Launceston, Australia, July 27 (Reuters) – India’s move to market its strategic crude oil reserves is another sign that major Asian importers are taking steps to mitigate lofty prices caused by the OPEC+ group’s production cuts.
India, Asia’s second largest importer of crude following China, aims to market half of its strategic petroleum reserves, Reuters reported on July 22, citing two government sources familiar with the plan.
While the marketing of the Strategic Petroleum Reserve, which currently holds about 36.5 million barrels of crude oil or about 5 million tons, aims to hoist funds to build more storage tanks, it also allows refiners to access and purchase cheaper oil from storage when prices are lofty. . Back when prices drop again.
The Indian Strategic Petroleum Reserves Limited, which oversees the Strategic Petroleum Reserve, will be allowed to sell 1 million tons of crude to local buyers, while private companies leased to storage will be allowed to re-export 1.5 million tons of oil if Indian companies do not wish to do so.
Indian officials have expressed concern this year as crude prices rose strongly amid moves by the Organization of the Petroleum Exporting Countries (OPEC) to cut up to seven million barrels per day of production.
Brent crude oil futures contracts LCOc1 It is up 44% this year, to close at $74.50 a barrel on Monday, not much below the highest level so far this year at $77.84 reached on July 7.
For OPEC+, it may be a case of being watchful what you wish for. Senior member Saudi Arabia had previously rejected India’s calls to ease production curbs, instead telling New Delhi that it should instead use stocks bought cheaply final year when crude oil prices plunged to their lowest levels in two decades amid the coronavirus pandemic.
India’s move to market its Strategic Petroleum Reserve brings it in line with similar policies in Japan and South Korea, the third and fourth largest buyers of crude oil in Asia.
China using inventories
China has not disclosed details of the size or practices of managing the Strategic Petroleum Reserve, but it appears that the world’s largest importer of crude has fallen into stocks this year.
An estimate of how much can be made by deducting the whole amount of crude available from imports and domestic production from the amount of crude oil processed by refineries.
Chinese refineries processed 15.13 million barrels per day in the first half of the year, while imports amounted to 10.51 million barrels per day and local production was 4.01 million barrels per day. In short, they processed about 610,000 barrels per day of crude oil in the first half of what was available from imports and domestic production.
This is a reversal of the trend in recent years when China’s imports and domestic production exceeded refinery throughput by big margins.
The recent willingness of China, and now India, to use stockpiles to decrease crude oil imports can be seen in the data, as China’s imports of crude oil fell by 3% in the first half of 2021 compared to the alike period a year earlier, while India’s imports fell to the lowest in nine months in June.
Kepler commodity analysts expect China’s imports to see a rebound in July, reaching 10.85 million barrels per day, up from 9.77 million barrels per day in June, likely reflecting the return of many refineries to operations following maintenance periods.
However, India’s July imports are preparing poorly, with Kpler estimating that 3.66 million barrels per day will be dropped, which would be the weakest result since September final year.
If China and India become more active in using the Strategic Petroleum Reserve to cushion the impact of crude oil prices they consider too lofty, this could potentially be a bearish factor in the short term for oil.
The interrogate becomes how lengthy these countries, and others in Asia, can persevere to use stocks to offset imports, and what happens when they quit.
(Editing by Edwina Gibbs)
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