China prints oil reserves

Anna Morina, Otkritie Bank 13 September 2021 13:00

The consequences of Hurricane Ida are still having an impact on the oil market. This time, the refineries in the United States are the first to recover, while production usually increased first. According to Reuters on September 10, almost all the damaged refineries in Louisiana had restored their work by Friday. At the same time (as of September 9), 71 of the 288 platforms were idle in the Gulf of Mexico. About 1.39 million barrels. oil production (mbs) and more than 1.72 billion cubic feet of gas were not resumed per day. The supply of oil and gas was delayed due to power outages and partial destruction of platforms and pipelines. As a result, the US Department of Energy expects a decrease in oil production in September by 28% mom to 10.76 mbs.

The resulting shortage of oil inside the United States, as well as the destruction of the infrastructure of sea terminals, led to the cancellation of planned supplies to China. The National Administration of State Reserves of China announced the planned sale of 10-15 million barrels of crude oil from state reserves through an auction to compensate for canceled oil supplies from the closed Shell Mars platform in the Gulf of Mexico. The total volume of China's strategic reserve is estimated by Consultancy Energy Aspects at 220 million barrels. In August, the total volume of oil imports to China amounted to 44.53 million tons, and for 8 months of 2021 – 346.4 million tons (-5.6% yoy), according to the customs Administration (GAC). The decrease in imports is probably due to both significantly increased prices and the expectation of a new batch of import quotas by independent refineries. New taxes imposed on certain types of customs codes from the section of petroleum products and petrochemicals also had a negative impact on imports.

The Friday call between Biden and Xi gave market participants optimism not only about oil, but also about all key risky assets. The hope of reducing the intensity of the trade war led oil quotes to the range of $72.8 per barrel of Brent.

At the beginning of this week, the positive conversation between Biden and the oil quotes will continue to recoup. At the same time, increased volatility, as well as reactivity to emerging news, will remain. A number of macroeconomic statistics are expected to be released this week: on inflation, industrial production of a number of countries, as well as indices of economic expectations in the United States from the University of Michigan. In the baseline scenario, oil prices will remain in the range of $72-$75 per barrel of Brent.

Anna Morina, Head of the analytical department "Otkritie Research "of Otkritie Bank.

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