Chinese Oil: Google Images Show Growing Crude Storage in China  

The WSJ reports that satellite images are being used to estimate the capacity of China's SPR - Chinese Oil: Google Images Show Growing Crude Storage in China.

The economic recovery may yet tarry, and oil demand is still anemic, but there might be a solid reason crude oil has perched above $60 a barrel. Energy analysts at Sanford Bernstein say eye-in-the-sky satellite images from Google show the Chinese are packing away a rising amount of crude in storage tanks.

“Our analysis confirms that tanker capacity arrivals into China have spiked up in recent months, in line with imports, but more importantly, tanker arrivals into Strategic Petroleum Reserve ports have increased materially,” Bernstein says Friday in a research report.

Just as satellite imaging has helped fuel debate over the true state of oil supplies—especially in Saudi Arabia—the new technology promises to give oil-market watchers a chance to crack the demand side of the puzzle too.

Bernstein estimates that the amount of crude entering the SPR ports in China—the world’s second biggest oil consumer after the U.S.–has increased by around 400,000 barrels a day since November, based on its assessment using the satellite imaging services of Google, the search engine company.

Those barrels are tiny in the overall scheme of the global oil market, but when crude consumption has gone negative in the U.S. and elsewhere, those added barrels do matter.

“While overall demand in China has slowed, the effort to increase crude storage levels, while oil prices are low, has added some incremental support to the global oil market,” Bernstein says. Crude traded Friday up around 50 cents at about $61.50 a barrel, near a six-month peak.

There’s likely more to come. Bernstein says satellite images show a marked increase in oil-storage construction over the past few years and estimates that China’s number of days of forward demand–a gauge of oil storage–amount to just 28 days of imports and 14 days of total demand.