Asian nations build enormous stockpiles as Oil prices remain low

By Rahul Vaimal, Associate Editor
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  • Taking advantage of the collapse in prices, most economies in Asia have been aggressively building up strategic oil reserves for emergencies. 
  • The move has adversely affected Asian oil exporters Malaysia, Indonesia and Brunei. 

Strategic stocks are the storage of oil and other fuels held by economies in secure storage facilities to cover unanticipated disruptions to energy supplies. Major economies such as the US, China and Russia had begun to build up these reserves after incidents in the early 1970s.

China which is believed to have the biggest in the Asia-Pacific is expected to have around 550 million barrels which are considered adequate and are more than the emergency threshold of “international standard” 90-day safety level as reported by several agencies.

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On the other hand, India has stocks with a storage capacity of approximately 40 million barrels which is expected to last only 10 days in the country with a population of 1.3 billion people. Elsewhere, According to the latest reports Japan’s oil reserves were around 500 million barrels at the end of February, equal to national usage for more than seven months, while South Korea had around 96 million barrels in strategic reserves as of December 2019, enough for meet the needs of 89 days.

Dominant oil-importers in Asia such as China, Japan and South Korea would usually benefit from low prices but this is doubtful to be the case immediately given the economic desolation caused by the pandemic. In Japan, for example, the price crash has hit financial markets hard, which is negatively affecting the Japanese economy.

Some economists, however, expect oil prices to stay low for a long period, meaning major importers could eventually emerge winners.


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