China Is OPEC's Big Winner
Not long ago, Saudi Arabia was as important to China's oil supply as it is to the rest of the world.
In October 2013, the kingdom had a 22 percent share of crude imports in China. Nowadays, it's been overtaken by Russia, and has Iraq and Iran nipping at the hem of its dishdasha.
That dynamic is only likely to accelerate as a result of Wednesday's OPEC meeting. Almost all the cartel's members agreed to cut output by a fairly uniform 4.6 percent below reference levels. The glaring exception was Iran, which will be allowed to boost production 2.3 percent. The 300,000 barrel-a-day reduction promised by Russia, a non-OPEC member, is likewise a modest 2.7 percent below current levels.
All things being equal, that's likely to accelerate China's trend toward a broader base of crude supply. In 2013, Saudi Arabia and Angola together accounted for 33 percent of the country's imports. The kingdom's 11.8 percent import share in September was the lowest figure since 2005; Angola's 8.5 percent slice last month was the smallest since 2007.
Meanwhile, other Gulf producers have been catching up. Iraq briefly overtook the kingdom in September with 4.1 million metric tons of exports to China, compared with Saudi Arabia's 3.9 million. Iran, with 3.3 million tons, wasn't far behind.
That's good news for Tehran, which could do with a diversity of customers, given the risk that a Trump administration manages to stymie oil exports to Europe, as Gadfly's Julian Lee has argued.
The biggest winner, though, is Beijing. China is already passing the baton to India in terms of demand growth. Its own apparent oil demand has been stagnating for more than a year, and even that measure probably is propped up by the gradual filling of the country's strategic petroleum reserves.
Nonetheless, China remains alert to the stability and diversity of its supply of commodities. A situation where Saudi Arabia and Angola accounted for more than one-third of imported crude left energy security at the mercy of foreign powers. A world in which Russia and Iran gain a little more market power isn't necessarily bad for China -- especially if it's at the expense of Riyadh.
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