China bought too much foreign crude oil at cheap prices this spring that a huge traffic jam of oil tankers formed at sea, waiting to offload. As of 29th June, China – the second-largest oil consumer of the world after the United States – collective seventy-three million barrels of oil on fifty-nine different ships moving at sea off the northern coast of the country, according to the statistics of ClipperData, the waterborne tracker flows of crude oil in real-time.
China bought so much foreign oil at dirt-cheap prices this spring that a massive traffic jam of tankers has formed at sea waiting to offload crude https://t.co/9wctN1ML6T
— CNN Business (@CNNBusiness) July 1, 2020
For context, that is about three-quarters of the oil demand for the whole world. The Chinese officials purchased today’s coming oil supply in March and April at a low price because of the coronavirus pandemic. On 20th April, the United States crude crashed below zero for the first time in the history of the country. The so-called floating crude storage of China waiting for one week or longer – almost quadrupled since the May end, according to the statistics of ClipperData.
The hoarding of barrels at sea reflects the bargain-hunting of China during the extreme stress time in the global oil market. The director of the commodity strategy at ClipperData, Matt Smith, said that China went on an international purchasing binge. Smith also noted that the onshore storage oil tanks of China are not even close to filling. It only related to terminal congestion.
China is hoarding a ton of crude at sea
According to ClipperData, as of 29th June, China amassed around seventy-three million barrels of oil on fifty-nine various floating ships at sea. Below is the graphical representation of China crude floating storage (millions of barrels) in the last five years.
Swing of $80 in crude oil prices
Because of the purchases of China, it helped uphold the global battered oil market. Just around fifty days after crashing of prices to a low of negative forty dollars per barrel, the United States crude rushed back to $40 per barrel. The extraordinary supply cuts by Russia and OPEC, strong demand from China, and the lifting of health restriction across the world drove the $80 swing.
The world’s second-biggest economy, China relies majorly on foreign crude to smoothly run its economy. That is why it makes sense for China to stockpile crude when worldwide prices were at rock bottom. According to S&P Global Platts, the oil imports of China flew nineteen percent in May from one year before to a record high of 11.3 million barrels a day.
The Chinese shipments of foreign crude likely to top that record in June. A good-sized amount of that crude originated in Latin America. According to ClipperData, Brazil is the top source of oil in the floating storage of China. It takes about forty-five days for crude to get shipped from Brazil to China. Similarly, much of the crude also comes from Saudi Arabia, Iraq, and Nigeria.