Oil market imbalances: new threats from China
According to the International Energy Agency, China is one of the major importers of crude oil in the world. For many years People’s Republic enjoyed the relatively low oil prices to stockpile crude for its strategic petroleum reserve (SPR). Now, it was announced that Chinese reserves are almost full. This fact, in perspective, may wind down the major oil exporters’ derisive attempts to reach the deal on the oil production freeze to bring the prices back from their extreme lows.
Oil experts believe that China may seriously disrupt the commodity markets, once it decides to play its trump card – use or sell its sacred oil reserves in order to keep the oil prices at their current level. Because People’s Republic doesn’t become better off from the oil price hikes. Nobody knows exactly at which extend this may affect oil markets, as China prefers not to reveal the information about how many barrels it managed to preserve. But, if we refer to the level of Chinese oil consumption (which was around 11.5 million barrels a day in June, according to the IEA), we may conclude, that China’s SPR is not small.
Meanwhile, a significant slowdown in Chinese demand chills the spine of major producers. Once they lose such a good customer, they will have to shrink their profits considerably. And with the deal on the oil output reduction looming on the horizon, this perspective doesn’t make them happy.