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China Sourcing Update: Energy Costs (Mar 2018)

Energy Costs

1. Crude prices rise in March

In line with the movement of global crude prices, China’s crude prices fluctuated within a narrow range during early to mid-March and went up afterwards.[1] For instance, after hovering around US$58.0 per barrel in the first half of March, the Daqing[2] crude price surged to US$63.1 per barrel on 26 March, before retreating a bit to US$62.5 per barrel on 29 March.

There were two main reasons behind the rise in oil prices in the second half of March. First, it was rumoured that the US would impose sanctions on Iran again, which would probably in turn greatly reduce Iran’s exports of oil. Second, the US oil crude inventories dropped unexpectedly: the US Energy Information Administration (EIA) reported on 21 March that commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) in the US fell by 2.6 billion barrels in the week ending 16 March.

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[1] From the year 2000 onwards, China’s crude prices were determined with reference to global crude prices.
[2] Daqing Field is the largest oil field in China.

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