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Last week I reported that there continued to be a draw down in crude inventories even as prices were falling. Today, we found out who was buying.

According to Chinese industry sources, China increased its strategic reserves in December by 12.4 million barrels. The report also indicates that China took advantage of lower crude prices to fill 70% of their strategic storage tanks- Read Article

Oil prices are falling this morning on news that Saudi Arabia's oil minister said there was no need for an OPEC emergency meeting to discuss further cuts to oil production. OPEC said they would wait until the February meeting before deciding on any additional cuts.

At this stage of the game we have to assume the Chinese are buying because they see the fall in crude prices as a bargain, and not a sustainable trend. Chinese oil imports for December were 50% higher than the imports in November.

On Monday, news reports said that Iran asked Saudi Arabia to help them mediate their nuclear talks with the United States. It is also being rumored that Saudi Arabia has told the US to back-off.

If the US takes part in a military strike against Iran, we may begin to see the word "Embargo" resurface again.