Saudi Embraces China As Oil Exports To U.S. Drop | Independent Newspapers Limited
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Saudi Embraces China As Oil Exports To U.S. Drop

Posted: May 19, 2015 at 9:45 am   /   by   /   comments (0)

By Ejikeme Omenazu, (With Agency Reports, Lagos)


Saudi Arabia’s oil exports to the United States (U.S) have fallen to the lowest level since the financial crisis, showing the impact of the shale boom and fast-growing imports from Canada.

According to CNN reports on Monday May, 18, 2015, the US has bought an average of less than one million barrels a day of Saudi crude over the past year, weekly and monthly US government data show.

The kingdom, the report added, had been compensating for the loss of sales by accelerating its pivot towards Asia, with China vying with the US as one of the biggest buyers of Saudi crude.

But, any weakening of the economic ties that bolster Saudi Arabia’s relations with the US may still provoke concern in Riyadh, as it undergoes a major power shift.

“The behaviour of the kingdom over the past year suggests they recognised the US was going to be a declining market and east of Suez was their growth market,” said Jason Bordoff, founding director of Columbia University’s Centre on Global Energy Policy.

“But this argument has limitations. They want to be diversified and need a presence in the US for geopolitical reasons.”

The last time that Saudi crude exports to the US averaged less than 1m b/d for a significant period was 2009, when the financial crisis had slashed demand for crude. There have been individual months when imports have fallen below that milestone level, but not for a prolonged period.

The only similar experience in recent memory was during the 1980s, when the kingdom slashed its own oil production in a failed attempt to prop up the price.

As recently as 2013, the US imported an average of more than 1.5m b/d.

While a sharp increase in US oil output has already taken the place of much of the crude that the country used to import from West Africa, rising imports from Canada appear to be the other driving force behind the need to bring in less crude from the Middle East.

Canadian exports to the US are now averaging more than 3m b/d, an increase of roughly 1m b/d since 2011.

The shift comes as Saudi Arabia has vowed to battle to hold on to its share of the oil market, leading to the OPEC decision last November to keep production high despite excess global supplies, triggering a price collapse.

Last week, it said it was succeeding in its policy to squeeze out higher-cost producers by keeping output high despite the 60 per cent price drop between June and January, sparking an angry reaction from one of the leading architects of the US shale revolution.

Saudi Arabia remains the second-biggest oil exporter to the US after Canada, and owns stakes in refineries and petrochemical plants in the country.