Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on October 16, 2016
Winners of the oil bust: How much oil did China store?
It’s not surprising that in recent years China has been taking advantage of the low crude prices to stockpile strategic and commercial oil reserves. It’s not surprising that official data – if and when authorities decide to make it available – understates said reserves. This lack of information has left oil traders, investors and the market guessing how much crude China has been storing, and how it could use the quantity to possibly swing oil demand growth estimates and oil prices.
U.S. geospatial analytics company Orbital Insight has analyzed satellite images of China’s territory, applying computer algorithms and machine learning to identify and quantify crude storage tanks. Since tanks have floating roofs, the company uses algorithms to detect the shadows on the roofs and calculate how full a storage facility is.
Orbital Insight has found that there were 2,100 commercial and strategic petroleum reserve tanks across China, with capacity to store 900 million barrels of oil as of the end of 2014. That’s four times more than the 500 tanks reported in the industry standard database of tank farms at TankTerminals.com, Orbital Insight says.
The U.S. company’s latest estimates show that China had around 600 million barrels of oil supply on its territory as of May 2016—and that’s not counting underground storage.
Although the figure is higher than estimates, some analysts seem unsurprised. Michal Meidan, an analyst with London-based consultancy Energy Aspects, told Bloomberg that her estimate was over 400 million barrels including strategic and commercial stocks, but she was not surprised at Orbital Insight’s figures.
“There is more storage available in China than the market is willing to acknowledge,”Meidan says.
Since China is not keen on sharing updated data on its oil inventories, be it strategic or commercial, geospatial analytics may be a source of information that could be quite valuable to the oil market.
It was only last month that China decided to report strategic inventory reserves as of January 1 of this year: 31.97 million tons, or between 33 and 36 days’ worth of China imports. The figure was more than analysts had anticipated, and no one knows for sure how much China has been stockpiling since.
Early last year, China had plans to increase its strategic petroleum reserves (SPR) from 30 days to 90 days. According to Reuters, some 90 days of imports are equal to around 600 million barrels.
That’s the amount that Orbital Insight’s geospatial analysis has revealed. The U.S. company’s algorithms and data do not differentiate between strategic and commercial reserves. But in view of the lack of regular official and reliable data, it’s a source of data anyways.
And it shows that China continues to amass crude oil supplies.
“China seems to be building tanks and filling them fast—and building more tanks just as fast or even faster,” Orbital Insight’s CEO James Crawford told Newsweek last week.
At the pace at which China is piling up inventories, analysts see it as a ‘wildcard factor’ in determining oil prices, even if OPEC’s much-discussed-little-specific deal on output cap were to materialize later this year.
“Now that China has bought so much cheap oil to fill their SPR…if OPEC does freeze and tries to bring the price back up, China may push it back down because they might choose not to buy it at a higher price and just choose to use their SPR or start exporting it themselves – like they did with other commodities,” Jodie Gunzberg, global head of commodities and real assets at S&P Dow Jones Indices, said at an S&P Global conference last week, according to CNBC.
According to Orbital Insight oil data, China has the leverage to do so.
14 Comments on "Winners of the oil bust: How much oil did China store?"
rockman on Sun, 16th Oct 2016 9:53 am
Minor winner of the oil bust: China
So far the MSM has ignored one of the greatest transfers of oil in history. And it isn’t being purchased for $45/bbl as China has…closer to $15/bbl. The MSM focuses on companies going bust and skips past the benefits many companies are reaping. Couldn’t find a total but based upon the $’s tossed around China has accumulated produced oil on the order of 1% of what other companies have acquired in PROVED PRODUCING oil reserves. And that also includes Chinese companies. In a future world of controlling oil the Chinese SPR is truly insignificant.
Just one of hundreds of examples:
Reuters – Russia’s top oil producer Rosneft has around $32 billion in available funds, so it buying a controlling stake in mid-sized oil company Bashneft would not be a problem.
Very few understand that much of Big Oil was created during busts…just as we’re seeing today:
“It is in our current market that giants like Exxon, BP, Chevron, ConocoPhillips, and Shell are formed. Another large oil and gas producer finds itself on the cusp of joining the ranks of oil and gas super-majors: Occidental Petroleum (OXY). OXY is a U.S.-based oil and gas company producing over 650,000 barrels of oil equivalent per day (boe/d). The company is unique: it has a dominant domestic position in the Permian Basin and holds other large producing assets in the Middle East and Latin America.
What puts OXY in the driver’s seat as it relates to potential acquisition is the fact that the $50 billion company has $3 billion in net debt. The company holds one of the cleanest balance sheets of major oil and gas producers.”
{As the Rockman has been explaining the bust was anticipated by most in the oil patch…the only uncertainty was when}
“The finest execution of asset management in the oil and gas business has come at the hands of Occidental. As the price of oil fell to $75 in November 2014, OXY was already in the midst of shedding itself of unwanted assets.
The finest execution of asset management in the oil and gas business has come at the hands of Occidental. As the price of oil fell to $75 in November 2014, OXY was already in the midst of shedding itself of unwanted assets.
For instance: In early 2014, when prices were up over $100 per barrel, Occidental sold its Middle Eastern assets. Those assets were estimated to fetch $8 billion upon acquisition by a consortium of state owned Qatar, UAE and Omani oil and gas entities.”
And who might Oxy be looking at: “Based on the global companies and companies who have significant exposure to the Permian Basin, Apache Corporation stands out as the primary acquisition target. Of the Permian Basin players, Apache has a sizable reserve base when compared to its peers.”
Some folks unable to comprehend the Big Picture keep pitching the industry is “dead”. They are not just wrong but VERY WRONG. LOL. The INDUSTRY isn’t dead…just a portion has or is dying. At the same time another portion is acquiring fossil fuel assets at a much lower cost then has been possible for more then 15 years. Assets that will provide decent profits even if oil prices remain at current price levels.
And if/when oil prices increase? BONANZA! LOL. The companies that were generating huge profits when oil hit $100/bbl weren’t the ones producing their new shale wells. It was the companies that acquired proved producing reserves in conventional oil fields when oil was selling for less then $35/bbl.
Good to keep the various components of the POD in perspective lest one looks like a simple minded fool. LOL.
Boat on Sun, 16th Oct 2016 10:21 am
OPEC fumbles along with an attempt of collusion to drive prices higher. China, US and other large importing countries should dump/consume their reserves when prices are high. Replace them when prices are low. Capitalism at it’s best.
Boat on Sun, 16th Oct 2016 10:42 am
Even in 2040, for the fun lets assume peak oil is long past dead and electric cars are at 70 percent of new sales and growing. Oil will have winners and losers. There will still be volatility. The oil market will still be huge. The lowest cost producers will continue to pump and there will be plenty of investment dollars for that oil.
William Whitsitt on Sun, 16th Oct 2016 11:03 am
Let us get all the Investor out of Futures by suing them for trillions of dollars for unlawful price fixing on commodities like oil, gasoline etc and food items. Lets us as Citizens under the Common Law take back corporate america and shut down greed. Lets face it the investors have lied about peak oil to us the consumers. Let break down their strangle hold and then remove our shackles of imprisonment to them.
William Whitsitt on Sun, 16th Oct 2016 11:07 am
Then truly whom the Lamb has set free we will be free indeed. For we seek that truth and that truth will set us free indeed. No more bondage no more chains just freedom and liberty. On a note the draw down from US inventories of Oil is just lies and or misinformation to raise prices. Ask the the investors about the billions of barrels of oil in tankers be stored?
rockman on Sun, 16th Oct 2016 11:27 am
“…large importing countries should dump/consume their reserves when prices are high. Replace them when prices are low.” You mean unlike President Obama’s proposal to sell SPR oil in the current lower oil price market.
Obvious, Boat, you’re not nearly as smart as the POTUS when it comes to fossil fuel strategies. LOL.
Blur on Sun, 16th Oct 2016 4:18 pm
I love how Westerners think what China did is some sort of crime. You’re upset that China might not buy oil when it high because it’ll just tap its oil reserves? Since when does China have to buy at a high when it doesn’t have to? You say you’re about freedom but like communists you want to tell what and what not China will buy. It’s really high-tech slavery. China has to buy oil when it doesn’t need it so you can get rich. And on top of that you’re hypocritical complaints that China drives up the price of oil when it was a $100 a barrel. On top of that you complain about how when China buys oil it helps cause many problems in the world. Well the higher the price of oil, it’s more likely to do that. Only a slave master thinks everyone has to change with the whims of their thoughts.
Davy on Sun, 16th Oct 2016 4:26 pm
Da Blur; who thinks westerners think It is a crime? More likely your dumbass is anti-western so you want the issue to be the bad westerner is anti-Chinese and blames everything on China. Go circle jerk with Makati.
rockman on Sun, 16th Oct 2016 7:28 pm
And some of us westerners wished China would buy a hell of a lot more oil regardless of the price. LOL.
peakyeast on Sun, 16th Oct 2016 7:56 pm
@rockman: Why?
Just keep that oil around until the price rises. In the meantime massage your accounting with future value accounting.
Just like Enron.. oh yeah and do remember to stop while the game is good.
😀
makati1 on Sun, 16th Oct 2016 8:00 pm
Blur, you are correct. The greedy American’s want it all, not just some. Power and greed is their national motto: “All for One!”. Their flag is the US dollar. Their arrogance is bring them down. Fun to watch.
rockman on Mon, 17th Oct 2016 11:44 am
peaky – Sorry…should have waved my sarcasm flag higher. LOL. Needless to say selling into a depressed market unless forced to is never a good plan. Ironically the stated reasdreasdon from the POTUS is to repair the the SPR infrastructure. IOW repairs to a system which will contain less oil as a result of selling oil to finance the upgrade.
Essentially just a numbered game. Whether any POTUS can ever get away with such a plan remains to be seen: utilization of the SPR is tightly controlled by a CONGRESSIONAL LAW no POTUS can override. It would take a vote of the full congress to make major changes. And that law was written specifically to minimize political games and efforts to influence oil prices.
peakyeast on Mon, 17th Oct 2016 3:24 pm
Yeah… Totally overlooked that sarc 🙁
I was thinking that perhaps the books were a little light. And yes – I agree on the selling timing.
I can’t see the upgrade to SPR will inflict any significant changes in oil price nor any political “gain” for the exiting POTUS…
But again I am just probably “blind” to the political game in this?
Boat on Mon, 17th Oct 2016 8:58 pm
rockman on Sun, 16th Oct 2016 11:27 am
“…large importing countries should dump/consume their reserves when prices are high. Replace them when prices are low.” You mean unlike President Obama’s proposal to sell SPR oil in the current lower oil price market.
Obvious, Boat, you’re not nearly as smart as the POTUS when it comes to fossil fuel strategies. LOL.
Obviously I think Obama and congress handle the SPR wrong. Same with federal lands. The US could have kept 500 or so of those drilling rigs going and by now had thousands of DUCT’s waiting on $80 oil. Drill low, sell high.