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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (28575)	3/14/2005 6:57:13 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

Thought you might appreciate this one, China gets flucht in die sachwerte fever, time to unload Old Maid cards for something. Not at all insignificant if true, now do you think they retract it tomorrow? No doubt large manila envelopes were exchanged to get a chunk of this Biz. China says may use forex reserves to buy oil. SHANGHAI, March 14 (Reuters) - China's foreign exchange chief has proposed using the country's forex reserves, the largest after Japan's, to buy oil for a strategic reserve the country is already planning, a semi-official newspaper said on Monday. Guo Shuqing, head of the State Administration of Foreign Exchange, estimated that 100 million tonnes of oil - about 750 million barrels - would cost $30 billion, a sliver of China's forex reserves of $610 billion at the end of 2004. "China's oil security is likely be threatened along with an increasing reliance on oil imports," Guo Shuqing was quoted as saying by the China Business Post. China in 2003 set up a National Strategic Oil Reserve Office to build a reserve to guard against interrupted supply. Though Beijing has not commented on the price it might be willing to pay to secure emergency reserves as its dependence on imported oil grows, Guo's remarks hinted China might be willing to buy at $40 a barrel. Robust economic growth, at 9.5 percent in 2004, pushed oil consumption to more than 6 million barrels per day (bpd). That strong demand had been a crucial factor driving oil prices to a peak of around $55 a barrel at present. Last week the International Energy Agency said it had revised up estimates on China's 2005 oil demand growth by between 100,000 and 500,000 bpd, though the 7.9 percent rate of increase is expected to slower than 2004's. "At the same time, current heavy forex reserves make it completely possible for China to buy petroleum to be used as strategic energy reserves," Guo was quoted as saying during an annual parliament session in Beijing. The first phase of the reserve of about 150 million barrels is scheduled for completion in three to five years, with 10 million barrels of storage capacity in the east coast city of Ningbo due to be ready for use in August. Cambridge Energy Research Associates estimates China's build-up of petroleum reserves would add 80,000 to 90,000 barrels per day (bpd) to its crude imports in 2006/2007 - roughly 3 percent of China's current record import level of about 2.5 million bpd. Guo was also quoted as saying China had too much forex reserves due to booming trade and heavy investment inflows. "China's forex reserves have certainly exceeded a reasonable level," Guo was quoted as saying, adding he believed $500 billion was the right level. "This is partly because expectations of a yuan appreciation has made domestic institutions increase foreign currency debts and avoid yuan loans," he said. China is under pressure from the United States and other developed economies to let the yuan appreciate. They say the currency is undervalued, giving Chinese exporters an unfair advantage in world export markets. Beijing has resisted foreign pressure to free up the yuan but has promised to make the currency more flexible over time through gradual reform. ($1=8.276 yuan).