China Energy Chief Says Oil-Market Rally Won't Last
[2009-06-03]
China's top energy official suggested the global oil-market rally may be hard to sustain, saying that demand may fall now that oil inventories are brimming, even while he announced that China will start the second phase of its own strategic petroleum reserves program.
May saw the biggest one-month gain in crude-oil futures in a decade. Since the beginning of the year, the futures have nearly doubled to a six-month high of more than $67 a barrel as traders bet on rebounding demand from Asia and especially China.
But Zhang Guobao, head of China's National Energy Administration, suggested that the rising demand was coming from nations building up their crude-oil stockpiles while prices were low -- not increased consumption.
"Most countries' crude-oil inventories are already full. It will be difficult to continue increasing reserves in the second half of the year at the same rapid pace. Analysts should pay attention to this phenomenon when analyzing oil prices," said Mr. Zhang, who is also vice chairman of China's top economic policy maker, the National Development and Reform Commission.
China, which has announced goals of eventually building up strategic reserves of 90 days' worth of oil imports, in line with U.S. and European standards, has completed the first phase of filling its petroleum reserves, and construction will start in the second phase this year, according to Mr. Zhang. The first part consisted of building tanks built along the coast; new storage will be in salt caverns, as is done in the U.S. and Europe.
Officials had said the first phase was to build capacity for 102 million barrels of crude oil, and the second phase was to hold an additional 169 million barrels. China, the world's second-largest oil consumer after the U.S., currently imports about half of the eight million barrels of oil a day it consumes. Under pressure from rising global oil prices, China raised domestic fuel prices on Sunday.
Separately, Mr. Zhang said he was optimistic that a successor to the Kyoto Protocol on climate change could be reached in December in international negotiations in Copenhagen.
China has proposed developed countries such as the U.S. cut their carbon emissions by an average of 40% from 1990 levels, and subsidize pollution reduction and technology transfer to poorer countries. Developing nations such as China and India would have voluntary greenhouse goals under Beijing's proposal.
May saw the biggest one-month gain in crude-oil futures in a decade. Since the beginning of the year, the futures have nearly doubled to a six-month high of more than $67 a barrel as traders bet on rebounding demand from Asia and especially China.
But Zhang Guobao, head of China's National Energy Administration, suggested that the rising demand was coming from nations building up their crude-oil stockpiles while prices were low -- not increased consumption.
"Most countries' crude-oil inventories are already full. It will be difficult to continue increasing reserves in the second half of the year at the same rapid pace. Analysts should pay attention to this phenomenon when analyzing oil prices," said Mr. Zhang, who is also vice chairman of China's top economic policy maker, the National Development and Reform Commission.
China, which has announced goals of eventually building up strategic reserves of 90 days' worth of oil imports, in line with U.S. and European standards, has completed the first phase of filling its petroleum reserves, and construction will start in the second phase this year, according to Mr. Zhang. The first part consisted of building tanks built along the coast; new storage will be in salt caverns, as is done in the U.S. and Europe.
Officials had said the first phase was to build capacity for 102 million barrels of crude oil, and the second phase was to hold an additional 169 million barrels. China, the world's second-largest oil consumer after the U.S., currently imports about half of the eight million barrels of oil a day it consumes. Under pressure from rising global oil prices, China raised domestic fuel prices on Sunday.
Separately, Mr. Zhang said he was optimistic that a successor to the Kyoto Protocol on climate change could be reached in December in international negotiations in Copenhagen.
China has proposed developed countries such as the U.S. cut their carbon emissions by an average of 40% from 1990 levels, and subsidize pollution reduction and technology transfer to poorer countries. Developing nations such as China and India would have voluntary greenhouse goals under Beijing's proposal.
Source: WSJ
Keywords:Oil
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