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Concerns rise over Chinese oil stockpiling

Chinese oil stockpiling may drive up oil prices

China is Accused of Forcing Energy Prices up by Stockpiling Oil.

Concerns are rising that energy prices could be forced up by the increasing stockpiling of oil taking place in China.

As oil is seen as an important commodity in the Asian nation, it has started to stockpile it so it has enough to keep its key industries running.

However, Michael Lewis, head of commodities at Deutsche Bank, suggested that traders in China have been playing the oil market tactically in the last few months, waiting for dips in the price of oil to make their move with purchasing the commodity.

In its latest report, the International Energy Agency stated that China imported an all-time high of 6.81 million barrels a day in April. This may have a knock-on impact on heating oil prices in the UK unless action is taking to prevent the stockpiling from occurring.

Mr Lewis told the Daily Telegraph that in trader language, China is “buying the dips” in the oil market. He added: “It’s very similar to what they have been doing with copper. Whenever it drops below $7,000 (£4,159 a tonne), they see it as a buying opportunity. They do the same with agricultural commodities.”

John Mitchell from Chatham House stated that China only has enough oil stocked up to cover 46 days of imports, which compares with 209 for the US. However, as these estimates are based on figures from last year, it is possible they are now out of date.

Political Instability in Russia is Adding to Concerns Over Oil 

The global oil situation is complicated further by the ongoing political instability in Ukraine, with Russia having moved its military forces into the disputed Crimea region earlier in the year. That led to fears Russian leader Vladimir Putin may be planning to move further into Ukraine, but these concerns are yet to come to fruition.

Russia produces much of the world’s oil and there has been speculation a new Cold War-style situation could develop regarding the supply of the commodity to the western world. Protests began in Ukraine’s capital city Kiev this year as the public grew increasingly unhappy with the country’s government’s perceived closeness to Russia, with thousands taking to the streets to campaign for Ukraine to instead lobby for membership of the European Union.

 

For more news on this item:

Read the Telegraph article on China stockpiling oil: http://www.telegraph.co.uk/finance/newsbysector/energy/10839701/China-steps-up-speed-of-oil-stockpiling-as-tensions-mount-in-Asia.html

China adding additional oil storage capacity

http://www.bloomberg.com/news/2013-05-14/china-seen-boosting-emergency-oil-storage-capacity-iea-says.html

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