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China to sell part of its precious oil supply

2021-09-10T15:46:20.275Z


China is starting to sell some of the oil it holds in strategic reserve in an attempt to lower prices in the market.


(210223) - TIANJIN, Feb. 23, 2021 (Xinhua) - Aerial photo taken on Feb. 21, 2021 shows the Bozhong 13-2 field, which is situated in the middle of the Bohai Sea, 140 km away from north China's Tianjin Municipality. The China National Offshore Oil Corporation (CNOOC) announced Monday that it has discovered a field in the Bohai Sea with estimated reserves of crude oil and natural gas totaling 100 million tonnes of oil equivalent. (Tianjin branch of China National Offshore Oil Corporation (CNOOC) / Handout via Xinhua) Xinhua News Agency / eyevineContact eyevine for more information about using this image: T: +44 (0) 20 8709 8709E: info@eyevine.comhttp: // www.eyevine.com

Hong Kong (CNN Business) -

China is starting to sell some of the oil it holds in strategic reserve in a bid to lower market prices, a historic first for the world's largest oil importer and its second-largest consumer.

The State Office of Grain and Material Reserves said Thursday night that it will release crude oil from its national reserve in batches.

It intends to sell the oil to refining and petrochemical companies.

"Putting national reserve crude oil on the market, through open auctions, will better stabilize supply and demand in the domestic market and effectively guarantee national energy security," the Office said in a statement, adding that the release of Oil "would ease the pressure of rising crude prices of materials for production companies."

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On Thursday, oil prices fell to their lowest levels in two weeks after China's announcement.

Brent, the world's benchmark index, fell 1.6%, while US oil fell 1.7%.

They recovered slightly, last trading at US $ 71.85 and US $ 68.45 per barrel, respectively.

The Chinese government did not say how much oil it would eventually sell, but accumulating barrels is critical for China.

The country relies heavily on foreign oil to boost its economy and has been working for years to bolster its emergency arsenal of oil reserves.

China doesn't publish much data on its oil reserves, but said, in 2017, that it had established nine major reserve bases across the country, with a combined capacity of 37.7 million tonnes.

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The country has also said it wanted to have 85 million tons of oil in its emergency reserve by the end of 2020, which is about the same as the United States maintains in its Strategic Petroleum Reserve, the world's largest backup oil supply. .

China increases its oil reserves

China's difficulties with oil

But China's economy is dealing with several headaches right now.

Inflation is skyrocketing and the country's producer price index hit a 13-year high last month, driven by rising commodity prices.

Energy costs are also skyrocketing and demand is so high that some provinces have even experienced power shortages.

Despite Beijing's efforts to contain rising costs, factory inflation remains high.

The Chinese government has warned that high costs for raw materials, such as energy and petrochemicals, will exacerbate the growth and employment challenges faced by manufacturers, especially small and medium-sized enterprises.

Rising prices also complicate any effort the government may consider to prevent an economic slowdown with more fiscal and monetary support.

Expansive policy aimed at boosting growth, such as increased government spending or expanding the money supply, will only further increase inflation.

China's economy has also been hit by other problems, including an outbreak of the delta variant of the new coronavirus and the shipping crisis.

An official survey of manufacturing activity last month reported the lowest growth rate since the start of the pandemic, while a private survey showed the first contraction since April 2020. Service industries also suffered, and the survey Non-manufacturing official recorded the first contraction since February 2020.

China Oil

Source: cnnespanol

All news articles on 2021-09-10

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