China is boosting the volume of crude oil it purchases in order to increase its strategic reserves, Reuters’ Clyde Russell reported on Friday. China, the world’s largest crude importer, is buying more oil at a point when the demand-supply balance is already stretched. This will impact global prices.
Chinese imports of crude from Russia are destined to go up, defying the United States-led sanctions against Russia. China seems intent on continuing to benefit from the steep discounts Russia is offering on its oil sales.
This is likely to force other nations that supply China, especially Iran and Venezuela, to make their crude available at even cheaper prices. Iran’s crude exports to China have fallen sharply since the start of the Ukraine war, as China favours the heavily-discounted Russian barrels.
For years, China has ignored U.S. sanctions seeking to ban the purchase of Iran and Venezuela oil, thus providing the two countries with revenue.
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And according to the Financial Times, Italy has also reportedly increased its imports of Russian crude despite European Union efforts to end ties to Russian energy. Russia has reportedly exported about 450,000 barrels a day of crude to Italy this month. That’s more than four times as much as in February and the most since 2013, according to Kpler, a commodity data company.
The United States also plans to increase its crude purchases to refill its strategic reserves, potentially giving oil prices another boost.
So despite U.S. pressure to throttle crude revenue to Russia, the emerging reality is quite different. And that means the U.S. has been unable to rein in Russian President Vladimir Putin.
Despite the sanctions, Russian oil revenues are soaring, the International Energy Agency reports. It has earned approximately US$20 billion every month this year from combined sales of about eight million barrels per day (bpd) of crude and related products while offering deep discounts. And that revenue seems to be enough to keep Russia afloat.
And in another major policy reversal, U.S. President Joe Biden seems ready to meet with Saudi Arabia’s Mohammed bin Salman, CNN reported on Thursday. Biden officials are in the middle of talks with the Saudis about a meeting between the two when the president is in Saudi Arabia for a Gulf Co-operation Council meeting next month.
Biden has long been vocal in his criticism of bin Salman over Saudi Arabia’s human rights record and after a CIA report determined that bin Salman ordered the capture and murder of journalist Jamal Khashoggi.
To no avail, Biden and his administration have been urging Saudi Arabia and the United Arab Emirates, the two countries with spare capacity, to increase oil output to cool down the markets. It’s even been reported recently that Saudi Arabia and the U.A.E. have refused to take calls from the Americans.
Current gasoline prices seem to be forcing Biden to reverse his promise to make Saudi Arabia “the pariah state that it deserved to be.”
Market conditions have already forced the U.S. to begin relaxing restrictions placed on Chevron with regard to its crude business in sanctioned Venezuela. According to U.S. officials, the licence to negotiate, granted to Chevron, could be just the first step toward relaxing other oil-related sanctions on Venezuela.
So the crude oil market is forcing the major players to redraw the geopolitical map.
Toronto-based Rashid Husain Syed is a respected energy and political analyst. The Middle East is his area of focus. As well as writing for major local and global newspapers, Rashid is also a regular speaker at major international conferences. He has provided his perspective on global energy issues to the Department of Energy in Washington and the International Energy Agency in Paris. For interview requests, click here.
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