By Maria Gallucci - China is snapping up unusually high amounts of crude oil as global prices hit their lowest level in years, Wall Street Journal reported Monday. The buying spree could boost the weak international demand for oil, which has helped to push down prices by more than 25 percent over the past five months, analysts say.
A unit of state-run China National Petroleum Corp. has purchased 36 cargos of crude oil in the open market so far in October, Singapore traders told WSJ. The oil haul, equal to about 18 million barrels of crude, is the country’s largest purchase in a single month and hails primarily from Oman and the United Arab Emirates.
The crude is thought to be destined for China’s emergency oil stores, which the country could tap during a crisis to produce transportation fuels like gasoline and diesel. China’s current thirst for oil, meanwhile, remains low, with demand growing at its slowest rate since 1990, WSJ noted.
The large-scale purchase indicates that Chinese oil officials are expecting prices to eventually bounce back, and that they are capitalizing on the cheap crude while they can. But Goldman Sachs analysts said they project prices will fall even further next year as worldwide production -- led by U.S. developers -- outpaces demand.
In a report released late on Sunday, the U.S. investment bank said it expects benchmark Brent crude prices to drop to $85 a barrel in the first quarter of 2015, while U.S. benchmark West Texas Intermediate (WTI) crude could fall to $75 a barrel. Both prices are down by $15 per barrel from the bank’s previous oil price forecast.
Brent crude prices fell to below $85 per barrel on Monday, and WTI crude dipped below $80 per barrel, following the Goldman report, Reuters reported.