Plummeting Over 50%! Amid This Epic Collapse, China Is "Buying the Dip" in Crude Oil

This time, Saudi Arabia’s key discount customers included China, and it announced an unlimited purchase policy for one Indian oil company and two Chinese petrochemical enterprises. It is thus no wonder that the China Association of Shipbuilding Industry stated outright that the global crude oil price plunge is nothing short of a windfall—like gold bricks falling from the sky. Industry insiders estimate that for every $10 drop in crude oil prices, Chinese enterprises and residents collectively save RMB 107 billion annually. A Bigger Goal: China’s Strategic Petroleum Reserve With 84 giant oil tankers now collectively setting sail toward the Gulf to stock up on oil, beyond meeting daily industrial manufacturing needs, there lies a far more ambitious objective: rapidly replenishing China’s strategic petroleum reserves. Reviewing China’s history of large-scale crude oil purchases over the past decade, it is evident that whenever international oil prices plummet, China accelerates its strategic reserve procurement. For instance, during the 2015–2016 global oil price lows, the pace of strategic reserve injections markedly increased. According to Zhongda Futures, it is generally believed that China opens the window for building its strategic crude oil reserves when international oil prices fall below USD 40 per barrel. By international convention, a country requires roughly 90 days’ worth of petroleum reserves to ensure normal national operations—but China’s strategic reserves still fall short of this benchmark. China began constructing its strategic petroleum reserves relatively late—around the early 21st century, following its accession to the WTO. In 2004, China launched large-scale construction of petroleum reserve bases. To date, it has established crude oil reserve bases in Dalian, Huangdao, Zhenhai, and Zhoushan, and plans to complete Phase III of its crude oil reserve base construction by 2020, adding 28–85 million tons of crude oil storage capacity. Moreover, according to the *Medium- and Long-Term National Petroleum Reserve Plan (2008–2020)*, China aims to build a total reserve volume equivalent to 100 days of net oil imports by 2020. In September 2019, the National Energy Administration stated that commercial and strategic crude oil inventories stood at approximately 80 days of net imports—still 20 days short of the target, or about 25.7 million tons. It is therefore highly likely that, precisely amid the current international oil price collapse, China will make massive crude oil imports in 2020 to reach its targeted reserve level. Industry insiders estimate that, theoretically—and assuming no constraints from infrastructure—China may possess an import capacity of roughly 200 million barrels, including commercial stocks absorbed in March and newly completed strategic reserve facilities. Oil Collapse: Winners and Losers Facing oil prices slashed in half, China has already sprung into action—calmly purchasing cheap crude oil to top up its reserves and significantly reduce import costs. Additionally, on the evening of March 19, U.S. Treasury Secretary Steven Mnuchin announced plans to buy USD 10 billion—or even USD 20 billion—worth of crude oil during this low-price period. Yet beneath the oil price collapse, not everyone is celebrating. Foremost among the distressed are the world’s largest oil giants—starting with Saudi Aramco (2222), whose share price plunged continuously, wiping out over RMB 128.74 billion in market value within just nine trading days—equivalent to Kweichow Moutai’s entire market capitalization. U.S.-listed global energy giants fared even worse: their share prices collapsed consecutively—so severely that the term “bankruptcy-level crash” would not be an exaggeration.

South Africa’s National Strategic Crude Oil Reserve: A Practice of Mixed Praise and Criticism

South Africa began constructing its national strategic crude oil reserve as early as the 1960s, reaching its maximum scale in 1988. While South Africa’s strategic crude oil reserve achieved financial self-sufficiency, it also experienced major operational incidents. Wang Nengquan As early as 1964, South Africa initiated construction of its national strategic crude oil reserve—well before the establishment of the International Energy Agency (IEA) and long ahead of most major oil-importing countries’ strategic petroleum reserve programs. Over nearly six decades of building and operating its national petroleum reserves, South Africa has conducted extensive, proactive, and constructive explorations—achieving notable successes, but also encountering serious challenges. Its experience offers valuable lessons and references for many countries currently developing their own strategic petroleum reserve systems. The Development Process and Current Status of South Africa’s National Strategic Crude Oil Reserve South Africa, located at the southernmost tip of the African continent, has a population of approximately 62 million and ranks as Africa’s third-largest economy. In 2023, South Africa’s GDP totaled USD 405.71 billion, trailing only Nigeria and Egypt. Despite being Africa’s third-largest economy, South Africa is also Africa’s largest energy consumer. In 2023, its total primary energy consumption reached 4.85 exajoules—accounting for 23.23% of the entire African continent’s primary energy consumption. South Africa’s energy consumption remains heavily coal-dependent: in 2023, coal accounted for a staggering 68.66% of its primary energy consumption, while oil represented 22.47%. Although rich in mineral resources—including abundant coal deposits—South Africa produces virtually no crude oil. With the exception of domestically produced synthetic fuels derived from coal, nearly all liquid fuels consumed in South Africa are imported. Given its vast coal reserves, as early as 1947, the South African government enacted the *Liquid Fuels and Petroleum Act*, designating coal liquefaction (CTL) technology development as a national strategic priority. In 1954, Sasol—the South African company—built the world’s first coal-to-liquids (CTL) plant in Sasolburg, South Africa. In 1955, Sasol successfully synthesized its first barrel of diesel fuel using low-temperature Fischer–Tropsch synthesis. In 1980 and 1983, Sasol constructed two additional CTL plants in Secunda, South Africa—thereby laying the foundation for South Africa’s coal-to-liquids industry. In 2012, Sasol’s coal-to-liquids output amounted to approximately 30 million tons. Due to its long-standing policies of racial discrimination and apartheid, South Africa faced prolonged international condemnation and sanctions. Consequently, alongside vigorously expanding coal-to-liquids production, the South African government initiated its national strategic petroleum reserve program at an early stage. In 1964, the Department of Economic Affairs established the Strategic Fuel Fund (SFF) to store strategic crude oil; the fund was fully capitalized by the Industrial Development Corporation (IDC), a state-owned financial institution. Simultaneously, the government-owned External Procurement Fund provided interest-free loans to the SFF for operational purposes. Under Section 21 of the South African Companies Act, the Strategic Fuel Fund is classified as a non-profit entity. In 1967, the SFF acquired its first batch of reserve crude oil, stored in tanks at its Milnerton facility.