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Mysterious Chinese Buyer Of Record Crude Oil Cargoes Revealed

Tyler Durden's picture




 

Last week we noted a near-record number of VLCC oil tankers sailing towards Chinese ports as we speculated that the world's largest economy looked to rebuild its strategic petroleum reserve at low-low prices. Now we know... as Bloomberg reports, China National United Oil Co., a unit of the country’s biggest energy company, bought the most ever cargoes of Middle East crude through a pricing platform in Singapore. "The big question is what China will do with all of these cargoes," notes one analyst, "It's very difficult for the market to know Chinaoil's strategy."

 

There are 89 tankers sailing for Chinese ports, 80 of which are VLCCs - the highest since January 3rd.

 

And now as Bloomberg reports, China National United Oil Co., a unit of the country’s biggest energy company, bought the most ever cargoes of Middle East crude through a pricing platform in Singapore amid oil’s slump into a bear market.

The company, known as Chinaoil, purchased about 21 million barrels this month through the system used to determine benchmark prices by Platts, a unit of McGraw Hill Financial Inc. It bought more than 40 cargoes of the Dubai, Oman and Upper Zakum grades in the so-called window, according to data compiled by Bloomberg. A Beijing-based press officer for CNPC, the parent company, wasn’t immediately able to comment and asked not to be identified because of internal policy.

 

“It’s very difficult for the market to know Chinaoil’s strategy,” Ehsan Ul-Haq, a senior market consultant at KBC Energy Economics in Walton-on-Thames, England, said by phone. “Prices have gone down and China is always interested in buying more crude whenever the price is right, but they could also have some other different trading strategy.”

 

...

 

“The big question is what China will do with all of these cargoes,” JBC said in an e-mailed report Oct. 21. “If the Middle Kingdom puts the barrels into strategic storage, something that would be logical given low outright prices, they will disappear entirely from the market and China will still have to buy more crude for its day-to-day needs.”

 

...

 

Chinaoil may be trying to narrow the spread between the prices of two different Middle East grades, according to Bernard Leung, an oil strategist for Bloomberg First Word in Singapore who traded crude for 15 years.

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Wed, 10/29/2014 - 21:21 | 5392030 ZippyBananaPants
ZippyBananaPants's picture

Go Royals!!

Wed, 10/29/2014 - 21:25 | 5392044 knukles
knukles's picture

Dumb fucks. 
They'll stick the shit in a big hole in the ground and save it for a rainy day, FFS.
Why do you think they're buying gold on the cheap along with oil?
Same excuse as Mrs K's sport shopping .....

"It's on sale"

Why do I have to do all the thinking for everybody all the time?

Wed, 10/29/2014 - 21:28 | 5392059 nmewn
nmewn's picture

Now see, if they had a "proper bureaucratic regulatory body" concerned only with rising sea levels it would put a stop to this!

Wed, 10/29/2014 - 21:31 | 5392063 mjcOH1
mjcOH1's picture

"It's for the syndicate..."

https://www.youtube.com/watch?v=Jcx-bSyJpYk

Wed, 10/29/2014 - 21:48 | 5392101 Keyser
Keyser's picture

Not a bad move to stockpile crude in case something happens to curtail ME supply... 

Wed, 10/29/2014 - 21:57 | 5392141 max2205
max2205's picture

Crude is like twinkles....never goes bad

Wed, 10/29/2014 - 22:19 | 5392203 NoDecaf
NoDecaf's picture

I topped off my Hyundai today.

Wed, 10/29/2014 - 23:28 | 5392364 Publicus
Publicus's picture

The strategy is simple, get rid of the us dollar.

Thu, 10/30/2014 - 02:33 | 5392611 COSMOS
COSMOS's picture

Chinaman this century much smarter than roundeye.

Thu, 10/30/2014 - 02:44 | 5392622 svayambhu108
svayambhu108's picture

I am confused, are they buying the cargoes or their content.

Thu, 10/30/2014 - 04:11 | 5392658 zhandax
zhandax's picture

The Chinese love a bargain.  This is all that $40/bbl Kurdistan oil everyone has been wondering about.  Don't be surprised if all that 'contraband' gets stopped next Wednesday.  Never let a good crisis go to waste, indeed.

Wed, 10/29/2014 - 23:18 | 5392343 Calmyourself
Calmyourself's picture

Russians cued them to prepare for the issues Moscow is planning for the ME.  Qatar and SA  are running scared, siccing the Chechens on Russians bad idea....

Thu, 10/30/2014 - 06:56 | 5392757 BandGap
BandGap's picture

You buy and store oil when you are gearing up for war. It's that simple.

Wed, 10/29/2014 - 21:53 | 5392129 motor_angel
motor_angel's picture

my roomate's half-sister makes $68 every hour on the laptop . She has been fired for five months but last month her pay was $19864 just working on the laptop for a few hours. pop over here... www.Yelptrade.com

Wed, 10/29/2014 - 22:11 | 5392187 ClowardPiven2016
ClowardPiven2016's picture

I'll pass...but why don't you and your roommate go to yelptrade? And tell your roommates half-sister to chill out. At $68 per hour she would have had to work 292.hours last month, or on average 9.7 hours seven days a week. 

Thu, 10/30/2014 - 20:17 | 5396091 Mad Muppet
Mad Muppet's picture

I saw his roomate's half-sister....looked like a walrus doing something rude with the drive shaft from an old Ford.

Wed, 10/29/2014 - 21:24 | 5392043 SillySalesmanQu...
SillySalesmanQuestion's picture

Sum won long crude

Wed, 10/29/2014 - 21:26 | 5392048 knukles
knukles's picture

... " rong clude ".....

Wed, 10/29/2014 - 21:24 | 5392046 nmewn
nmewn's picture

Dirty, greedy Chi-Coms stealing the worlds resources for themselves! ;-)

Wed, 10/29/2014 - 21:25 | 5392047 Charles Wilson
Charles Wilson's picture

"I've got an IQ of over 2000 and I don't understand Shirley..."

- Alien from a Woody Allen movie

 

Does it MATTER if the market can't figure out what China's gonna do with all that oil?  The Market couldn't find its dinky in the dark and they're worried about CHINA?

 

Wed, 10/29/2014 - 21:48 | 5392094 KnuckleDragger-X
KnuckleDragger-X's picture

Maybe they'll put it in bonded Chinese warehouses and float loans using it as security.

Thu, 10/30/2014 - 07:25 | 5392802 PT
PT's picture

They'll sell oil-backed paper to the US but when the US tries to collect they'll say, "Solly.  We no haf enuf oir but we settr account wi cash!  Why so sad?  It youl idea.  Pelhaps instead I gi you this papel leceipt fo gord!"

Wed, 10/29/2014 - 21:26 | 5392052 i_call_you_my_base
i_call_you_my_base's picture

They must not have heard about that energy breakthrough Gartman was talking about.

Wed, 10/29/2014 - 21:43 | 5392079 bugsmashers
bugsmashers's picture

They'll burn it.  Mystery solved.

Wed, 10/29/2014 - 21:44 | 5392080 SmittyinLA
SmittyinLA's picture

No mystery here they're burning the oil in industry, a million different ways, shale, solar are all hype cars need oil, chemistry needs oil, plastics need oil.

China will buy as much as tgey can store / use as long as dollars are taken for oil.

Oil is bing artificially suppressed to hit Russia and push carbon taxes, it'll be over $5 gallon right after they pass their carbon tax, and then higher.

Thu, 10/30/2014 - 07:28 | 5392807 PT
PT's picture

My goodness!  Whoever thought the country that does all the manufacturing might need some oil?

Wed, 10/29/2014 - 21:43 | 5392082 One eyed man
One eyed man's picture

Maybe their strategy is to BTFD.

 

Wed, 10/29/2014 - 21:59 | 5392149 max2205
max2205's picture

When they burn it, it will Shirley make a small improvement in their air quality

And don't call me Shirley

Thu, 10/30/2014 - 01:20 | 5392544 Kirk2NCC1701
Kirk2NCC1701's picture

I'm surprised that so few ZHers have picked up on the obvious:

ALL the smack-downs on PM and Commodities, and Sanctions against Russia are helping ... CHINA. They must be laughing their asses off at the stupidity of Round Eye.

Wed, 10/29/2014 - 21:48 | 5392093 buzzsaw99
buzzsaw99's picture

21m barrels per month = a drop in the bucket.

Wed, 10/29/2014 - 21:49 | 5392098 Stained Class
Stained Class's picture

Flushed.....

Wed, 10/29/2014 - 21:49 | 5392106 umdesch4
umdesch4's picture

That lady with 8 kids just came out of the grocery store with hundreds of dollars-worth of food! I wonder what she's going to do with it?! Clearly she's looking for some angle to affect the price of food... idiots!

Wed, 10/29/2014 - 21:49 | 5392109 short screwed
short screwed's picture

Silly Chinese! Actually taking delivery of all that crude when they could have just bought up shares of the USO (or some other EFF).

Wed, 10/29/2014 - 21:52 | 5392120 alexcojones
alexcojones's picture

21 million barrels?

That is about ONE days usage here in the USA

How much oil is consumed in the United States? - FAQ
Wed, 10/29/2014 - 22:36 | 5392233 ekm1
ekm1's picture

3 days in china

Wed, 10/29/2014 - 21:51 | 5392124 Reaper
Reaper's picture

Too many dollars; not enough oil.

Thu, 10/30/2014 - 07:53 | 5392858 Wahooo
Wahooo's picture

The Chinese know that you can never have too much oil.

Thu, 10/30/2014 - 08:21 | 5392925 laomei
laomei's picture

well, as long as it's the petrodollar, and the us is whining about whenever china dares to redeem their dollars for hard assets in the us.... might as well just use it to buy all the oil.  then china has oil and the dollar thing becomes someone else's problem.

Wed, 10/29/2014 - 21:56 | 5392133 alexcojones
alexcojones's picture

Svetlana was her name.

And your roommate's sister was always oiled up.

Yeah, I know, that's crude.

Wed, 10/29/2014 - 22:15 | 5392192 anachronism
anachronism's picture

Not only is oil a strategic reserve, because it is needed to power industry and war machines, it is also a great store of value....much better than gold. China already has more gold than any country on earth except Russia. It doesn't need anymore.

If the US wanted to wage economic warfare with China through the use of sanctions, the US Navy could cut China off from getting oil from Africa and the Middle East through the Straits of Malacca. But with its storage capacity on land filled up -equivalent to 6-8 months of usage- it can add 2-3 months more storage with these 80 supertankers in its ports. Effectively, China's ability to power itself will exceed America's ability to live on its inventory of essential consumer and industrial goods for which China is the primary supplier.

Oil will appreciate in value in times of crisis. With all this oil on board ships in harbor, China can speak very softly yet be heard all over the world. "You need oil, we got oil and can deliver it anywhere in the world in a couple of weeks. What can you do for us and how much is it worth to you?"

 

 

Thu, 10/30/2014 - 08:22 | 5392929 Solarman
Solarman's picture

Great point, but China's food comes the same way.  I guarantee you they don't have 6-8 months stored away.

 

It would be an interesting scenario, but my bet is on the U.S. unless nukes start flying.

Wed, 10/29/2014 - 22:36 | 5392235 Karaio
Karaio's picture

Nobody knows how many missiles with nuclear warheads China has. 

Nobody knows how many missiles Mosquit (only two end up with a US aircraft carrier). 

Nobody knows how many coal mines became deposits of crude oil in China (they learned from the US store it in the basement). 

Store it as the Poles in salt mines, and also Ukrainian with Russian gas. 

These are state secrets only to the sheep. 

hehe. 

Could tell you a bunch of things but, I am afraid Kkkkkkkkkkkkkkkkkk 

hehe.

Wed, 10/29/2014 - 22:58 | 5392290 WTFUD
WTFUD's picture

Probably bought the stuff from JPM along with the gold storage vault.
Is that cunt Dimon dead yet? Heard fuck all and he's the type of prick who loves to hear himself.

Wed, 10/29/2014 - 23:39 | 5392386 hedgiex
hedgiex's picture

Not a surprise to diversify foreign reserves away from paper and currencies into physicals at prices that can sustain the long term viability of their mfg bases. They are not traders interested in the daily blips of their strategic reserves or to noises of analysts, economists, etc.

Already commodity traders do not ignore BRICS strategic reserves. Increasingly, their reserves are fear factors for market price makers.

These are also Predators taking advantage of indebted economies. They shall unload as much deflation to the global economy as they can while enjoying the gospels of free markets (in reality rigged markets under the captives of their own Predators).

For the millenials, not the right place and time to be in US/EC unless you are the 1%.

Wed, 10/29/2014 - 23:57 | 5392418 847328_3527
847328_3527's picture

"No one saw this coming...."

Thu, 10/30/2014 - 00:04 | 5392433 user2011
user2011's picture

Let's push the price low on soy, rice, corn and see those Chinese will buy them.

Thu, 10/30/2014 - 00:05 | 5392435 kchrisc
kchrisc's picture

"Daddy, what's insanity?"

"Well, honey, insanity is pushing the price of oil down, putting it on "sale," to negatively effect one's enemies, but only causing others to buy boatloads of it at the sale price."

"Huh, daddy?!"

"Never mind honey."

An American, not US subject.

Thu, 10/30/2014 - 00:36 | 5392480 abgary1
abgary1's picture

Pump it back into the ground in China. 

The US did the same thing to Canada.

Thu, 10/30/2014 - 01:47 | 5392572 joego1
joego1's picture

Strategic oil reserves for when they pull the flush lever on U.S. debt. I'm sure they hate the fact that the U.S. can still block oil shipments if SHTF.

Thu, 10/30/2014 - 08:19 | 5392916 Solarman
Solarman's picture

LOL, this is a month of oil.  Also China's export go by ship too.  Zero Hedgereaders know nothing of China's trap.  Same with Russia, and Iran. They are doomed by Geography.

 

http://www.rferl.org/content/robert-kaplan-geography-fate-nations/247049...

Thu, 10/30/2014 - 02:22 | 5392601 Srebro
Srebro's picture

china and singapore just sign a direct currency swap. what if they are paying for all this oil in rmb?a pricing platform in Singapore

Thu, 10/30/2014 - 02:28 | 5392603 Notsobadwlad
Notsobadwlad's picture

The interesting thing is that there is not doubt that this is a move by the Chinese governent and not just by an independent company.

It kind of reminds m of the Lenovo thing. Lenovo is a Chinese company, but many people do not know that it is Chinese government funded and controlled. They have purchased global brands such as IBM PC/laptops and Motorola cell phones and turned them into Chinese brands ... which then re-emerge on the global market.

It is part of the bigger global plan.

Thu, 10/30/2014 - 03:12 | 5392636 king leon
king leon's picture

The Saudi's must be "fucking thick as Pig shit" China buys cheap oil, now oil will go up in psice again

Thu, 10/30/2014 - 05:00 | 5392686 Obamanism
Obamanism's picture

Their economy is shrinking but they want to buy oil. Could it be to buy up the spare supply to deine it to The Europeans when Putin reduces the Gas flow through Ukraine?

The 2nd reason is to secure a reserve in times of war.

Thu, 10/30/2014 - 07:24 | 5392798 gatorengineer
gatorengineer's picture

amazing to see what has happened to the baltic dry...

Thu, 10/30/2014 - 07:26 | 5392803 Bourbonite
Bourbonite's picture

The numbers will be the same thereabouts, all across Asia. Oil prices are way too big a gifthorse to even risk a glance. 

Hedging oil etc for major users is a no brainer.

Thu, 10/30/2014 - 07:51 | 5392855 Wahooo
Wahooo's picture

China always buys low. Another sign we've hit the bottom in crude prices.

Thu, 10/30/2014 - 08:10 | 5392894 Solarman
Solarman's picture

LOL, they have been buying gold too, and that low is still 50% away. Maybe they simply need it desparately.

Thu, 10/30/2014 - 10:47 | 5393608 halfasleep
halfasleep's picture

man... this very well may be the most important story of this year. that's some serious strategy. oil makes our world go round, more than anything else. if i could trade trillions in paper for oil i'd be sending tankers my way, too.

Thu, 10/30/2014 - 17:50 | 5395620 cart00ner
cart00ner's picture

Last year they were buying tons of our coal and dumping it in the ocean for storage, however all reference to this has since dissapeared from the aussie news/web. They know something big is brewing.

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