S&P 500 & Nasdaq Analysis and Trends

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Beijing Logs Surge in Oil Imports
By DAVID WINNING and SHAI OSTER
December 12, 2006

BEIJING -- China's crude-oil imports powered to a record in November, as low prices appeared to have tempted officials to add to the country's strategic reserves.

Foreign cargoes carrying 13.54 million tons were registered by Chinese customs in November, equivalent to 3.31 million barrels a day and above the previous monthly peak for imports of 13.46 million tons recorded in September.

Although the data from the General Administration of Customs yesterday didn't give a percentage change for individual months, calculations show that November imports were up 31% from November 2005 levels.

China's oil imports have been steadily rising. However, year-to-year comparisons for a given month can be misleading because China's demand doesn't follow a seasonal pattern. Instead, oil traders appear to base their decisions more on price, which is partly why they kept out of the market in October and then piled back in once oil prices fell a bit in November.

At least part of the extra oil imports were bound for China's emergency oil stockpiles, analysts said. China's has finished the first stage of a three-phase project of tank farms to store oil in case imports are disrupted. The first phase can store about 33 million barrels. Analysts believe China, in November, added to its reserves about eight million more barrels, which accounted for about 8% of China's oil imports.

By comparison, the U.S. strategic oil reserve has more than 680 million barrels in storage, enough to cover about 55 days of crude-oil imports.

The surge in imports last month comes after prices of light, sweet crude on the international market hit $56.55 in October and fell even lower in November to $54.86 before rebounding thanks to an uptick in demand.

Analysts believe China capitalized on the dip in prices to buy crude cargoes for its strategic reserves, pouring more oil on top of the three million tons that it put aside in an initial load in August.

Everbright Securities oil analyst Li Chen doubted the strategic reserves were the critical factor behind the surge in imports in November because of their small size. He pointed to the continued strength shown by the economy, especially after oil imports in October fell 3.8% from a year earlier to 10.82 million tons, meaning that those traders who stayed out of the market opted to return and buy last month.

Write to David Winning at [e-mail] and Shai Oster at [e-mail]