April 24 (Bloomberg) -- Oil may reach $70 a barrel as China starts filling its emergency crude storage tanks, boosting the nation's imports to a record in March, CLSA Ltd. said.

China may begin pumping oil into a storage facility in Huangdao in eastern China's Shandong province in late April, Gordon Kwan, head of China oil and gas research wrote in a note today. The nation imported a record 13.86 million metric tons (3.3 million barrels a day) of crude last month, China's customs data showed on April 10.

China, the world's second-biggest energy consumer, is building storage tanks along its coast to protect against international price fluctuations and supply disruptions. The nation's strategic oil reserves will have an equivalent of 30 days of imports by 2010, Chen Deming, vice chairman of the National Development and Reform Commission, said April 20.

``Under China's tenth five-year plan, and the continued positive surprises in gross domestic product growth, we can expect heightened possibility of China further expanding the strategic petroleum reserve base,'' Kwan said in the note. ``Dollar weakness and the election fraud in Nigeria are two additional catalysts that could fuel this oil price rally.''

Benchmark crude oil in New York traded near a three-week high after surging above $65 a barrel yesterday on concern conflict in Nigeria may disrupt supplies. Crude oil for June was at $65.68 a barrel, down 21 cents, in after-hours electronic trading on the New York Mercantile Exchange at 1:31 p.m. in Singapore.

Storage Tanks

China is building storage tanks in the eastern cities of Zhenhai, Zhoushan and Huangdao, and in the northern city of Dalian. The terminals are set to be completed by 2008. China started filling its first storage facility, in Zhenhai, in August and the terminal has 24 million barrels of oil now, Kwan said. The nation has completed the building the Zhoushan facility, he said.

China is drafting regulations to require the government and companies to build up emergency stockpiles, Chen said in April. The International Energy Agency, an adviser to 26 oil- consuming nations, recommends its member countries maintain a stockpile level of 90 days of net oil imports.

``Assuming China will want to accumulate 3 months of consumption for the strategic petroleum reserve, this could amount to 630 million barrels of extra demand in the next two years, or about 863,000 per day,'' Kwan said. That is the equivalent of the daily production of the Daqing oilfield, Asia's largest, he said.

China imported 39.7 million tons of crude from January to March, 6.8 percent more than a year earlier, customs said. Imports rose as the nation's gross domestic product expanded 11.1 percent in the quarter, exceeding economist's expectations. The nation's oil demand will rise 6.8 percent to 7.6 million barrels a day this year, the IEA said in an April 12 forecast.

China will build oil stockpiles in areas with convenient transportation access and close to refineries where crude oil can be processed and turned into fuels, Chen said April 20.

To contact the reporters on this story: Ying Lou in Hong Kong at ylou1@bloomberg.net.

Last Updated: April 24, 2007 02:15 EDT