OPEC Has New Competitor

China Ships Oil From Swelling Storage

 Some oil from China’s swelling storage tanks is finding its way back into the international market as traders jump at the opportunity to source cheap crude for resale to regional refiners. The shipments in question, so far just 1 million barrels, have been procured by trading houses via the Shanghai futures exchange, and loaded from the bourse’s numerous storage tanks that dot the country’s eastern coast. From these Chinese ports, the cargoes were then shipped to international buyers who would have otherwise sourced such supplies from producers across the Middle East and Africa.

While China will never compete with the likes of Saudi Arabia as a supplier in the long run, the trickle of crude out of the world’s No. 1 importer underscores how fragile oil’s recovery remains. China went on a record buying spree to fill its reserves with low-cost supplies, helping prices double from April lows. Now the purchases are slowing and some of those stockpiles are hitting the market just as OPEC and its partners prepare to raise output. The oil is coming from the 14 depots designated as delivery and storage points for the Shanghai International Energy Exchange’s oil futures trading contracts. The exchange had a total of 39 million barrels of medium sour grades in storage as of this July 16, up more than 10-fold since April 20.

The rising inventories are weighing on the price of the oil futures, making it attractive for traders to buy them, accept physical delivery upon expiration, and then ship the crude to refineries nearby, according to traders and analysts surveyed by Bloomberg.

https://ca.finance.yahoo.com/

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