CHINA OIL

[rffrydr]

Here's the first sign of that demand I wondered about:

http://online.wsj.com/article/SB116068035924090950.html?mod=home_whats_news_us

The combination of a ballooning, politically awkward surplus, big selloff and need to create a strategic reserve may put a floor under crude--for now.

[HenryTo]

China maintains its relatively high fuel prices. This shows China's committment to reducing its "energy intensity" by 20% in the next few years:
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China won't cut fuel price, even at twice crude cost
Tue Jan 13, 2009 11:44pm EST

BEIJING, Jan 14 (Reuters) - China has no room for further fuel price cuts even though motorists are paying the equivalent of up to $80-90 per barrel of crude oil, twice the international crude price, state media quoted an official as saying.

"We have no plan to re-adjust the retailing prices as the present prices are well reflected in the cost," the official China Daily reported, citing a spokesman for the National Development and Reform Commission (NDRC), China's price-setting ministry.

"We found there is no room for further retail price cuts at the national level," the spokesman said, adding that a December price cut and new government-set ceiling prices were based on "the averaged cost of $80 per barrel".

China slashed gasoline prices by 14 percent, diesel by 18 percent and jet kerosene by nearly a third on Dec. 19, the first time in almost two years.

But it also raised consumption tax on refined oil products sharply on Jan. 1 to compensate for revenue lost from the abolition of a range of transport fees and road tolls. The move was aimed at curbing wastage of fuel and making China more efficient and cleaner.

Motorists now pay 1 yuan ($0.146) on a litre of gasoline, which retails for around 5.44 yuan in Beijing, on top of 17 percent value-added tax, meaning tax accounts for more than a third of every fill-up at the pump.

The NDRC spokesman did not specify what was covered by the $80-90 figure, which referred to state-set ceiling prices and could include crude oil purchases, refinery processing costs, taxes and profits.

Some analysts have said that Chinese fuel prices were still at a hefty premium over rates in many other countries and there was room for a reduction even after taking into account the inefficiency in Chinese refineries.

Beijing has said it will continue to "set and guide" gasoline and diesel prices. It has not disclosed the conditions for changing prices, other than saying fuel prices would be based on refinery gate prices and reflect factors such as international crude prices, average production costs and domestic supply and demand.

On Wednesday, U.S. crude CLc1 was trading around $38.80 a barrel, slightly above its level on Dec. 19 when China introduced the cuts, although it has fluctuated in the interim.

[HenryTo]

China raises tax on fuel consumption:

http://news.morningstar.com/articlenet/article.aspx?id=268930

[rffrydr]

https://research.mfglobal.com/Dailyres/NewYork/Energy/Dailyenergy_files/image007.jpg
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

And the cost of above hits the bottomline of the once biggest.

http://www.bloomberg.com/apps/news?pid=20601087&sid=agFeSKzStXfA&refer=home
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Cost of driving in china:

http://ftalphaville.ft.com/blog/2008/04/25/12621/the-china-priceto-drive/
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Difficult to say how much of this increase was due to the inventory building ahead of the Olympics, but it is also interesting to see that the Chinese government has now embarked on a plan to require wholesalers to start building up an inventory (equivalent to 15 days supply) as a means to curb daily price volatility.
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UDPATE 2-China March oil demand jumps 8pct, fastest since 06
Reuters, Tuesday April 22 2008 (Updates with details, quotes throughout)
By Emma Graham-Harrison

BEIJING, April 22 (Reuters) - China's implied oil demand leapt 8 percent in March from a year earlier, the fastest rate in 19 months, as refiners boosted imports to stock up ahead of the Olympics, official data showed on Tuesday.

A resurgence in demand from the world's number-two consumer has helped drive oil markets up nearly a quarter this year to a record near $118 a barrel on Monday, even as high prices and an economic slowdown dent demand in the developed world.

Demand rose 6.2 percent in the first quarter, aided in part by a Beijing's tax rebate on imported fuels, which has taken some of the sting from refining losses inflicted by the widening gap between soaring crude costs and low retail prices.

China used or stockpiled 7.26 million barrels of oil per day in March, Reuters calculations based on net fuel imports plus refinery production showed on Tuesday.

This was supported by a leap of one-third in net imports versus a year ago, the fastest growth since the start of 2007, with diesel and fuel oil shipments strongest.

Despite low margins, March refining runs were up 6.8 percent from a year earlier and analysts say that with the Olympics looming, Beijing may have invoked patriotic pride to encourage its firms to stock up to ensure smooth supplies.

Because China does not publish inventory data, oil that is put into storage tanks registers as part of implied demand.

"March demand growth was robust...this may reflect the desire on the government's part to build up inventory before the summer Olympics," said U.S.-based analyst Paul Ting.

"Another reason for inventory build was the speculation that the government may raise product prices. As the hope of price increases fades, there were some de-stocking recently, but the inventory level is still adequate," he added.

Some refiners are buying feedstock at over $30 per barrel above break-even levels, because pump prices in China have risen by 10 percent or less since mid-2006.

REBATES, SUBSIDIES?

A year ago, a gap this large would likely have sparked shortages, and eventually a price rise, but this year Beijing has opted to refund import taxes in order to avoid raising prices, which would stoke inflation now at its highest in almost 12 years.

Beijing is also mulling a similar import tax rebate for crude shipments and said that from May 1 it will require wholesalers of refined oil products to keep stocks equivalent to at least 15 days of sales to help ward off supply disruptions.

And it is stepping up subsidies against monthly refining losses, with PetroChina expecting a first payout from April, all of which has helped keep apparent demand robust, analysts say. [ID:nHKG270904]
Until recently the upstream giant had been expected to cover losses with earnings from its production units, although refining heavyweight Sinopec <0386.HK> has been getting government assistance to trim losses for several years.

If this assortment of ad-hoc measures helps prevent a recurrance of the sporadic fuel shortages that China has suffered in recent years, it could put further pressure on world markets, particularly over the peak demand summer period.

The country's car ownership is booming and fuel consumption usually rises in the summer as the newly rich enjoy a smaller scale version of the U.S. "driving season", with weekend trips and air conditioning supporting demand.

"Chinese oil demand would probably rise sharply as long as supplies proved to be sufficient," the International Energy Agency said in a recent report.

"In the meantime, domestic needs will likely continue to depend on a high level of imports, both of crude...and products (notably of diesel)," it added. (Reporting by Emma Graham-Harrison; editing by Ken Wills and Jonathan Leff)

[rffrydr]

I have little doubt they have stopped it. State commodity stockpiles however must remain secret otherwise they defeat the purpose--for in and of themselves they serve no purpose.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

This older research piece from the St. Louis Fed suggests a daily fill rate of about 100,000 barrels/day.

http://research.stlouisfed.org/publications/net/20070101/cover.pdf

However, assuming that current inventories are at 33 million barrels, this implies an increase of only 30 million barrels over the last 18 months, or the equivalent of only 55,000 barrels a day.

With the record high prices today, it makes sense to assume that China's SPR daily fill rate is now closer to 55,000 than to 100,000 barrels a day, if it hasn't stopped altogether.

[HenryTo]

We now know that China's "Strategic Petroleum Reserves" has at least 33 million barrels stored. China hasn't disclosed its daily fill rate but they have the capacity to store 100 million barrels right now. If we assume they have the same fill rate as the US (70,000 barrels/day), then it would take more than 2 1/2 years to fill that remaining 67 million barrels, disregarding the fact that China has more plans to further build out their SPR.
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China 3rd oil reserve ready; no oil fill yet-sourceReuters, Friday April 18 2008

SINGAPORE, April 18 (Reuters) - China's third strategic oil reserve base of Huangdao is ready for filling after construction of all crude tanks and related facilities were completed, but no oil has been pumped in yet, a Chinese source said on Friday.

The first batch at Huangdao -- 12 tanks with 100,000 cubic metres of storage capacity each -- was first ready for use last June and later had some technical upgrades to improve lightning-proof ability after one tank was struck by a bolt in August.

The tanks in the port city of Qingdao in eastern Shandong province have been idled so far and Beijing has not disclosed any plans when it may start injection or where it will secure the resource.

"The government may have many concerns to delay the use of tanks, but high oil prices are likely the main consideration," the source said, asking not to be named due to sensitivity of the issue.

Zhang Guobao, vice minister of the country's powerful economic planner and chief of the newly established State Energy Bureau, said in March that Huangdao and the fourth base of Dalian were near completion and would soon be put to use.

Huangdao, with capacity of nearly 20 million barrels, was previously scheduled to be ready for use by end-2008.

The world's second-largest energy consumer already has two tank farms in operation in eastern Zhejiang province, one of which Beijing said late last year had been filled with 33 million barrels of oil.

The four bases, which together make up China's first phase of strategic oil stockpiling, can hold 100 million barrels of crude, or around one month of imports.

Beijing has not yet decided on the scale or location of its second phase of strategic petroleum reserves, Zhang said last month.

The tanks have been managed by state-owned oil firms under a lease scheme, prompting concerns in the global market that China might operate its reserve differently from industrialised nations under the supervision of the International Energy Agency, which calls for stock draws only for emergencies.

[rffrydr]

Overlooked point in Paulsen trip. Mentality of "ownership" for control.

http://www.thepeninsulaqatar.com/Display_news.asp?section=Business_News&subsection=market+news&month=December2006&file=Business_News2006122175216.xml

Manipulate global prices? China? No way.
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

China will add up to 4 million barrels of crude to its strategic storage tanks by mid-December. The new crude will top up China’s reserve facility near Ningbo to about one-fifth of its capacity.