up: Boosting Oil Imports Amid Geopolitical Tensions

China has recently announced plans for another round of Strategic Petroleum Reserves SPR filling, ming to add approximately 8 million tonnes equivalent to roughly 58.5 barrels per day - bbld by March 2025. This plan is likely to increase crude demand by about 2, amounting to around 1 of China's total seaborne crude imports.

By the of June, the country's Big Four oil majorsPetroChina, Sinopec, CNOOC, and Sinochemhad amassed roughly 665 million barrels in their above-ground storage tanks. Moreover, they also held approximately 100-110 million barrels in underground SPR facilities controlled by these major firms. The utilization rate of these tanks has just surpassed the 60 mark, suggesting that the oil majors might achieve the target using existing storage capacities.

In November 2023 to March 2024, CNOOC injected around 10 million barrels of Russian Far East ESPO Bl crude into its Dongying storage facility in Shandong province under a previous SPR mandate source: news article. Meanwhile, other major-operated bases saw continuous declines in crude inventory levels.

The new SPR filling mandate is anticipated to bolster Russia's oil exports to China. Oil majors t to exercise caution when handling other sanctioned crude grades with international discounts and are likely to refrn from engaging with such products due to potential risks associated with sanctions violations. Consequently, this could potentially d Russia in mntning or increasing its crude shipments to the Chinese market.

The plan stabilize domestic crude markets by boosting demand and could help offset any disruptions that may arise from global oil supply constrnts or changes in geopolitical dynamics affecting the flow of crude into China. By injecting more domestically produced crude into the market, the SPR filling can also contribute to stabilizing prices within China's oil sector and reducing reliance on imported oil sources.

However, it remns to be seen how effectively this SPR filling will support crude imports considering other macroeconomic factors that may impact demand in the long term. The market needs further policy guidance and substantive encouragement to ensure sustned economic recovery and increased demand for oil products. This could help stabilize global oil markets as well.

In , while China's strategic move towards increasing its SPR can provide a short-term boost in demand for crude imports from Russia and potentially other producers, it is essential to consider the evolving dynamics of global energy trade patterns and geopolitical risks that might influence longer-term outcomes for both importers and exporters alike.
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