EVIDENCE is mounting that China is buying more oil than it consumes, raising fears that oil hoarding may be supporting the current high price of crude.

The signs of aggressive Chinese stockpiling emerge from research by Merrill Lynch, the investment bank, which suggests that China is importing crude and refined products at twice the rate of growth in actual demand.

Rampant economic growth in the People’s Republic over the past two years has enabled China to overtake Japan this year as the world’s secondlargest oil consumer, burning some 6.3 million barrels a day.

Projections of the rate of growth in consumption in the People’s Republic suggest that China’s power generators, road hauliers, petrochemical plants and factories will burn an extra 500,000 barrels a day of crude oil this year. But Merrill Lynch’s analysis of implied demand, based on import data in the first and second quarter of this year, suggests that demand will increase this year by one million barrels a day.

Michael Rothman, Merrill Lynch’s senior energy analyst in New York, reckons that the second figure is not real consumption and does not reflect actual burning of crude in Chinese cars and power plants.

“It appears to be a hoarding phenomenon and we think it has to run its course, and when it does pass, prices should gravitate much lower, somewhere down towards $30 per barrel.”

Crude prices in New York fell to their lowest point in a month yesterday, slipping to $41.30 a barrel before closing down 90 cents at $42.28. Assurances from Opec that the cartel is pumping more crude have countered concern about sabotage to oil infrastructure. Hedge funds, which helped to boost the US Light Crude futures contract to record levels of more than $49 a barrel are beginning to retreat from their aggressive stance and unwind long positions.

Last night US State Department data showed the damage done to Iraq’s oil exports by near-daily attacks on pipelines and pumping stations. Crude revenues in Iraq averaged $24.8 million a day in August, down from $46.8 million a day in July and the lowest figures since October 2003.

Crude oil stocks are monitored closely by oil traders seeking to check the world’s comfort level in supplies of oil and changes in demand. Hoarding was a major factor in the escalation of the crude price in the late 1970s when Western countries snapped up cargoes fearing shortages following the Arab oil embargo.

In recent years, US crude stocks have fallen as oil refiners shift to a just-in-time policy aimed at cutting costs. In December stock levels fell to 268 million barrels, below the 270 million threshold the US Government considers a safe level. Since then American refiners have been rebuilding supplies.

More signs of stockbuilding emerged three months ago when it transpired that India had bought cargoes of 25 million barrels. “This volume of oil, almost a million barrels per day for precautionary reasons, is a type of hoarding,” Mr Rothman said. Data on Chinese consumption was sparse because the country did not provide oil stocks data, so inventories had to be inferred from import statistics, he added.

Fears about the lack of data has also been highlighted by the International Energy Agency. “People arrive at Chinese demand by computing derived demand from import and consumption data,” a spokesman said.