BEIJING, Feb. 21 (Xinhua) -- The rising price of crude oil, pushed up by the latest Iran oil ban, has made it more difficult for China to build its oil reserves, analysts said.
Benchmark March crude oil hit a nine-month high of 105.26 U.S. dollars per barrel on the New York Mercantile Exchange on Monday after Iran said it has stopped crude exports to Britain and France in an escalating dispute over its nuclear program.
The price hike has fueled discussions over whether it's the right time for China to buy oil, as the country is working to rapidly boost its oil reserves, which are at a low level in comparison to many developed countries.
"The best time to increase oil reserves is undoubtedly when prices are low, but it's hard to judge oil price trends," said Zhou Xiujie, an analyst with the China Investment Consulting Corp.
Current oil prices are much higher than in previous years, but they may dwindle after hitting 150 U.S. dollars per barrel in the future, as some researchers have predicted.
There is good reason for the market's uncertainty. Iran, OPEC's second largest exporter after Saudi Arabia, has insisted that it will cut oil exports to more EU nations if they remain "hostile," which may cause further price increases.
The Middle Eastern country exports 2.6 million barrels per day, 20 percent of which go to the EU, Italy, Spain and Greece in particular, while another 70 percent enter Asian markets, mainly China and India.
China may consider buying oil at competitive prices, as many other economies have increased their oil reserves amid a complex global situation.
"Generally speaking, oil prices will head upwards anyway. Therefore, the earlier the oil is purchased, the better," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.
China currently maintains a strategic oil reserve equivalent to 30 days of imports, compared with 90 days in many developed countries. The United States' strategic oil reserves exceeded 700 million barrels in 2009, enough for 150 days of oil consumption, according to Zhou.
To reduce the gap, China set up a national oil reserve center to build and manage its strategic reserves in 2007. Four strategic oil reserve bases in the coastal cities of Dalian, Qingdao, Ningbo and Zhoushan have already been built, and construction on another eight bases will be completed by the end of 2012.
"Oil prices could go much higher after the country finishes building the bases. Even at current prices, the cost of increasing oil reserves is much greater than that seen in the past," Lin said.
Acquiring and maintaining a large amount of oil reserves may prove to be costly. China aims to boost its strategic oil reserves to 500 million barrels, equivalent to 90 days of consumption, by 2020.
If calculated using the current price of 105 U.S. dollars per barrel, the 500 million barrels will cost 52.5 billion U.S. dollars. The real cost could be even greater if oil prices continue to increase.
Maintenance and management fees are also high. The U.S. government spent 200 million U.S. dollars, or 0.35 dollars per barrel, annually between 1976 and 1999 to manage its reserves.
"Theoretically, the more oil held in reserve, the better, as sufficient oil stocks will help ensure energy safety. But it takes money to do that, so oil reserve plans should be made in line with the country's energy demands," Zhou said.
China's energy consumption has increased rapidly. Its primary energy consumption went up 5.9 percent year-on-year to 3.25 billion tonnes of coal equivalent in 2010, making it the world's second-largest energy consumer after the United States. The 2011 figure has not yet been released.
Zhou Dadi, a researcher at the Energy Research Institute under the National Development and Reform Commission, the country's top economic planner, said China has room to increase its oil reserves, but should balance the cost of maintaining the reserves with its actual needs.
"A scientific, top-down analysis should be used to determine how much oil a given country should keep in reserve," Zhou said.
China's crude oil reserves include its national strategic oil reserve and corporate commercial oil reserve. In China, commercial oil reserves are mainly held by large oil producers, such as Sinopec and PetroChina.