Oil Prices to Plummet Following the First-Ever Public Auction of Crude Oil Reserves in China

China announced to emancipate crude oil from its strategic reserves with the intention to limit the inflating oil prices in the country. The decision comes as a relief amidst the incessantly rising energy costs that covers crude oil, natural gas, and coal.

The repercussions of rising energy prices have hit some Chinese provinces where factories have reduced their plant operations due to electricity supply outages. The National Food and Strategic Reserves Administration confirmed to make state oil reserves available to select chemicals and refinery companies through its first-ever public auction that will be conducted phase-wise. 

Crude oil is a naturally occurring hydrocarbon rich fuel that is present in underground reservoirs and extracted through the drilling process. Crude oil is an extremely important fuel source that underpins industrial growth and modern living by providing fuel to the transportation sector, supplying energy for electricity generation, and providing feedstocks for manufacturing important downstream petrochemical products and plastics.

During the fiscal year, crude oil prices in China were at a record high in 13 years. In the past decade, China has been the largest importer of crude oil, which has allowed it to reserve around 220 million barrels of oil. Releasing the crude oil reserves to public auction is being viewed as an important step that would contribute to balance the price rise for an optimum period of time. 

As per ChemAnalyst, the public auction of the state oil reserves is a well-thought strategy to stabilise the supply and demand of crude oil in the domestic market. This will specifically aid in easing out the tight supply of raw materials in the end-user industries and will also cap the rising price of oil imports.