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China's oil imports surge as country begins filling strategic reserves
2006-10-12 03:52:37 THE ASSOCIATED PRESS

SHANGHAI, Oct. 12 (AP) -- China's oil imports surged to a record high 3.3 million barrels a day in September, the government reported Thursday, as the country recently began filling its newly built strategic oil reserves.

Preliminary data from the General Administration of Customs showed crude oil imports jumped 24 percent over the same month a year earlier to 13.5 million metric tons (15 million U.S. tons) in September.

That would be an all-time high for any month, beating the 13.2 million tons of crude oil China imported in January, said David Hurd, a Beijing-based oil and gas research analyst at Deutsche Bank.

China recently completed construction of a storage facility in Zhenhai, a city south of Shanghai, the first of four planned strategic oil reserves. Filling of those tanks began in August with a shipment of Russian crude from the Urals, state media reported earlier this week.

China is the world's second largest consumer after the United States and construction of a state-controlled crude oil reserve is viewed as a strategic priority. Until now, Chinese oil companies have held between 10-30 days of oil stocks, but the country as a whole has not kept emergency reserves.

Eventually, Beijing is expected to stockpile up to 100 million barrels of petroleum, or the equivalent of a month's national consumption. The U.S., Japan and other countries have similar reserves.

Chinese analysts say the reserves will be filled gradually and are unlikely to impact international prices.

"Oil prices are mainly decided by the Middle East, U.S. and Russia," said Zou Jianhua, an expert on the oil industry at Zhongshan University in the southern city of Guangzhou.

"Compared to U.S. reserves, I think China's reserves are not big enough to impact the international market," Zou said.

So far, 3 million barrels of Russian oil have been shipped to Zhenhai, reports said. Earlier reports said China was also reserving some of its domestic offshore output for the reserves, though the ratio of imported to domestic oil to be stocked has not been disclosed.

The extent to which China may increase its international demand for crude oil to fill its strategic reserves remains unclear. Wary of accusations that rising Chinese demand may push oil prices higher, Beijing has released few details about how and when it will fill the reserves.

China's top economic planner, Ma Kai, said in March that the reserve at Zhenhai had been completed. But shipments apparently did not begin until after oil prices peaked at about US$78 a barrel in July.

Since then, the cost of crude oil has plunged by more than 25 percent amid rising global inventories, concerns about slowing economic growth and a milder-than-anticipated hurricane season.

Oil prices edged up Thursday, with light, sweet crude for November delivery rising 26 cents to US$57.85 a barrel in Asian electronic trading on the New York Mercantile Exchange.

The spike in Chinese demand may also reflect higher shipments to refiners taking advantage of lower costs, analysts said.

Whether China uses domestic or imported oil to fill the reserves, demand is bound to increase with the economy growing at a rate of more than 10 percent a year. Any diversion of locally pumped oil will have to be compensated for by higher purchases abroad.

Crude oil imports totaled 109.3 million tons, or 765 million barrels, in January-September, up 16.3 percent over the same period of 2005, figures showed.

Meanwhile, exports fell 22 percent year-on-year, to 4.3 million tons, or 30 million barrels, in the first nine months of the year, the customs figures showed. In September, China's crude oil exports fell 76 percent year-on-year in September, to 130,000 tons or about 910,000 barrels.

Three more reserves, at Daishan, also near Shanghai; Huangdao, in Shandong province, and Xingang, in northeastern Liaoning province, are due to be built in coming years.

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