As Saudis court Asia, U.S. thirst for Canada's oil grows deeper
Saudi Arabia is increasingly targeting its oil exports to fast-growing Asian economies, and Canadian producers are picking up the slack as Saudi exports to the U.S. tumble.
During a state visit by Indian Prime Minister Manmohan Singh, Saudi officials this week committed to doubling the volumes the world's second-largest producer ships to India, where demand is booming.
Saudi Arabia has also increased exports to China, which has overtaken the United States as the kingdom's top oil customer. Both Asian countries are also working with Saudi Aramco to build refineries to feed their growing appetite for fuel.
At the same time, Saudi exports to the United States plunged last year. By December, monthly U.S. imports from the kingdom were down 40 per cent compared to December, 2008, according to Washington's Energy Information Administration (EIA).
The rapid shifts in global crude markets underscore the uneven growth between emerging Asian economies and mature developed ones. It also suggests the U.S. may be succeeding in reducing its reliance on Middle East oil a key policy goal of President Barack Obama as well as his predecessor, George W. Bush.
That policy includes a greater reliance on Canadian crude from the oil sands. From 2005, when U.S. demand peaked, through 2008, Canadian crude imports grew by 15 per cent. Imports continued to climb last year, though final numbers are not available.
With most of the demand growth coming in Asian and the U.S. demand not likely to ever recover to what it was in 2007, the U.S.-Saudi trade pattern just doesn't make sense any more, said Greg Priddy, oil analyst with Washington-based Eurasia Group.
It's clearly an opportunity for Canada it doesn't make sense geographically for those [Canadian] exports to go anywhere else.
With expectations of slow growth, high fuel-efficiency standards and aggressive biofuel mandates in the U.S., Canadian producers face a stagnant demand picture in their only significant export market. But as they expand oil sands production, they hope that Canada can grab a larger share of a smaller pie as traditional competitors like Mexico and Venezuela have trouble maintaining production and Saudi Arabia shifts its focus to Asia.
For their part, the Saudis have long worried about security of demand that threats from U.S. presidents to reduce the country's dependence on Middle East oil would limit their export potential.
Still, the EIA suggest that 2009 was something of an aberration in U.S.-Saudi oil trade because the kingdom cut its production by one million barrels a day as part of the effort by the Organization of Petroleum Exporting Countries to defend prices as world consumption dropped during the recession.
Their production dropped; our consumption dropped, so it's natural that we would see a drop in our imports from them and that it would be a greater share of their production decline, said EIA oil analyst Doug McIntyre.
But the agency forecasts that U.S. consumption will not recover to pre-recession levels for many years, while China and India will experience dramatic growth in oil demand. China is expected to increase its oil consumption by more than 900,000 b/d over the next two years.
India has built several massive refineries and is increasingly dependent on crude oil imports to fuel its economic growth, which after sliding to 7 per cent this year, is expected to rebound to annual rates of 9 per cent over the next several years.
India is looking for secure, long-term supplies from Saudi Arabia to feed these massive facilities over the longer term, said Thomas Greider, an analyst with IHS Global Insight. And Saudi Arabia's pledge to double its exports to India is a recognition of that.
While China and India will draw some OPEC supplies away from North America, Canadian producers will still face stiff competition in the shrunken U.S. market. Saudi Arabia may be shifting its focus to Asia, but it will still be a major force in the U.S. Gulf Coast market that is so coveted by Canadian producers.
Countries in the Atlantic basin, including Angola and Brazil, also hope to increase their exports to the U.S., while Mexico and Venezuela are determined to defend their market share.
http://www.theglobeandmail.com/report-o ... le1487466/" onclick="window.open(this.href);return false;
Saudi Arabia is increasingly targeting its oil exports to fast-growing Asian economies, and Canadian producers are picking up the slack as Saudi exports to the U.S. tumble.
During a state visit by Indian Prime Minister Manmohan Singh, Saudi officials this week committed to doubling the volumes the world's second-largest producer ships to India, where demand is booming.
Saudi Arabia has also increased exports to China, which has overtaken the United States as the kingdom's top oil customer. Both Asian countries are also working with Saudi Aramco to build refineries to feed their growing appetite for fuel.
At the same time, Saudi exports to the United States plunged last year. By December, monthly U.S. imports from the kingdom were down 40 per cent compared to December, 2008, according to Washington's Energy Information Administration (EIA).
The rapid shifts in global crude markets underscore the uneven growth between emerging Asian economies and mature developed ones. It also suggests the U.S. may be succeeding in reducing its reliance on Middle East oil a key policy goal of President Barack Obama as well as his predecessor, George W. Bush.
That policy includes a greater reliance on Canadian crude from the oil sands. From 2005, when U.S. demand peaked, through 2008, Canadian crude imports grew by 15 per cent. Imports continued to climb last year, though final numbers are not available.
With most of the demand growth coming in Asian and the U.S. demand not likely to ever recover to what it was in 2007, the U.S.-Saudi trade pattern just doesn't make sense any more, said Greg Priddy, oil analyst with Washington-based Eurasia Group.
It's clearly an opportunity for Canada it doesn't make sense geographically for those [Canadian] exports to go anywhere else.
With expectations of slow growth, high fuel-efficiency standards and aggressive biofuel mandates in the U.S., Canadian producers face a stagnant demand picture in their only significant export market. But as they expand oil sands production, they hope that Canada can grab a larger share of a smaller pie as traditional competitors like Mexico and Venezuela have trouble maintaining production and Saudi Arabia shifts its focus to Asia.
For their part, the Saudis have long worried about security of demand that threats from U.S. presidents to reduce the country's dependence on Middle East oil would limit their export potential.
Still, the EIA suggest that 2009 was something of an aberration in U.S.-Saudi oil trade because the kingdom cut its production by one million barrels a day as part of the effort by the Organization of Petroleum Exporting Countries to defend prices as world consumption dropped during the recession.
Their production dropped; our consumption dropped, so it's natural that we would see a drop in our imports from them and that it would be a greater share of their production decline, said EIA oil analyst Doug McIntyre.
But the agency forecasts that U.S. consumption will not recover to pre-recession levels for many years, while China and India will experience dramatic growth in oil demand. China is expected to increase its oil consumption by more than 900,000 b/d over the next two years.
India has built several massive refineries and is increasingly dependent on crude oil imports to fuel its economic growth, which after sliding to 7 per cent this year, is expected to rebound to annual rates of 9 per cent over the next several years.
India is looking for secure, long-term supplies from Saudi Arabia to feed these massive facilities over the longer term, said Thomas Greider, an analyst with IHS Global Insight. And Saudi Arabia's pledge to double its exports to India is a recognition of that.
While China and India will draw some OPEC supplies away from North America, Canadian producers will still face stiff competition in the shrunken U.S. market. Saudi Arabia may be shifting its focus to Asia, but it will still be a major force in the U.S. Gulf Coast market that is so coveted by Canadian producers.
Countries in the Atlantic basin, including Angola and Brazil, also hope to increase their exports to the U.S., while Mexico and Venezuela are determined to defend their market share.
http://www.theglobeandmail.com/report-o ... le1487466/" onclick="window.open(this.href);return false;
