The beginning of the coronavirus pandemic has led to a collapse in oil prices. In spring, the price of Brent dropped to $15 per barrel, as demand for fuel also slumped. China, in turn, took advantage of the situation and bought cheap oil. Oil was stored not only in the government reservoirs, but also in the commercial ones.
Now, China has started selling this oil. At the same time, OPEC + is preparing to ramp up the production. It will be limited only by 7.7 million barrels per day from August 1. This is a serious threat to the market.
Thanks to the Shanghai International Energy Exchange, China has managed to sell about a million barrels. The oil was shipped from storage facilities on the east coast of the country. It was bought by those who used to stockpile oil in the Middle East and Africa.
Some analysts argue that China is not the main oil producer, but it is the main oil consumer. That is why China is unlikely to be able to radically change the balance of power in the market. The Chinese showed that demand is not recovering as quickly, as it is expected. China is unlikely to become a serious competitor.
China's oil reserves count 69% of the world's total reserves, but it is hard to imagine that China will outshine the main oil producers such as Russia, Saudi Arabia, and the United States.
The agency's interlocutors also paid attention to the fact that China has to store oil somewhere. At the same time new reservoirs are being built very quickly. According to Kpler's, at the end of June, free capacity of oil storage facilities owned by private and state-owned companies and International Energy Exchange reached 330 million barrels. Moreover, in the second half of the year, it is planned to commission storage facilities with a capacity of 74.85 million barrels.
In other words, there's no point to be afraid of a collapse in prices. Most likely, a slow growth would happen.
However, China can put pressure on prices by manipulating the United States. For example, in the case of new US sanctions against China, Beijing may start selling off the excess oil. In this case, relations between the countries will worsen even more.
Today, oil prices grew up. September's futures of WTI crude oil rose by 0.12% to trade at $40.87 per barrel. While September's futures of Brent oil increased by 0.02% to $43.27 per barrel. The difference in the price between Brent oil and WTI oil contracts is $2.40 per barrel.
The US Dollar Index, which measures the US dollar against a basket of six major currencies, fell by 0.15% to trade at $95.632.