Saudis Chinese agreement March 16 oil
Industry

Saudis and Chinese Get Closer Through Oil

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During the course of King Salman’s six-week tour of multiple Asian countries, the main focus was geared toward the sale of oil in different contexts. Drumming up interest in next year’s expected IPO of Saudi Aramco was one component, but traditional deals also weren’t left out.

In that case, the Saudis and China came to an agreement on March 16 on a series of deals that amount to more than $65 billion in trade and other economic deals. The main component is oil, with China continuing to look to any and all sources to make sure that their ravenous need for the commodity is satisfied.

In the past few years, issues have surfaced that prevented Saudi Arabia from being able to fulfill those needs, which resulted in a loss of market share to countries like Russia. In order to build that area back up and keep China from becoming more ensconced with the Kingdom’s main rival, Iran, a better understanding between the two countries was needed.

Saudi Arabia remains the top oil exporter in the world, with their China agreement locking in a reliable source that also happens to possess an economy that’s now reached the level that only the United States remains above it.

China is also becoming more political when it comes to the Middle East. Thus far, their approach has been mixed by first backing Syrian president Bashar al-Assad last year. However, support of Saudi Arabia’s position with respect to the Yemen government’s fight with Houthi rebels soon followed.

The bottom line in all of this is that with oil prices still stagnant, a consistent source of revenue for the Kingdom is needed. The profit might be smaller, yet China’s oil appetite will guarantee such profits continue to flow.

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