Saudi’s New Friend

Saudi Arabia, the world's largest oil producer, last year shipped more oil to China than it did the United States for the first time ever. The flow of oil from Saudi Arabia to China rose to more than 1 million barrels per day (bpd) last year, just as demand in the United States fell below that level for the first time in more than two decades. The US has been moving away from fossil fuels for years, a trend that will only accelerate with the current administration.

China in December alone imported a record-high 1.2 million bpd of Saudi oil, as its economy rode the momentum of Beijing's $585 billion (2 trillion yuan) stimulus package. U.S. imports of Saudi oil, on the other hand, fell to a 22-year low of 998,000 bpd in the first 11 months of 2009, as the world's largest oil consumer clawed its way back from its worst recession in 70 years. One point to note, however, is that the US is now getting most of its oil from Canada and that overall oil consumption in China still pales in comparison to America…7.8 billion b/d to 19.5 billion b/d, even though they have more than four times the population.

On top of that, China last year supplanted the United States as the world's largest auto market with 13.6 million vehicles sold. Roughly 10.4 million light vehicles were sold in the United States in 2009 - the lowest total since 1982 and a 21% decline from 2008.

Saudi Arabia has reacted by striking new refining deals with Beijing and moving storage facilities from the Caribbean to Japan.

Saudi Arabian Oil Co. (Saudi Aramco), the world's biggest crude producer, already owns a 25% interest in a refinery in China's Fujian province, and is in talks with China Petroleum & Chemical Corp. to take a stake in a 200,000 bpd plant in Shandong.

China and Saudi Arabia aim to boost trade 50% to $60 billion by 2015, the state-owned Saudi Press Agency reported last month, citing Chinese Trade Minister Chen Deming. As global demand has been picking up in the east... Saudi Arabia has been looking east.