China taps more Saudi crude than US
Saudi Arabia’s oil exports to the US last year sank below 1m barrels a day for the first time in two decades just as China’s purchases climbed above that level, highlighting a shift in the geopolitics of oil from west to east
By Gregory Meyer | Financial Times.com | February 21 2010
The shift in strategy is not expected to weaken the political relationship between the US and Saudi Arabia
The drop in US demand for oil from the kingdom, traditionally one of its primary sources, is the result of overall lower energy consumption but also greater reliance on imports from Canada and Africa.
China’s economic growth, meanwhile, is prompting Beijing to buy more Saudi oil, a trend Riyadh has encouraged through refinery joint ventures.
“China offers demand security, something that for a long time the oil-producing countries including Saudi Arabia have called for,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh. “As global demand has been picking up in the east . . . Saudi Arabia has been looking east.”
Barack Obama, US president, wants to reduce US dependence on foreign oil and encourage renewable fuels. Meanwhile, Saudi Arabia wants stable markets for its oil reserves.
The divergence will provide the backdrop as Steven Chu, US energy secretary, visits Riyadh on Monday. His agenda reflects Washington’s focus, with an emphasis on technology research rather than oil politics.
The drop in Washington’s reliance on Riyadh’s oil is unlikely to alter dramatically their relationship, at least in the short-term. Analysts say oil is a fungible commodity and any supply shock in the Middle East will still affect the US economy in spite of lower imports from Saudi Arabia. On the other hand, China’s rising demand for Saudi oil, on top of already large purchases of Iranian crude, could boost Beijing’s interest in the region.
The US imported 998,000 b/d of Saudi crude in the first 11 months of 2009, the lowest since 1988, according to official data. Analysts expect that December figures will confirm the drop. The fall came as Saudi oil exports to China hit a record in December above the psychologically significant 1m b/d level. Beijing has doubled the amount of oil it buys from the kingdom over the past three years.
For years, state oil company Saudi Aramco “was under strict orders to be first in sales” to the US, a strategy that was “political and not commercial”, according to Amy Myers Jaffe and Jareer Elass at Rice University in Houston. That changed in 2003 after the Saudi ruling elite relaxed the strategy.
Posts
No comments:
Post a Comment