SHANGHAI, Mar 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 today.
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.