China to auction off state crude oil reserves to help refiners

September 9, 2021

BEIJING (Reuters) -China’s state reserves administration said on Thursday it would release crude oil reserves to the market via public auction to ease the pressure of high feedstock costs on domestic refiners.

The release, described as a first, will be made in phases and is mainly for integrated refining and chemical plants, the National Food and Strategic Reserves Administration said in a statement. That potentially rules out the participation of smaller, independent refiners known as “teapots” in the bidding.

The move will “better stabilise domestic market supply and demand and effectively guarantee the country’s energy security,” the administration added, without specifying the volume of crude it would sell.

China, the world’s biggest crude oil importer, is famously secretive about its strategic petroleum reserve (SPR) and rarely releases information on the amount of oil it holds.

Beijing has repeatedly taken steps to cool a rally in the price of other key commodities this year, even auctioning off state metal reserves for the first time in more than a decade to try and keep manufacturers’ costs down.

Even so, factory gate inflation hit a 13-year high in August, data published earlier on Thursday showed.

The out-of-the-blue announcement from the reserves administration comes with benchmark Brent crude oil prices up almost 40% this year amid a rebound in energy demand after a coronavirus-led collapse in 2020.

Brent had climbed as much as 0.8% on Thursday but turned lower following the reserves administration announcement and was trading down 1.4% at $71.57 a barrel as of 1339 GMT.

Consultancy Energy Aspects in early July estimated that China’s SPR sites hold 220 million barrels of crude oil, equivalent to 15 days of demand.

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

Two years ago, China’s National Energy Administration said the country had oil inventories that could last 80 days, including those in the SPR, storage at oil firms and commercial tanks.

(Reporting by Muyu Xu and Tom DalyAdditional reporting by Beijing NewsroomEditing by David Goodman and Mark Potter)

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