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Global Oil Inventories: China Drains Commercial and Strategic Crude Oil Tanks

Copyright © 2021 Energy Intelligence Group
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China continues draining its crude inventories in reaction to rising crude oil prices. In April, with Brent moving over $60, China took 9 million barrels out of stocks; in May, with Brent at $65, the tanks emptied 23 million bbl. In June and July, as Brent averaged just over $70, China’s crude supply was 31 million and 21 million bbl short, respectively. Crude inventories have lost 85 million bbl since April. In addition, the government is releasing around 25 million bbl from the Strategic Petroleum Reserve (SPR) (related). Chinese buyers are increasingly price sensitive and tap their large commercial inventories to protest high prices engineered by Opec-plus (related). Energy Intelligence sees the country’s July commercial crude stocks drop to 839 million bbl, while the strategic stocks are down to 261 million bbl. The trend is set to reverse in August when crude stocks add around 25 million bbl, with crude imports rising. Chinese crude data is prone to revisions but the trend is showing. As a result, China was a key contributor to falling global commercial crude inventories in May, June and July, which has lowered the forward demand cover (OMI Jul.19'21). In July alone, these global stocks fell another 2 million barrels per day, preliminary data show. Global commercial product tanks are basically unchanged. They were expected to draw, but the new wave of Delta infections has lowered the growth of fuel consumption (related). OECD crude storage, the world’s most visible inventory marker, was down 700,000 b/d in July, while refined product tanks added 500,000 b/d. Forward demand cover for OECD inventories has dropped in a near-straight line from a peak of 79.1 days in March 2020 to 61.6 days in June, but the fall stagnated in July. Although stocks are seen down another 6 million bbl at 2.88 billion bbl, expectations of somewhat lower oil demand in the OECD over the next three months brings the cover up to 61.7 days. OECD inventories are expected to decline further in the coming months, without improving the forward cover. Global commercial cover is coming down and is now at 58.2 days (OMI Jun.16'21). Government-controlled strategic reserves are draining in the US, China and India. The US has a sales program approved by Congress that allows for the sale of 10 million bbl in 2021 and 16 million bbl in 2022, which lowers US' crude SPR to 613 million bbl. With rising shale production, the US is close to being self-sufficient, and security of supply would allow to lower inventories. China and India use the SPR to actively manage the crude market, although India said it would use the proceeds of its current 18 million bbl sale to build new SPR tanks. After a big jump in June, oil at sea remained virtually unchanged. Fixtures for very large crude carriers in the Mideast were again up in the Mideast for July, but sailings from the Atlantic Basin to Asia were down. Exports of Russia, North Sea, US and West African crudes to Asia fell (related). Oil a sea, at 1.28 billion bbl, is 110 million bbl lower than last year July, and 80 million bbl of that is oil in transit while floating storage fell 30 million bbl on the year. OBSERVED GLOBAL OIL INVENTORIES (At Month's End) Stock Chg. (in '000 b/d) (million bbl) 2021 2020 2021 2021 Region May Jun Jul Jul Jun Jul Q2 World Commercial* 5,960 5,873 5,822 6,544 -2,893 -1,633 -1,601 Crude 2,866 2,804 2,754 3,122 -2,053 -1,633 -1,422 Gasoline 719 708 686 755 -357 -735 -166 Mid-Distillates 1,122 1,100 1,106 1,268 -734 +189 -411 Fuel Oil 327 333 325 354 +177 -262 +112 Total Products 3,094 3,069 3,068 3,422 -836 -6 -150 OECD-34 Commercial* 2,932 2,882 2,875 3,218 -1,677 -213 -476 Crude 1,115 1,081 1,059 1,230 -1,144 -707 -758 Gasoline 392 383 369 397 -304 -433 -35 Mid-Distillates 589 583 590 649 -195 +213 -30 Fuel Oil 125 121 119 136 -159 -53 -32 Total Products 1,817 1,801 1,816 1,988 -534 +494 +282 Americas 1,564 1,547 1,539 1,712 -564 -280 -420 Crude 646 616 607 676 -993 -317 +223 Gasoline 268 266 255 277 -54 -348 -193 Mid-Distillates 208 213 211 243 +164 -54 -314 Fuel Oil 40 39 37 43 -33 -72 -19 Total Products 918 931 932 1,036 +429 +37 -643 Europe 1,007 981 985 1,092 -884 +141 -576 Crude 340 341 340 383 +62 -57 -188 Gasoline 95 88 86 94 -246 -70 -78 Mid-Distillates 317 307 312 334 -329 +184 -263 Fuel Oil 67 65 65 74 -89 -1 -20 Total Products 668 639 645 709 -946 +198 -387 Asia Oceania 361 354 351 414 -229 -74 -287 Crude 130 123 113 170 -212 -332 -186 Gasoline 29 29 28 26 -3 -15 -12 Mid-Distillates 65 64 66 71 -31 +84 -102 Fuel Oil 18 16 17 18 -37 +21 +35 Total Products 231 230 238 243 -17 +258 -101 Non-OECD Commercial* 3,028 2,991 2,947 3,326 -1,215 -1,420 -1,125 Crude 1,751 1,723 1,695 1,892 -909 -926 -664 Gasoline 327 326 316 358 -54 -301 -131 Mid-Distillates 533 517 516 619 -538 -25 -381 Fuel Oil 202 212 206 218 +336 -209 +143 Total Products 1,277 1,268 1,252 1,434 -302 -499 -432 Oil At Sea 1,255 1,277 1,278 1,389 +744 +20 -85 Oil In Transit 1,099 1,124 1,126 1,208 +824 +61 -107 Floating Storage 156 153 152 181 -80 -42 +22 Strategic Reserves 1,838 1,832 1,821 1,871 -194 -345 -200 Crude 1,516 1,510 1,499 1,548 -185 -345 -178 Products 322 322 322 323 -8 0 -22 Total World† 9,053 8,982 8,922 9,803 -2,342 -1,959 -1,886 Crude 5,221 5,168 5,107 5,599 -1,767 -1,972 -1,651 Products 3,832 3,815 3,815 4,204 -572 +7 -206 Days Cover‡ Chg. in Days Cover World Commercial 60.1 58.9 58.4 69.5 -1.2 -0.6 -4.0 Crude 28.9 28.1 27.6 33.2 -0.8 -0.5 -2.5 Products 31.2 30.8 30.8 36.3 -0.4 0.0 -1.4 Gasoline 27.1 26.6 25.7 30.6 -0.5 -0.9 -1.9 Mid-Distillates 33.3 32.4 32.3 39.5 -0.9 -0.1 -2.5 OECD-34 Commercial 63.2 61.6 61.7 75.7 -1.5 +0.1 -4.9 Crude 24.0 23.1 22.7 28.9 -0.9 -0.4 -3.0 Products 39.1 38.5 39.0 46.7 -0.6 +0.5 -1.8 Gasoline 26.3 25.7 24.9 29.6 -0.6 -0.8 -2.0 Mid-Distillates 35.9 35.4 35.5 42.9 -0.5 +0.1 -2.1 Non-OECD Commercial 57.3 56.5 55.4 64.4 -0.8 -1.1 -3.4 Crude 33.2 32.6 31.9 36.6 -0.6 -0.7 -2.0 Products 24.2 24.0 23.5 27.8 -0.2 -0.4 -1.3 Gasoline 28.1 27.7 26.6 31.8 -0.3 -1.1 -1.9 Mid-Distillates 30.9 29.6 29.3 36.4 -1.3 -0.3 -2.9 *Excludes Oil At Sea. †Includes Oil At Sea and Strategic Reserves. ‡Days of current

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