More News on China's Oil Reserves Plan

Friday, July 01, 2005

There won't be an extended pause for oil prices. China's plans to build up a strategic petroleum reserve are gaining shape. reports that the country has begun to build the tanks, an undertaking that will take several years to complete. It did not say how many barrels of oil the Eastern giant wants to store. The implications for the oil market can only be guessed yet as China wants to use its future reserves to smooth out spikes in the oil price. China has said earlier - see this post - that it also sees the build-up of the petroleum reserve as a way to diversify its forex reserves.
The Chinese want to avoid pushing oil prices still higher. Sinochem corp's vice president Han Gensheng thinks China will not start filling the reserve when the first tanks are ready later this year.
The comments are at odds with the statement made Tuesday by Zhang Guobao, vice chairman of the National Development and Reform Commission, that China would begin filling the reserve by the end of the year using domestic crude.
Meanwhile China tries to curb gasoline use by imposing tougher fuel economy standards in cars, reports the FT. From next week, carmakers in China will be required to meet stricter standards for engines than those in the US. The new engine rules are part of a raft of measures Beijing is preparing for the sector. The new standards are specifically aimed at minivans and SUV's and heavy vehicles.
At the moment, vehicles consume about a third of China's fuel. Yet as demand for cars doubles to an expected 8 to 9 million a year by the end of the decade, this will rise to 65 per cent of the oil by 2015, the government says.
US Will Have Topped Up Its SPR By August
The US Strategic Petroleum Reserve (SPR) will be topped up to its capacity of 700 million barrels by the end of August and there are plans for an expansion that will add another 300 million barrels to the existing facilities. The schedule for full capacity utilization has gotten pushed back by two months from earlier plans. For the SPR-meter click here.


Wikinvest Wire