China taps commercial oil stocks to help weather Iran war shock

Bloomberg reported that Chinese state energy companies have drawn 1.9 million barrels a day from commercial crude stockpiles over the past three weeks - the highest rate since the Ukraine-war shock in early 2022. SCI Energy and Vortexa data show that 24% of stocks at Shandong and Tianjin terminals have been used; total commercial stocks sit at 850 million barrels, a six-month low.

The General Administration of Customs said crude imports in the first 15 days of June fell to 9.8 million barrels a day from 11.1 million in May. Wood Mackenzie analyst Sushant Gupta said state refiners are not prioritising Saudi Arabian and UAE cargoes that transit Hormuz, opting instead for Brazilian and Atlantic-linked cargoes. Sinopec and PetroChina spokespeople declined to comment.

Over the same period diesel and petrol consumption fell 4% from May; the manufacturing PMI of 49.1 is in contraction territory. That weak downstream demand limits the upward pressure on prices from the commercial-stock draw. Goldman Sachs analyst Daan Struyven said China's stockpile strategy could pull Brent prices 4-6 dollars lower in the near term; the National Development and Reform Commission (NDRC) said it may consider additional measures next week. Not investment advice.