China is building new oil storage sites as it stockpiles crude while it is cheap. This year and next will see a total of 11 new storage sites built across the country, Reuters reported today, noting that the combined capacity of the new sites would come in at some 169 million barrels.
The amount is equal to two weeks’ worth of crude oil imports, Reuters also said. It compares to new oil storage capacity additions of between 180 and 190 million barrels for the period between 2020 and 2024, according to data from Vortexa and Kpler cited by the publication.
China has been buying more crude oil than it can consume and export for months now, taking advantage of stable prices and discounts for sanctioned crude from Russia and Iran. The country does not report inventory numbers but analysts estimate them on the basis of import and refinery runs data.
In August, for instance, China was stockpiling crude at a rate of 1 million barrels daily. The average rate for the year so far has been estimated at around 990,000 barrels daily. Over the next year or so, this rate may soften to around half a million barrels daily, at least according to Goldman Sachs’ Daan Struyven.
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Even with this stronger inventory buying from China, the majority of commodity analysts seem to be certain the oil market would tip into oversupply either by the end of this year or in 2026. This would drive prices even lower, the analysts believe, with some citing Brent crude at $50 and others seeing it dipping below that.
Goldman Sachs sees the supply overhang at some 1.9 million barrels daily. The International Energy Agency has predicted a record overhang of as much as 3 million barrels daily. Most analyses cite robust production from the U.S. shale patch even though growth there has slowed, sluggish demand growth, and OPEC+ output boosts, even though these are falling short of targets.
By Irina Slav for Oilprice.com
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