FX.co ★ China to sell oil from its strategic reserves

China's move to lower oil prices is forcing the market to be vigilant for unexpected prospects.

On Tuesday, the National Food and Strategic Reserves Administration announced that they will sell about 7.38 million barrels of oil on September 24, which is much less than what China usually imports per day.

This first sell-off from strategic reserves looks relatively insignificant, but the possibility of further release could have a strong impact on world oil prices.

The auction is part of Beijing's efforts to curb inflation and rising commodity prices, and there is a chance that it will increase to achieve China's goals.

Vandana Hari, founder of Vanda Insights, said the strategy is another approach for the market and one of the reasons why world oil prices are unlikely to rise above $ 80 nor stay there.

Currently, China's strategic reserves are around 220 million barrels. Energy Aspects said sell-offs may be more frequent next year, but total sales through mid-2022 will most likely be less than 50 million barrels.

As such, the Strategic Reserves Administration said the companies participating in the auction must comply with national policies and have a sufficient import quota.

Buyers should also have a good credit history, and the purchased oil should be intended for their own use and not for resale.

The agency said the oil will come from China's reserves in the northeastern city of Dalian.

Sengyik Tee, an analyst at SIA Energy, said the move of the government to announce an auction during the peak hours of the global oil trade and released many details suggests that it wants to be transparent. And it is likely that new lots and new prices should be expected in the fourth quarter.