China's New Oil Reserve Facility Still Empty - No Decision On When To Fill

[hatrack]

SINGAPORE - Six months after construction, China's first strategic oil reserve tanks in coastal Ningbo stand empty as politicians face a Catch-22 that has thrown a key part of their energy security plan into limbo.

Three years ago China launched a strategy to offset its growing reliance on imported crude by building government-run storage facilities estimated at $1.4 billion, a plan that coincided with the start of an oil price rally many analysts say has years left to run.

Beijing is slowly adjusting to the fact that prices may never return to below $40, but it remains reluctant to fill its new tanks for fear incremental purchases will strain global supplies and land China, again, with the blame for soaring prices. While empty tanks do nothing to enhance the security of the world's second-largest oil consumer, they also do not fan the flames of a market unnerved by geopolitical risks in the Middle East and supply disruptions in Nigeria.

"China's strategic reserve has met some difficulty. You don't want to have too much a market impact when oil prices are this high," said Han Wenke, deputy director of Energy Research Institute (ERI), a Beijing-based government think tank.

EDIT

http://www.planetark.org/dailynewsstory.cfm/newsid/35398/story.htm

[phantom power]

1. Anybody here think we'll ever see $55/brl again? I doubt it.

I'd say $60, but it might temporarily drop to 58 or something.