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Oil prices fall after China announced historic sale of precious reserves

bynewsdesk
September 10, 2021

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The State Bureau of Grain and Material Reserves said Thursday late that it will release crude oil from its national reserve in batches. It plans to sell the oil to refineries and petrochemical companies.

“Marking crude oil from the national reserve through open auctions will better stabilize supply and demand in the domestic market and effectively ensure national energy security,” the agency said in a statement, adding that releasing oil ” relieve the pressure of rising commodity prices.” prices for manufacturing companies.”

China has been storing oil for years. Low prices give it a reason to buy more

Oil prices fell to their lowest level in two weeks on Thursday after China’s announcement. Brent, the global benchmark, fell 1.6%, while US oil fell 1.7%. They recovered slightly, with latest trading at $71.85 and $68.45 a barrel respectively.

The government did not say how much oil it would eventually sell, but barrel hoarding is critical for China. The country relies heavily on foreign oil to power its economy and has been working for years to bolster its emergency supply of oil reserves. China doesn’t release much data on its oil reserves, but said in 2017 it had established nine major reserve bases across the country, with a combined capacity of 37.7 million tons.
The country has also said it aims to have 85 million tons of oil in its emergency supply by the end of 2020, which is almost as much as the United States has in its supply. Strategic Petroleum Reserve the world’s largest reserve oil reserve.
But the Chinese economy is currently facing several problems. Inflation is soaring and the country’s producer price index reached a 13-year high last month, driven by rising commodity prices. Energy costs are also rising and demand is so high that some provinces are even experiencing power shortages.
Despite Beijing’s efforts to contain rising costs, factory inflation remains high. The government has warned that high costs for raw materials such as energy and petrochemicals will exacerbate the growth and employment problems facing manufacturers, especially small and medium-sized companies.

Rising prices also complicate any attempt the government is considering to avert an economic slowdown with increased fiscal and monetary support. Expansion policies designed to stimulate growth, such as increased government spending or increased money supply, will only increase inflation further.

The Chinese economy has already been rocked by other issues, including an outbreak of the Delta coronavirus variant and the shipping crisis.

An official survey of manufacturing activity last month pointed to the lowest growth rate since the start of the pandemic, while a private survey showed the first contraction since April 2020. february 2020.

Sources

1/ https://Google.com/

2/ https://www.cnn.com/2021/09/10/economy/china-oil-prices-reserves-intl-hnk/index.html

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