China demand for oil, other resources soars as Beijing stockpiles reserves

ZHOUSHAN, China (AP) — One reason behind the rebound in world oil prices lies here on China’s eastern seaboard, where tidy rows of immense, squat oil tanks tucked away on an island south of Shanghai, have been filled to guard China’s energy security.

Patrolled by military personnel, these tanks in Zhoushan are one of four locations where China keeps its national strategic reserves.
Since crude oil and other commodity prices plunged last year — oil tumbled from $147 last July to nearly $33 in December — China has been rushing to build up stockpiles at bargain prices, economists say. That motive, more than a revival in actual industrial demand, has driven its recent import boom of oil, copper and other metals.

The surge in Chinese demand, along with rising hopes for a global economic recovery, has helped lift the price of oil, which is now trading at around $70 a barrel, and other commodities.

The question is how high prices will go before Chinese buyers — and other investors that have flooded into commodities from other markets — decide to cut back, says Simon Wardell, an oil analyst at IHS Global Insight based in London.

“This market is persisting and it may well persist for a few more months yet, simply on the basis of increased optimism,” he said.

China is obsessed with making sure it has enough energy and materials to feed its economy. Authorities plan to build more oil reserve tanks while lining up diverse supply sources, from Brazil to Nigeria and Siberia.

Chicago Tribune