China reveals part of the mystery of its intervention in the oil market

China Oil Market

The National Administration of Food and Strategic Reserves has confirmed today that it will carry out the first public auction of crude from its strategic reserves among the country’s oil companies. Specifically, it will be held on September 24 and 7.38 million barrels will be put into circulation. Until today it was speculated that the Asian giant had already put crude oil into circulation in the domestic market.

China has dispelled part of the doubts it had unleashed among operators by announcing last week that it was going to use its strategic oil reserves, which amount to more than 200 million barrels of crude. The previous statement was open enough to speculate on whether it had already released barrels or was an announcement.

Today the National Administration of Food and Strategic Reserves has been clearer and more precise and has announced that the first auction will be held on September 24 to use the country’s strategic reserve. In addition, it has offered the volume that will be put into circulation, 7.38 million barrels, it does not reach what the Asian giant imports on a daily basis.

From the outset, China was very explicit in speaking of an intervention to “ease the pressure of rising commodity prices.”

The Chinese agency explained that it is managing a “normalized” rotation of state reserves to fulfill “its role in balancing the market”, which is assumed to be able to continue releasing barrels. National oil reserves have been released in the domestic market to “better stabilize supply and demand.”

However, at the same time, doubts arose as to whether the country was experiencing oil shortage problems due to the impact of Hurricane Ida on pending orders. Royal Dutch Shell canceled oil exports due to damage to facilities in the Gulf of Mexico. According to Bloomberg, it could have affected the order of 2 million barrels of oil for the Chinese oil company Unipec. Energy Aspects estimates that shipments between 10 and 12 million barrels have been canceled with a delivery date for September and October due to problems with Royal Dutch Shell’s Mars platform.

China in the oil Market

Little impact on the price of oil

Now the big question is whether China will continue with new auctions. So far, their ads have not spooked the market. Oil rises almost 1%, after pausing today in its climb. The Brent exceeds the 74 dollars and the Texas the 70 dollars, in highs of a month and a half.

The Asian giant faces, like the rest of the world, a rising price of energy. Not only oil but also coal and natural gas, which is causing an increase in the cost of electricity consumption in homes and companies. In addition, in some provinces, there are blackouts due to a lack of supply that is affecting the industrial sector.

China is the world’s largest oil importer and in the last decade has built a huge reserve of crude. This reserve differs from the strategic oil reserves that the United States and Europe have, which can only be drawn on in the event of supply cuts or wars.