China plans to build state fuel reserves

China plans to build state reserves of oil products to help ease the pressure of rising stock levels on domestic refiners as slowing economic growth hits demand, an industry source and a media report said. China's commercial oil product stocks hit record highs at the end of last year as apparent oil demand fell for a second month in December. The size of the current state reserves is not publicly available information.
"We should learn a lesson from last year's experience that a certain amount of state fuel reserves are needed to stabilize market supply and demand," an industry source said. "It can also help lower oil firms' high stocks now," he added.

China's fuel sector is dominated by state-owned oil giants Sinopec Group and CNPC, the parent companies of Sinopec and PetroChina.
"A proposal has been submitted to the authorities," the source said. The government had yet to decide how much to buy, he said. Another report had similar information but also quoted an expert involved in the proposal as saying the state reserves could be expanded to 10 mm tons by 2011.

Last year, China imported 38.83 mm tons of oil products, including 21.6 mm tons of fuel oil and more than 6 mm tons of kerosene and diesel. The source said the stockpiling of reserves was part of a draft package to stimulate the country's petrochemicals sector.
State media have said the stimulus plan likely includes CNY 100 bn ($ 14.6 bn) in investment to upgrade the quality of oil products and CNY 400 bn ($ 58.4 bn) for the construction of dozens of new petrochemical projects, and to support overseas acquisitions of oil resources.