BEIJING, July 1 -- China planned to use its national petroleum reserve, now under construction, to blunt the country's exposure to market volatility, Han Gensheng, vice president of Sinochem Corp., said Thursday.

    The reserve "will be used to cope with short-term fluctuations and maintain stability in the market," Han said.

    The comments indicate the world's second-largest oil consumer plans a much more active role for its reserves than those held by the United States and Europe, which by policy use them only in the event of severe supply disruptions and not to affect prices.

    Analysts think filling the reserve could add to already strong demand for oil and put upward pressure on prices. But China's plans to use the reserves as a hedge means the ultimate impact on the market could be more complicated.

    Sinochem, a State-owned oil company, is helping build the national reserve. China started construction on storage tanks this year, but will take several years to complete the full project.

    With oil prices so high, Han thinks China will not start filling the reserve when the first tanks are ready later this year.

    China had many competing needs for funds, particularly for social development, he said.

    The comments are at odds with the statement made Tuesday by Zhang Guobao, vice chairman of the National Development and Reform Commission, that China would begin filling the reserve by the end of the year using domestic crude.

(Source: Shenzhen Daily/Agencies)