Photo: The VLCC oil tanker 'Kaiming' from the Middle East safely berthed at Sinopec Zhanjiang Petrochemical port's 300,000-ton crude oil terminal

As countries worldwide strive to lift pandemic lockdowns, China's crude oil consumption has begun to increase. Recently, a massive fleet of 117 very large crude carriers (VLCCs) is transporting ultra-low-priced crude oil to China. Calculating that each vessel can transport 2 million barrels of crude oil, this means at least 230 million barrels of oil will arrive at Chinese ports within the next 3 months. This is the largest number of oil tankers heading to China since early 2017, and very likely the largest ever.

Following the outbreak of the novel coronavirus pandemic, there are increasing signs that China's oil demand is recovering. The operation of oil tankers indicates that China has taken advantage of the once-in-a-lifetime cheapest oil prices to hoard crude oil. Chinese oil traders knew the price was cheap when they saw crude oil prices, which is at least one conclusion from the global supertanker movement.

Weekly vessel tracking data compiled by Bloomberg shows that the number of supertankers destined for China in the next three months has surged to a three-year high.

It is understood that after the COVID-19 pandemic and the oil price war caused a collapse in oil demand, China did not significantly cut crude oil imports. Instead, it doubled its strategic and commercial crude oil inventory rates in the first quarter of 2020, seizing the opportunity to make massive purchases at low oil prices.

       Peter Sand, BIMCO's chief analyst, stated: "China's purchases are based on geopolitical and pricing considerations." "In the second half of April, tankers lined up like stars."

As many other countries are still struggling to ease prevention measures to combat the coronavirus pandemic, China's oil consumption is recovering, a claim supported by further evidence.

Bloomberg analysis suggests that this batch of oil, arriving gradually from now until mid-August, may have been purchased when oil futures prices turned negative last month. Data compiled by Bloomberg shows that China's oil demand in April rose from 10.63 million barrels per day in March to 11.81 million barrels per day. This surge of about 11% means that this batch of oil tankers en route can provide nearly 20 days of supply. China's independent refineries are also accelerating production, indicating that local oil demand is gradually recovering.

       According to Economic Observer Online, since March this year, local refineries in Shandong have seized the opportunity to purchase low-priced imported crude oil, and after May, giant oil tankers fully loaded with crude oil have been arriving at ports one after another. This has put Shandong's ports under severe pressure regarding unloading and storage.

        Recently, as the province with the largest refining capacity, major ports, refineries, and traders in Shandong have successively begun expanding crude oil storage capacity at various coastal ports to alleviate the pressure of crude oil storage and transportation. According to incomplete statistics from Jinlianchuang, a commodity trading service provider, those planning to expand crude oil storage capacity in 2020 include not only major coastal ports in Shandong but also domestic oil giants like PetroChina and Sinopec, as well as local refineries such as Fuhai Group, Sinochem Hongrun, and Shandong Yulong Petrochemical. Even oil trading and storage companies like Zhenhua Oil and Dekun Oil Depot plan to expand crude oil storage capacity.

        Currently, including ports like Dongjiakou, Yantai, Rizhao, Longkou, and Dongying under Shandong Port Group, the total crude oil storage capacity expected to be commissioned in 2020 will be at least around 12 million cubic meters, theoretically capable of storing 8 million tons of crude oil.

It is estimated that in the first quarter of 2020, China's strategic and commercial crude oil inventory fill rates also doubled. China utilized low oil prices and, amidst the collapse in global crude oil demand, diverted more imported crude oil into storage rather than directly cutting crude oil imports, which to some extent also supported the global oil market.

According to China Customs data, as demand for petrochemical fuels began to recover, domestic refiners increased crude oil processing, and China's crude oil imports surged to approximately 9.84 million barrels per day in April.

However, experts say that the oil price war initiated by Saudi Arabia in March this year was also a defiant move by countries refusing to cut oil production, compounded by the negative impact of the ongoing COVID-19 pandemic on the world economy, leading to a continuous collapse in oil prices. This situation will not last long, so hoarding oil is a temporary measure, not a long-term one. Strategic petroleum reserves are for emergencies, not for daily supply; no country can indefinitely increase strategic petroleum reserves, as beyond a critical point, it becomes a burden.