RUSSIA & CHINA: GROWTH 36%
Warming ties between China and Russia are giving a big boost to Chinese imports of Russian oil, to the chagrin of OPEC nations jockeying for a slice of China's market.
Faced with falling prices and lower demand from the U.S., oil-exporting nations are increasingly putting their hopes in China's still-robust demand for crude. But Saudi Arabia and other big producers like Venezuela have seen such sales drop as Moscow's isolation from the West over Ukraine prompts it to turn to Beijing.
The death of Saudi Arabia's King Abdullah adds a measure of uncertainty to OPEC's oil policies, which boosted prices in global oil markets after the news early Friday, though analysts say the kingdom is unlikely to change its strategy and reduce production. That is despite a global glut of crude that is fueling new rivalry between OPEC and Russia for China's market—as well as among OPEC nations themselves.
Officials of the Organization of the Petroleum Exporting Countries, which declined to cut oil production last year, reasoned that maintaining high production levels would protect market share in crucial importing nations.
But Chinese customs data released Friday show that China's crude imports from some big OPEC nations have plummeted, while imports from Russia surged 36% in 2014. Meanwhile, imports from Saudi Arabia fell 8% and those from Venezuela dropped 11%.
As American companies have pumped soaring amounts of oil from shale, U.S. imports of Saudi Arabia's crude oil and petroleum products have also fallen, dropping to 25.6 million barrels a month in October, from more than 42 million barrels a year earlier.
The changing pattern in China's imports is one result of Russian President Vladimir Putin turning to China as an economic lifeline as Moscow is shunned by the West over the Ukraine crisis.
That has tilted in China's favor the relationship between two countries that for decades have jousted for influence in Asia.
For its part, Beijing wants to make sure Russia's economy doesn't deteriorate further as that could threaten stability on China's borders, security scholars say. In addition, buying more of its oil from Russia helps China lessen dependence on seaborne imports from the Middle East, which it fears are susceptible to supply disruptions.
An early sign of the thaw came in May, when Mr. Putin and Chinese President Xi Jinping sealed a long-hobbled deal for Russia to supply China hundreds of billions of dollars in natural gas. Since then, Chinese banks have come through with loans for Russian companies ailing under U.S.-imposed sanctions and Russia has even signaled it might be willing to accept a Chinese stake in one of Russia's biggest new oil fields.
Security analysts and some western diplomats say the governments remain wary of each other. Russian crude shipments to China reflect a marriage of necessity as Moscow seeks to tap new markets for its oil, but doesn't mean leaders have overcome decades of mistrust.
But Messrs. Xi and Putin have strived to appear warm during frequent bilateral meetings, smiling as they have toasted to the relationship with a shot of Chinese baijiu.
The rise in Russian imports to China comes as OPEC members themselves are competing for bigger roles in Asia as demand from the U.S., for years their biggest market, has dwindled as the result of the North American shale-oil boom.
In the past year, Saudi Arabia and Iraq—OPEC's biggest oil producers—have slashed prices for Asian buyers, a move viewed by many commentators as a tactic to gain market share as global consumption shifts east. Asia demand accounts for roughly 70% of Saudi crude exports, according to the U.S. Energy Information Administration.
A closed-door meeting in November between Saudi Arabia's Oil Minister Ali al-Naimi and senior oil officials from Russia, Venezuela, and Mexico illustrated the oil-producing cartel's growing concern over Russia's role. When Russia rejected a suggestion that non-OPEC members participate in a move to cut production and prop up prices, Saudi Arabia abandoned any plans to rein in its output, opting instead to fight to maintain its position in the market, according to people familiar with Saudi thinking.
OPEC declined to comment.
Of course, OPEC nations, and in particular Saudi Arabia, will continue exporting huge amounts of crude oil to China over the long run. Domestic oil production in China has plateaued even as demand continues to rise. Saudi Arabia remains China's largest source of imported crude.
Nevertheless, China's "diversification toward Russia has been a concern" for Saudi Arabia, said Sushant Gupta, an analyst at energy consultancy Wood Mackenzie. "They want to protect the market share in the growing-demand regions of Asia."
The new data show Saudi Arabia's market share in China fell versus Russia's last year. Russian oil accounted for about 11% of Chinese imports in 2014, versus about 9% a year earlier, while Saudi Arabian crude fell to roughly 16% of total Chinese crude imports from 19% a year earlier.
For poorer countries, such as Venezuela, whose economy is highly dependent on oil sales, the shift in Chinese imports adds to the pain from falling oil prices, said James Henderson, a senior research fellow at the Oxford Institute for Energy Studies.
Venezuelan President Nicolás Maduro traveled to Beijing this month as part of a world-wide tour seeking aid, during which he said he secured $20 billion in unspecified Chinese investment, although analysts say that isn't nearly enough to cushion the impact of oil's fall.
And the rise in Chinese imports of Russian crude will continue. The flow of Russian crude to China will surpass 50 million tons annually by 2020, from more than 30 million tons in 2014, forecasts Wood Mackenzie's Mr. Gupta.
Portions of that will flow through Central Asia, a region where Chinese companies have built a huge presence, eager to tap growing energy trade. But the region of former Soviet republics remains deeply intertwined with Russia, another reason for China to worry about Moscow's economic health.
In September, China's Kunlun Energy , a subsidiary of PetroChina Co. , reported a foreign-exchange loss of nearly $65 million following a devaluation of the tenge, Kazakhstan's currency.
China has concerns that increased volatility in Moscow could pose challenges for Chinese interests in Central Asia, said Niklas Swanstrom, director of the Stockholm-based Institute for Security & Development Policy.
While Russia has long wanted to sell more crude to China, its government and companies have been far less willing over the years to welcome Chinese investment in its oil and gas fields.
Even that is beginning to change. When President Putin visited Beijing in November, chiefs of China National Petroleum Corp., China's biggest producer of oil, and Russia's Rosneft laid the groundwork for CNPC to take a stake in Rosneft subsidiary ZAO Vankorneft, which is developing one of Russia's biggest new oil fields.
|December, 18, 12:50:00|
|December, 18, 12:45:00|
|December, 18, 12:40:00|
|December, 18, 12:35:00|
|December, 18, 12:30:00|
|December, 18, 12:25:00|
PLATTS - National Australia Bank announced Thursday it will no longer provide financing for new thermal coal projects.
Petrobras and ExxonMobil signed a memorandum of understanding regarding a strategic alliance to jointly identify and evaluate potential business opportunities.
ExxonMobil Development Africa B.V. has acquired a 25 percent indirect interest in Mozambique’s gas-rich Area 4 block from Eni and assume responsibility for midstream operations.
U.S. Rig Count is down 1 rig from last week to 930, with oil rigs down 4 to 747, gas rigs up 3 to 183, and miscellaneous rigs unchanged. Canada Rig Count is up 19 rigs from last week to 238, with oil rigs up 22 to 134 and gas rigs down 3 to 104.