US, WASHINGTON (ORDO NEWS) — The oil market is now beneficial for the buyer, and China is the largest oil buyer in the world. World prices have collapsed to multi-year lows, and the country is ready to reap not only geopolitical advantages, but also economic benefits. China imports up to 70% of the energy consumed in the country.
Nevertheless, some analysts believe that low prices pose problems for state-owned oil companies in terms of production and investment. They also believe that low prices do not mean an automatic reduction in consumer fuel prices due to internal price controls. They do not see the big picture.
Russia, Saudi Arabia, and the United States hope China will support their oil industries, which have been hit by a recent price collapse. American oil companies are demanding that their government put pressure on Beijing, which has stepped up oil purchases as part of the first phase of a bilateral trade agreement. At the same time, China buys more oil from Russia and Saudi Arabia.
Futures contracts for West Texas WTI crude oil – one of the main indicators of the oil market – at some point even went negative, but then recovered. Compared to last year, prices fell by about 70%.
Russia, the OPEC oil cartel and its allies, have just concluded a ceasefire in their rash price war that brought down the market. But the main reason for the global economic downturn is still the COVID-19 pandemic.
The agreement to reduce production, which put an end to the price war, was concluded with the mediation of US President Donald Trump. Washington needed nosebleeds to somehow stop the fall in prices in order to save producers from bankruptcy.
But the real reason for the sudden drop in oil demand is an impending global recession. And the leaders of the three oil-producing countries can do little about it.
That is why they turned to China – as the most significant buyer. Concerned that China is buying more and more Saudi and Russian oil, American producers are pushing the Trump administration to reorient it to a trade deal with Beijing. It is estimated that in the first phase, China will purchase US energy 18.5 billion more in the first year and 33.9 billion more in the second.
But because of the economic downturn in China, the worst of reform policies and the openness of the late 1970s, even Trump and economic adviser Larry Kudlow warned that Beijing might not fulfill its promises.
Taking into account the difficult situation of the energy sectors in all three countries, it is not difficult to imagine that Beijing will push their heads together. At the very least, China may demand some compensation from the Americans – be it for hostile rhetoric about COVID-19 or treatment of Chinese high-tech companies. In any case, it would be foolish not to use it.
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