China is stocking up on cheap crude

While the rest of the world is taking the first steps out lockdowns to the economy to contain the spread of COVID-19, China is taking advantage of the cheap price of crude oil to ramp its inventory.

Asian superpower last week the country was expecting a shipment of 117 Very Large Crude Carriers (VLCCs) with a capacity of shipping 2 million barrels of oil for unloading at its ports from the middle of May to August according to shipping data tracked by Bloomberg.

If those supertankers transport standard-size crude oil cargoes, it could mean that China expects at least 230 million barrels of oil over the next three months.

The fleet en route to China could be the largest number of supertankers traveling to the world’s top oil importer at one time, ever according to the shipping data tracked by Bloomberg.

It is possible that many of the crude oil cargoes were bought in April, when prices were lower than the current price and when WTI Crude futures even dipped into negative territory for a day.

Last month, emerging from the coronavirus lockdown, China’s oil refiners were already buying ultra-cheap spot cargoes from Alaska, Canada, and Brazil, taking advantage of the deep discounts at which many crude grades were being offered to China with non-existent demand elsewhere.

China was also estimated to have doubled the fill rate at its strategic and commercial inventories in Q1 2020, taking advantage of the low oil prices and somewhat supporting the oil market amid crashing demand by diverting more imports to storage, rather than outright slashing crude imports.

China’s crude oil imports jumped in April to about 9.84 million bpd as demand for fuels began to rebound and local refiners started to ramp up crude processing, according to Chinese customs data cited by Reuters.