Will China Forming Oil Buying Cartel End the Petrodollar?
China is building a buyer’s group (or cartel) comprised of its major state oil companies. I’m frankly surprised that this wasn’t already the case, since everything else is tightly controlled in China.
A report from Bloomberg (via Investing.com) states that:
Since China is now the world’s largest importer of oil it only makes sense they would flip the switch and act as price makers rather than be price takers.
This makes perfect sense, economically, in the current environment as troubled oil exporters like Saudi Arabia continue to try and exert influence over the oil market.
The Saudis refuse to admit to themselves that their era of dominance over oil prices is, itself, over. As I noted in my blog from last week their attempt to gain market share through price slashing did nothing more than slash their own revenue to the bone, while making no new friends.
Because while China is certainly happy to pay less for oil, the knock-on effects of undermining its capital markets were and are far greater than the savings per barrel.
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The proof? Back to the Bloomberg article:
For a start, the group is set to collectively issue bids for certain Russian and African grades in the spot market, they said. While it’s unclear how the cooperation will evolve, the group represents refiners that import more than 5 million barrels of oil a day. That’s nearly a fifth of OPEC’s total output, which would make it the world’s largest crude buyer in theory.
[/quote]Because here’s the rub, as always, China is looking for ways to deepen international use and liquidity of the yuan. Saudi Arabia and the U.S. want to continue use of the dollar as the main settlement currency for oil trading, the so-called petrodollar.
It is the petrodollar that provides the most inertia the world fights against to allow the rise of other currencies as settlement. Dollars are cheap to use, freely accepted and, for now, still a good store of (at least) medium-term value.
The petrodollar was created by the relationship between the U.S. as the biggest importer and Saudi Arabia the biggest exporter. As long as that relationship held the petrodollar flowed into foreign central banks, deepening everyone’s trust in it.
Now China is saying things have changed. Europe and China are willing to pay a little more for Russian Urals grade (per my article from Friday) after MBS’s tantrum.
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vollständig unter
https://tomluongo.me/2020/06/2…g-cartel-end-petrodollar/
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