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People's Daily Online>>Foreign Affairs

Iran oil ban triggers Chinese oil reserve concerns

(Xinhua)

08:39, February 22, 2012

BEIJING, Feb. 21 (Xinhua) -- The rising price of crude oil, pushed up by the latest Iran oil ban, has made it more difficult for China to build its oil reserves, analysts said.

Benchmark March crude oil hit a nine-month high of 105.26 U.S. dollars per barrel on the New York Mercantile Exchange on Monday after Iran said it has stopped crude exports to Britain and France in an escalating dispute over its nuclear program.

The price hike has fueled discussions over whether it's the right time for China to buy oil, as the country is working to rapidly boost its oil reserves, which are at a low level in comparison to many developed countries.

"The best time to increase oil reserves is undoubtedly when prices are low, but it's hard to judge oil price trends," said Zhou Xiujie, an analyst with the China Investment Consulting Corp.

Current oil prices are much higher than in previous years, but they may dwindle after hitting 150 U.S. dollars per barrel in the future, as some researchers have predicted.

There is good reason for the market's uncertainty. Iran, OPEC's second largest exporter after Saudi Arabia, has insisted that it will cut oil exports to more EU nations if they remain "hostile," which may cause further price increases.

The Middle Eastern country exports 2.6 million barrels per day, 20 percent of which go to the EU, Italy, Spain and Greece in particular, while another 70 percent enter Asian markets, mainly China and India.

China may consider buying oil at competitive prices, as many other economies have increased their oil reserves amid a complex global situation.

"Generally speaking, oil prices will head upwards anyway. Therefore, the earlier the oil is purchased, the better," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

China currently maintains a strategic oil reserve equivalent to 30 days of imports, compared with 90 days in many developed countries. The United States' strategic oil reserves exceeded 700 million barrels in 2009, enough for 150 days of oil consumption, according to Zhou.

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