June 26
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China is in talks with Moscow to buy cheap Russian oil for its strategic petroleum reserves, Bloomberg reported on Thursday.

Beijing is in talks with Moscow to buy additional volumes. The oil will be used to replenish China's strategic oil reserves and negotiations are conducted at the government level with little direct involvement of oil companies, the sources said.

To cope with skyrocketing oil and gas prices, China has arranged different ways to import fuel, according to a statement from the National Development and Reform Commission.

Details on the volume or terms of a potential deal have not yet been determined, and there are no guarantees that an agreement will be reached, the source said.

The U.S. and U.K. have pledged to ban Russian oil imports, and the European Union is discussing similar steps, but oil from the OPEC+ producer is still flowing to buyers, including India and China. For Asian countries, heavily discounted oil is too good an opportunity to pass up, which is one reason China continues to accept cargoes from Iran and Venezuela.

China has not publicly disclosed the size of its crude oil reserves. According to some projections, the country has the capacity to hold more than 1 billion barrels of combined commercial and strategic reserves. Third-party estimates also indicate that supplies have recently increased because of the Covid-19 outbreak.

"There is still room to replenish stocks and it would be a good opportunity for them to do so, if they can be sourced on commercially attractive terms," Jane Xie, a senior oil analyst at data and analytics firm Kpler told the newswire.

Kpler estimates total oil reserves at 926.1 million barrels, up from 869 million barrels in mid-March, but still 6 percent below the September 2020 record. By comparison, the capacity of the U.S. Strategic Petroleum Reserve is 714 million barrels.

Last year China sold oil from its strategic reserves, g to try to tame oil prices. The action had no lasting impact, only depleting reserves and increasing the likelihood that China will need to replenish reserves at higher prices.

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