Daily Energy Report
China oil inventories, Oil prices continue rise, Aramco to increase capacity, EV start-ups suffering, UAE makes big gas deal, another regulation in US Gulf, EV batterybreakthrough, and more.
Related Links:
Busting Myths about China’s Oil Demand and Imports
Early Signs of Recovery in China’s Gas Demand
After Xi’s Visit: Will Saudi Arabia Ditch the US Dollar for China’s Yuan?
Chart of the Day: China will use its inventories as oil prices rise.
Summary
Figure (1) above shows the trends in China’s total oil inventories (commercial and strategic). It illustrates the inverse relationship between inventories and oil prices (with a lag of two months).
EOA’s Main Takeaways
If you have any doubts that China may not use its inventories, think again. Several days ago, we posted a chart showing the inverse relationship between China’s crude oil imports and prices. Now we are posting this chart showing the inverse relationship between inventories and oil prices. China will import and store crude when prices are low. As prices rise, it will lower imports and withdraw from inventories. Since China is the largest oil importer in the world and has been the engine of the world economy for years, lower crude imports limit the increase in oil prices. Those who are interested in the details and the impact on the oil market may read our report HERE.
China now has about 1.1 billion barrels in inventories, including strategic reserves (including oil stored underground. The chart above shows storage above ground). Its inventories are higher than that of the US by about 250 mb. China has become what is called “oligopsonist” in economic jargon: a buyer who can influence the market. As we have mentioned before, the Saudis will set the price floor. China will set the ceiling. For this reason, absent any major political event in any of the major oil-producing countries, we do not see $100/b in 2023.
Story of the Day: OPEC+ JMMC Meeting
Summary
The Joint Ministerial Monitoring Committee (JMMC) urged full conformity to the Declaration of Cooperation (DoC) by all participating OPEC and non-OPEC countries. The committee praised Saudi Arabia for its voluntary cut of 1 million barrels per day extended through September and acknowledged Russia for reducing exports by 300,000 barrels per day in September. The committee voted to meet bi-monthly instead of monthly.
The Joint Ministerial Monitoring Committee that meets every two months met earlier today and OPEC issued the press release below.
