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Saudi Aramco to Sell 41% More Crude to China Pete

As I’ve noted before, the difference between China’s national policy on buying oil and that of the OECD in general and the U.S. in particular is striking.  The Chinese have been trying to wrap up as many direct bi-lateral purchase agreements as they can while the U.S. relies on the “free market.”

The U.S. may become highly disadvantaged by being a passive observer as China takes oil off the market via long term bilateral deals.  China’s actions will result ultimately in less oil being available to the free market.  The  Chinese strategy will tend to take themselves out of the competitive arena and leave it to the OECD to fight among themselves and India for the remaining free market oil. 

I’ve suggested that the net result of China’s bi-lateral deals, like the one described in the Xinhua report cited below, will be higher world oil prices.  That will be true if the price paid by China in its bilateral deals is lower than the world price.  Those facts will probably be up to future historians to determine.

 
28 Jul 2008
Xinhua Newsfeed

BEIJING (XFN-ASIA) - Saudi Aramco is expected to sell 41 pct more crude oil to China Petroleum & Chemical Corp (Sinopec) this year, the official China Daily reported.
Mohammed Al-Madi, regional vice-president and chief representative of Saudi Aramco in Beijing, was quoted as saying that Saudi Aramco is looking to deliver 32.4 mln tons of crude, equivalent to 650,000 barrels per day, to Sinopec, compared with nearly 23 mln tons in 2007.
The Saudi company expects to increase exports to 1 mln bpd by 2010 and 1.5 mln bpd by 2015, he said.
Saudi Aramco is an equity partner in Sinopec’s 5 bln usd Fudian refinery and chemical project, due to enter operations in early 2009.

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This entry was posted on Saturday, August 2nd, 2008 at 3:20 pm and is filed under China, India and the Pacific Rim, Price of oil, Saudi Arabia. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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1 response so far ↓

  • 1 Robert Essian // Aug 3, 2008 at 5:38 am

    Jim, this action is so logical and will be used by every economy but ours.

    The good news coming out of all of this is we will have to change over to all available fuels to run our economy because we won’t be able to purchase enough oil to satisfy our needs.

    In addition the OPEC country’s may not want to sell to us because our credit, dollar, and financial system is in such a mess.

    We might have to rebuild by default and that would make Congress happy because they wouldn’t have had to make the decisions to change and wouldn’t have to answer to their voters or financiers. Win…Win.

    They’ll get to blame everyone now…

    Jim, I read that if we don’t pumped enough oil through our pipelines that it would cause them to fail…If it’s not one thing it’s another…(market oracle article).

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