China hoards more crude.
China is on an all-out effort to buy oil. So far in April, China National United Oil Corp, or Chinaoil, the trading unit of state-run China National Petroleum Corp, has bought a total of 19 tankerloads of oil for delivery in June or July, Singapore-based traders said. That is equal to 9.5 million barrels of oil, and is Chinaoil's largest buying binge on the spot market since October, when it bought 47 cargoes, or 23.5 million barrels, a monthly record for the country. With more than half of April left, Chinaoil could surpass the October total if it keeps buying aggressively. China National Petroleum didn't immediately respond to an email seeking comment. Chinaoil's purchases were made through what traders call the "e-window," a mechanism operated by Platts, a commodities price-reporting company and unit of McGraw Hill Financial Inc. Through this system, traders submit their bid and offer prices for Dubai crude, and oil of similar grades produced in Oman and the United Arab Emirates' Upper Zakum field, broken into lots of 25,000 barrels each, called "partials." The trading of oil on the spot market is typically done in private, but participating in the Platts window makes the prices public. The prices at which transactions are completed are used to produce market benchmarks published by the pricing company. Prices of Dubai, Oman and Upper Zakum crude together comprise an indicator for oil prices in Asia. That benchmark, named for Dubai crude, is used by Middle Eastern oil producers and derivatives markets to set prices. Analysts have suggested that large oil purchases by Chinese trading firms are part of efforts to build the country's emergency stockpiles during a time of low oil prices. Chinaoil's record purchases in October contributed to China's oil imports in December hitting a record of around 7.3 million barrels a day that month. Yet traders say stockpiling may not be the only motive for firms to participate in a public oil-trading mechanism like the one Platts operates. Oil pricing in the spot market has been dominated by major international oil companies or large commodity-trading firms. National oil companies, which buy most of the crude, have a huge exposure to prices, but their involvement in setting price benchmarks has been limited. By taking a bigger role, they hope to reduce bias and increase their influence. "That is what Chinaoil is doing now, and together with Shell and Unipec, they have become a major player in the Platt's Dubai market," said Adi Imsirovic, general manager at Clearsource Commodity Resources, a trading company.
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