The trading unit of China’s biggest energy company is on course for its largest-ever crude haul after matching its record for monthly Middle East oil purchases in Singapore as benchmark prices tumble to a six-year low.
China National United Oil Co. bought 55 crude cargoes, or 27.5 million barrels, so far this month for October loading as part of the market-on-close price-assessment process operated by Platts, lifting total Middle East shipments in August to a record. The trader purchased the same number of June-loading cargoes in April, according to data compiled by Bloomberg.
The company known as Chinaoil is buying at a time when prices have retreated to the lowest level since 2009 on concern a global oversupply is persisting. China is filling its strategic reserves and stockpiling has helped it overtake the U.S. as the world’s biggest oil importer. The purchases may help reduce a glut driven by surging output from OPEC producers and U.S. shale fields.
“We have seen such buying activity by Chinaoil several times this year, and it could be due to a combination of factors such as trading position and commercial, strategic storage demand,” Li Li, an analyst at Shanghai-based commodities researcher ICIS China, said by phone.
Qu Guangxue, a Beijing-based spokesman for China National Petroleum Corp., Chinaoil’s parent company, didn’t answer three calls made to his office.
In the Platts process, which traders refer to as the window, bids, offers and deals are reported through e-mails, instant messages and phone conversations in a fixed period each day. These are used to create end-of-day price assessments for various commodities and form benchmarks for transactions around the world. The press office of Platts, a unit of McGraw Hill Financial Inc., didn’t immediately respond to an e-mail seeking comment.
China’s total overseas purchases rose to 30.71 million metric tons in July, equivalent to about 7.3 million barrels a day, according to customs data. That’s higher than the previous record of 30.4 million tons in December. On a daily basis, it imported an unprecedented 7.4 million barrels in April.
The world’s second-biggest oil user has boosted its strategic petroleum reserves as benchmark prices tumbled 19 percent this year. Brent for October settlement traded at $ 46.29 a barrel on the London-based ICE Futures Europe exchange at 6:21 p.m. Singapore time, heading for the lowest close since March 2009.
Oil’s slump makes crude so attractive to China that even the surprise devaluation of the yuan probably won’t deter its ambition to hoard supplies, Energy Aspects, KBC Advanced Technologies and Nomura Holdings Inc. said earlier this month. Imports become more expensive as the currency weakens.
More than 80 million barrels of new strategic-reserve capacity is scheduled to start operations this year, and China will continue buying to fill those tanks, said Energy Aspects. Building emergency supplies accounted for 49 million barrels of crude imports in the first half, or about 268,000 barrels a day, according to Citigroup Inc.
Swiss trader Mercuria Energy Group Ltd., the only other buyer this month, took three lots for October loading as part of the Platts process for a record 58 Middle East shipments in August. Unipec was the largest seller, supplying 39 to Chinaoil and three to Mercuria. The previous peak of 56 cargoes traded in April.
Buying and selling of larger-than-normal positions as part of the so-called window has occurred in other physical markets. Glencore Plc bought more than 1 million metric tons of fuel oil in Singapore in June as prices tumbled from a record premium in the world’s biggest bunker market. Bloomberg LP, the parent of Bloomberg, competes with Platts and other companies in providing energy-market news and information.