The country should take advantage of a record drop in global crude oil prices to build up more reserves of the resource, analysts have said.

"Compared with the highest prices in July, crude oil prices have dropped by 50 percent. We should take advantage of the low prices to build more oil reserves," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

"These oil reserves should include both the national oil reserves and oil companies' commercial reserves," Lin said.

Crude oil prices have fallen to below US$65 a barrel, following a record high of US$147 a barrel in July.

Han Xiaoping, senior vice president of Beijing Falcon Pioneer Technology Co Ltd said the country should also establish a special fund for oil reserves construction.

China had already launched a state strategic oil reserve base program as a way to offset oil supply risks and reduce the impact of fluctuating energy prices worldwide.

The bases are designed to maintain strategic oil reserves equivalent to 30 days of imports, or about 10 million tons.

The first batch of the bases include four in coastal provinces -- those in Zhenhai and Zhoushan of Zhejiang Province; Huangdao, Shandong Province; and Dalian, Liaoning Province.

Zhao Xiaoping, deputy director of the National Energy Administration, said earlier this month that China will complete construction of the four bases this year.

Similarly, the country last year established a center to manage its strategic oil reserves. The center is in charge of stockpiling crude and releasing reserves, as well as monitoring oil supply and demand on the domestic and international markets.

The authorities have also started planning the second phase of its strategic oil reserves. Sources said this will include a number of bases in the western regions, including Lanzhou in Gansu Province.

The volume of China's national oil reserves will increase to a level equivalent to three months' imports, said the National Development and Reform Commission.

PetroChina and Sinopec have all started building on their commercial oil reserves. To that effect, Asia's top refiner, Sinopec, has set up the Sinopec Commercial Crude Reserve Center to manage its oil storage.

(China Daily November 5, 2008)